Paola v. Huston

GRIFFIN, J. Plaintiff and respondent Patrick F. Paola brought this action against defendant and appellant Jack B. Huston for dissolution and accounting of an oral partnership agreement entered into on December 1,1950. The partnership was known as the “Arrow Liquor Stores.” The complaint alleged that on July 30, 1954, some difficulties arose between the partners and they entered into a written agreement (Exhibit A attached to the complaint), which, in effect, provided that:

“Solely for the purpose of arranging a settlement of all differences now existing between” them “it is proposed . . . (1) That in the event the parties hereto can arrange a sale of [207]the said” five “Arrow Liquor Stores, their leases, inventory, licenses and other assets, in their entirety, to the mutual satisfaction of the parties hereto, within sixty days from the date of execution herein, the net proceeds from such sale, after paying all outstanding bills and other indebtedness, shall be shared equally between the parties hereto, and there shall be a dismissal of the now pending Superior Court action. . . . (2) In the event no sale is agreed upon between the two parties hereto and any third party within said sixty-day period, the parties hereto agree to execute Articles of Copartnership, recognizing the equal interests of the parties hereto in said Arrow Liquor Stores, subject” to certain specified terms set forth. It then provides: “In the event that no sale is agreed upon between the respective parties hereto within sixty (60) days hereafter, . . . Huston shall be granted an option for a period of one (1) year to purchase the interest of Paola in said partnership business for a sum equal in amount to . . . Paola’s capital account in said partnership venture as reflected by the books of said partnership as of the date of the exercise of such option, or at any other price mutually agreeable to the parties. Said option may be exercised by . . . Huston by the giving of thirty days notice in writing of his intention to exercise his option to purchase to Mr. Paola. . . (Emphasis ours.)

The complaint then alleges that defendant elected to dissolve the partnership; that no accounting was had between plaintiff and defendant of the affairs of the partnership; that defendant withdrew funds in excess of the amount shown on the books, and that an accounting should be had. It prays for dissolution of the partnership and liquidation thereof under the court’s direction, for an accounting, and distribution of the proceeds.

Defendant answered and claimed complete books were kept by him. He denied withdrawing any funds as alleged and sets up a report of a certified public accountant of the affairs of the partnership as of August 31, 1955. By way of cross-complaint he relies upon the agreement above set forth and alleges he notified plaintiff on August 24, 1955, in writing, of his intention to exercise the option to purchase plaintiff’s interest in said partnership for a sum equal to Paola’s capital account as reflected by the books as of that date, and alleges that the audit of August 31, 1954, was the closest audit to that date and it reflects plaintiff’s balance to be $31,774.69; that defendant is agreeable to a settlement on that basis but