Mendelsohn v. Miller

FOX, Acting, P. J. The principal problem involved in this appeal is whether or not a purchaser at a judicial sale of partnership assets (which sale arises out of a suit in equity to dissolve the partnership) may assert as an offset against the price bid by him for the property an unliquidated, contested claim against an individual partner.

The partnership was composed of plaintiff Mendelsohn and defendant Miller. After commencement of the partner[666]sMp dissolution suit, respondent Allen was appointed receiver pending determination of the action. Thereafter, by stipulation of Mendelsohn and Miller, judgment was entered dissolving the partnership and continuing Allen as receiver for the purpose of conducting the sale of the real property which constituted the assets of the partnership. Allen conducted the sale pursuant to Code of Civil Procedure, section 568.5, and the property was purchased for $277,500 by appellant corporation, Eureka Iron and Metal Company, through Miller who was acting as its agent. Miller was the president and Mendelsohn was the vice president of Eureka, but Eureka had no other connection with their partnership nor the assets of that partnership. Eureka paid $35,000 at the time of the sale, and was to pay the remainder of the purchase price through escrow upon confirmation of the sale. An order was made confirming the sale to Eureka and directing the receiver to consummate the same through escrow. More than 60 days later receiver Allen filed a petition for instructions stating that Eureka had not signed the escrow instructions, though twice requested to do so. Allen further stated that Eureka claimed Mendelsohn was indebted to it and that it was entitled to a credit upon the purchase price in the amount of said alleged debt. Allen also averred that Mendelsohn denied any indebtedness to appellant.

Thereupon Eureka filed a “petition for an order after judgment” alleging the indebtedness of Mendelsohn to be in the amount of $40,663.10, and praying a credit upon the balance of the purchase price ($242,500) of said alleged indebtedness, and that the proceeds of the sale be impressed with a lien in its favor to the extent of the alleged debt. Mendelsohn filed a motion to strike Eureka’s petition, asserting in his supporting affidavit that he was not indebted to Eureka in any sum.

These matters came on for hearing on January 9, 1957, at which time Eureka’s petition was denied and the motion to strike it was granted. At the hearing Eureka orally requested permission to garnish or attach any property of Mendelsohn in custodia legis; such permission was refused. The receiver was instructed to set aside the sale unless Eureka paid the required amount into escrow. Eureka has appealed from the minute order incorporating these rulings.1