Opinion
No. 31093
Decided March 24, 1948.
Appeal — Accounting ordered prior to final judgment below — Review by Supreme Court — Limited to order granting accounting and jurisdiction of parties and subject matter.
Where a motion to certify the record is allowed in a case in which an accounting has been ordered prior to final judgment, this court will pass only upon (1) errors assigned respecting the propriety of the order granting the accounting and (2) the jurisdiction of the court over either or both the subject matter and the parties.
APPEAL from the Court of Appeals for Mahoning county.
An oral arrangement was entered into between Hickok Oil Corporation and the plaintiff-appellee and Charles M. Winn as partners in September of 1938 for a distributorship at Youngstown, Ohio. Hickok Oil Corporation financed them on open account and kept the books, sending them monthly statements. Lewis and Winn put no money into the operation.
Lewis and Winn operated as a partnership until February of 1939 at which time the Youngstown Hi-Speed Company was organized, and stock issued to Lewis and Winn, which was deposited with Hickok Oil Corporation as collateral security for their individual note. They operated as a corporation until August 31, 1939, when, following a conference with Lewis and Winn, they were informed that Hickok Oil Corporation would not finance them any more and that it was necessary to terminate the relationship.
Thereupon plaintiff below (appellee here) filed a petition containing two causes of action in the Common Pleas Court of Mahoning county against A.S. Hickok, Hickok Oil Corporation, nonresidents of Mahoning county, and the Youngstown Hi-Speed Company, properly served in Mahoning county, which resulted after amendments in the third amended petition alleging two causes of action in which the corporate capacity of Hickok Oil Corporation and Youngstown Hi-Speed Company was alleged.
Plaintiff alleged also that Youngstown Hi-Speed Company was organized in pursuance of an agreement which plaintiff and his partner, W.S. Winn, bad with A.S. Hickok and the Hickok Oil Corporation whereby Youngstown Hi-Speed Company was to be organized for the purpose of distributing petroleum and other products in Mahoning, Columbiana and Trumbull counties, which corporation was to be at all times under the direct and exclusive control of defendants, A.S. Hickok and the Hickok Oil Corporation; that such products were to be those manufactured, handled and sold by defendant Hickok Oil Corporation; that under such agreement Youngstown Hi-Speed Company was organized; that plaintiff and his partner were to be given all the capital stock of the Youngstown Hi-Speed Company, which capital stock was to be held in trust for them by A.S. Hickok and Hickok Oil Corporation as collateral security for the payment of notes signed by plaintiff and his partner, until the profits from the local business handled through Youngstown Hi-Speed Company were sufficient to pay off the money and merchandise advanced by defendants A.S. Hickok and Hickok Oil Corporation; that the books of the Youngstown Hi-Speed Company were to be kept and were kept by Hickok Oil Corporation; that Hickok Oil Corporation made unfair and unlawful allocations of expense against Youngstown Hi-Speed Company and failed and refused to properly account for the moneys which came into its possession and which should have been paid or credited to the local operation and to plaintiff; that a proper allocation of such funds would show that the notes theretofore signed by plaintiff had been paid in full and the stock of Youngstown Hi-Speed Company should have been delivered to plaintiff; and that accounts receivable were wrongfully charged against Youngstown Hi-Speed Company against the local operation "whether operated by said partnership [plaintiff and his partner Winn] or by Youngstown Hi-Speed Company, and that contrary to said understanding and agreement said defendants [A.S. Hickok, Hickok Oil Corporation and Youngstown Hi-Speed Company] acting jointly, have, by improper bookkeeping methods and entries, charged the local operation with the amounts that were lost * * * that the unwarranted methods of bookkeeping promulgated and followed by the defendants has caused him [plaintiff] to suffer irreparable injury and damage in the past, and that he will continue to suffer and sustain in the future such irreparable damage and injury, unless a proper accounting is ordered and required of the defendants by this court, and that he has no adequate remedy at law." Accounting was prayed for. It was alleged in substance that plaintiff had succeeded to the right to receive the entire capital stock of Youngstown Hi-Speed Company, the partner having been washed out.
In the second cause of action breach of contract was claimed.
A.S. Hickok and Hickok Oil Corporation moved to quash service of summons as follows: "Without in any manner entering their appearance herein or in any manner consenting to the jurisdiction of the court, and for the purpose of this motion only, move the court for an order to quash the service of summons herein on these defendants on the ground that the court has no jurisdiction over said defendants or either of them by reason of the fact that said defendants are not residents of Mahoning county, state of Ohio, said defendants being residents of Lucas county, state of Ohio, and having been purportedly served in Lucas county, Ohio; and for the further reason that this court has no jurisdiction over the subject matter of the action as pertaining to the defendants." Such motion was overruled.
In the trial court the record shows that on February 26, 1945:
"Court finds plaintiff is entitled to recover on his second cause of action for breach of contract. Judgment for plaintiff on second cause of action against defendants Youngstown Hi-Speed Company and Hickok Oil Corporation for $35,000 and costs. Complete accounting ordered as prayed for in first cause of action. Action referred to Harold B. Doyle, Special Master Commissioner. Accounting to be had at plaintiff's option. A.S. Hickok as an individual dismissed as a party defendant at costs of plaintiff. Defendants severally except. Motions for new trial severally overruled and exceptions noted. Bond for appeal fixed in sum of $35,000." Bond was filed on March 13, 1945.
Thereafter Hickok Oil Corporation and Youngstown Hi-Speed Company each filed motions for new trial, which were severally overruled. Appeal bond was fixed and given.
Separate notices of appeal on behalf of each Hickok Oil Corporation and Youngstown Hi-Speed Company contain the following:
"This appeal is on questions of law and fact.
"This appeal is also upon questions of law."
No appeal was taken in respect of A.S. Hickok.
The cause was heard in the Court of Appeals upon law and fact, which court held in part as follows:
"Robert F. Lewis [plaintiff] is entitled to an accounting on the first cause of action set out in his third amended petition and that this cause of action was rightfully brought in Mahoning county and that service of summons was property had on both appellants and that this court has jurisdiction on appeal and hereby reserves the second cause of action set out in plaintiff's third amended petition for decision until the accounting has been had and the master hereinafter appointed has made his return and his recommendations to this court."
The case is in this court following the allowance of a motion to certify the record.
Messrs. Harrington, Huxley Smith and Mr. Norman A. Emery, for appellee.
Messrs. Kirkbride, Cole, Frease Mittendorf and Messrs. Stephens Young, for appellants.
In the case of Shuster v. The North American Mortgage Loan Co. et al., 139 Ohio St. 315, 40 N.E.2d 130, we held:
"A decree, finding the general equities in favor of a party and ordering an accounting, is a final order from which an appeal may be perfected, although a further provision is included to carry into effect the rights settled."
As this case has not been disposed of finally, the appeal is necessarily limited to two questions:
1. Did the court below have jurisdiction? — a question which may be raised at any stage of the cause or proceeding as to subject matter and as to person when seasonably raised and not thereafter waived.
2. Do the facts found by the Court of Appeals justify the order for an accounting? — a final order when the general equities have been found for one party against another party.
Plaintiff's third amended petition upon which this action was tried contains the following allegations:
"That the defendant, Youngstown Hi-Speed Company, is a corporation organized under the laws of Ohio for the purpose of distributing petroleum and other products in the counties of Mahoning, Columbiana, and Trumbull, and is and was at all times herein referred to under the direction and exclusive control of the defendants, A.S. Hickok and Hickok Oil Corporation * * * and that a corporation would be organized by the defendants, A.S. Hickok and Hickok Oil Corporation at their expense under the laws of the state of Ohio, to be known as the Youngstown Hi-Speed Company, which corporation when organized was to continue the distribution of gasoline and other products in said three counties under the agreement and understanding theretofore made [by defendants] with this plaintiff and his partner, and that this plaintiff and C.M. Winn [the partner] were to continue to direct and manage said local distribution [in Mahoning, Columbiana and Trumbull counties] so long as the operation thereof showed a profit. * * *
"Plaintiff further says that the defendant, Youngstown Hi-Speed Company after organization did assume control and direction of the distribution of petroleum and other products in said three counties, and that he and his partner, C.M. Winn, relying upon the representations of the defendant, A.S. Hickok, and the officers and directors of Hickok Oil Corporation and Youngstown Hi-Speed Company that the agreement made with him and C.M. Winn as partners would be adopted, performed and carried out by Youngstown Hi-Speed Company * * * that a proper accounting between the parties hereto will show that said shares [of capital stock of Youngstown Hi-Speed Company claimed by plaintiff] have been paid for in full from the net earnings of the business in said three counties."
The petition alleges in substance that Winn, the partner, was washed out of the picture and in effect that all of the shares were to be issued to plaintiff. No objection was raised on account of defect of parties due to the fact that Winn was not a party. A claim of misjoinder was made by the Youngstown Hi-Speed Company on the ground that Hickok and Hickok Oil Corporation were improperly joined as defendants with Youngstown Hi-Speed Company.
It is further alleged: "That the defendants [which includes Hi-Speed] agreed to see that the money earned and received from the operation in said three counties was properly used and spent. * * * that said defendants [which includes Hi-Speed] have failed and refused to properly account for the moneys which have come into their possession and which should have been paid or credited to the local operation and to this plaintiff, and that a proper allocation of said funds will show that the notes heretofore signed by him have been paid in full, and that the stock of Youngstown Hi-Speed Company should have been delivered to him many months prior to the filing of this action. * * *
"Said defendants acting jointly, have, by improper bookkeeping methods and entries, charged the local operation with the amounts that were lost on the accounts which were in existence at the time this plaintiff assumed direction and control of the local system * * * and that this plaintiff has always and constantly been denied the right to inspect or examine the books and records of Youngstown Hi-Speed Company * * * and that a proper accounting will show that this plaintiff is entitled to receive from the defendants a large amount of money * * *.
"Plaintiff further says that the unwarranted methods of bookkeeping promulgated and followed by the defendants have caused him to suffer irreparable injury and damage in the past, and that he will continue to suffer and sustain in the future such irreparable damage and injury, unless a proper accounting is ordered and required of the defendants by this court, and that he has no adequate remedy at law.
"Wherefore, plaintiff prays that an accounting be ordered between the parties * * *."
It is the contention of appellants that Hi-Speed was merely a nominal party in no way involved in the accounting prayed for in the first cause of action. In view of the foregoing allegations of plaintiff's petition, we cannot agree with such contention and are of the opinion that under such allegations the Youngstown Hi-Speed Company was not only a proper but a necessary party.
After trial was had the facts fully justified the jurisdiction as is indicated by the journal entries of both the Court of Appeals and the Court of Common Pleas.
The journal entry of the Court of Appeals contains the following:
"* * * this cause of action was rightfully brought in Mahoning county and that service of summons was properly had on both appellants and that this court has jurisdiction on appeal * * *."
In the journal entry of the Court of Common Pleas is to be found the following:
"The evidence shows that the officers of the Youngstown Hi-Speed Company and the Hickok Oil Corporation conferred in Toledo on May 19, 1941, and as a result of such conference decided to and did send a force of men to Youngstown that night for the express purpose of taking charge of the property in Youngstown that was then being used in the operation of the business of the Youngstown Hi-Speed Company, so that the plaintiff could no longer control or operate the business in this county. This constituted a conspiracy to oust the plaintiff from his property and it was successfully carried out in this county. It follows that this court has jurisdiction * * *."
Section 11282, General Code, provides:
"When the action is rightly brought in any county, according to the provisions of the next preceding chapter, a summons may be issued to any other county, against one or more of the defendants, at the plaintiff's request; but no maker or acceptor, or, if the bill is not accepted, no drawer, of an instrument for the payment of money only, shall be held liable in an action thereon, except on a warrant of attorney, in any county other than the one in which he, or one of the joint makers, acceptors, or drawers, resides or is summoned."
Whether a derivative action would furnish the only form of remedy should not be determined until the court below has finally passed upon the entire case including the second cause of action which the court reserved for future disposition. A derivative action would be for the benefit of Youngstown Hi-Speed Company and plaintiff could profit only in the event that he established his ownership of the shares of capital stock of the Youngstown Hi-Speed Company.
We are of the opinion that the allegations of the petition and the returns of the sheriff disclose that the Court of Common Pleas of Mahoning county acquired jurisdiction of the subject matter and parties.
Coming now to the question whether a proper foundation was laid for an accounting, and waiving at this point any question as to the form of the action: Assuming that the first cause of action was of equitable cognizance, we are of the opinion that the recitals in the third amended petition and the evidence in support thereof are sufficient grounds for an accounting and that the following findings by the Court of Appeals of the general equities in favor of plaintiff [appellee here] justify the reference of the case for an accounting to a special master commissioner.
These findings are as follows:
"* * * that the accounting be had upon the following contract which this court finds as a fact to have existed between the parties to this action.
"First: That Lewis and Winn as partners and thereafter as the only stockholders of the corporation were to be the exclusive distributors in Mahoning, Trumbull and Columbiana counties for gasoline and other products manufactured or sold by Hickok Oil Corporation of Toledo.
"Second: As said distributors the local operation was to have a margin of 1 1/2c per gallon on gasoline and the prevailing rate of discount on oils, greases and other merchandise and supplies.
"Third: The Hickok Oil Corporation was to maintain all stations and furnish all new equipment necessary for their proper and efficient operation. The local distributorship was to bear the expense necessary to deliver gasoline from the local bulk plant to the several station outlets.
"Fourth: That no charge was to be made against the local operation for advertising unless the same was approved by Lewis or Winn.
"Fifth: The Hickok Oil Corporation was, without charge, to do the actual bookkeeping in Toledo and promptly render the local operation a true and correct operating statement.
"Sixth: That the local operation would be given 1% discount for cash.
"Seventh: That the local operation would be allowed 1 1/2% for shrinkage of gasoline.
"Eighth: That the plaintiff and his associates would own the local business just as soon as the profits from the operation thereof were sufficient to pay off such debts as would be justly and legally owing to the Hickok Oil Corporation of Toledo.
"Ninth: That the Hickok Oil Corporation was to finance the local operation.
"Tenth: That Lewis and Winn and later Youngstown Hi-Speed Company of which they were to be the only stockholders were to remain as such distributors in the local territory so long as they were able to operate the local business at a profit."
The Court of Appeals held also:
"A final decision in this cause and the determination of costs will be made after this court has received the report and recommendations of the master at which time either of the parties may request the court to make findings of fact and conclusions of law to all of which each of the parties excepts."
As stated at the outset of this opinion, we limit our decision to two questions: (1) of jurisdiction and (2) the propriety of the accounting.
We are of the opinion that both the Court of Common Pleas and the Court of Appeals had jurisdiction in this matter and that the granting of the prayer of the plaintiff below by the Court of Appeals for an accounting in a case appealed to the Court of Appeals on law and fact, and the reference to a special master commissioner to take testimony and other evidence in the accounting hearing, and to report the same with his conclusions and recommendations to the Court of Appeals, were correct.
Therefore, the judgment and decree of the Court of Appeals on the question of jurisdiction and order of accounting should be and hereby is affirmed and the cause is remanded to the Court of Appeals.
Judgment affirmed.
WEYGANDT, C.J., MATTHIAS, HART, ZIMMERMAN, SOHNGEN and STEWART, JJ., concur.