Opinion
August 28, 1951. Petition for Rehearing Withdrawn October 3, 1951.
Appeal from the Circuit Court for Dade County, Vincent C. Giblin, J.
Loftin, Anderson, Scott, McCarthy Preston and Robert H. Anderson, Miami, for appellants.
Sibley Davis and Marion E. Sibley, Miami Beach, for appellee.
Surfcomber Hotel Corporation and Seacomber Hotel Corporation own a 99-year lease on the Surfcomber Hotel and the Seacomber Hotel. The said properties are located at Miami, Florida, and the stock in the corporations is owned by three groups of individuals or stockholders. The Lieberbaums compose group one, the Mirmellis compose group two, and the Levines compose group three.
July 24, 1951, the Levines instituted this suit by bill of complaint against the Lieberbaums and the Mirmellis. The Seacomber Hotel Corporation, the Surfcomber Hotel Corporation and Levleeb Investments, Inc. were made parties defendant. Levleeb Investments, Inc. was formed before the bill of complaint was filed for the purpose of leasing the Seacomber Hotel. The bill prayed for dissolution of the partnership, liquidation of corporations, appointment of a receiver and for other relief. Considerable testimony was taken and the application for receiver was granted. Petition for supersedeas was denied and defendants appealed. When the appeal was perfected, application was made to this Court for an order staying the appointment of receiver and to fix the terms and conditions of a supersedeas bond. Account of the situation presented we deem it advisable to dispose of the cause on the merits.
It is first contended that under the law of Florida a court of equity cannot liquidate a corporation except in the manner prescribed by statute.
In support of this contention appellants rely on Tampa Waterworks Company v. Wood, 97 Fla. 493, 121 So. 789 and 19 C.J.S., Corporations, § 1647, page 1418. Appellants also rely on the fact that the bill of complaint declares for "dissolution of partnership, liquidation of corporations, appointment of a receiver and other relief." They say that it was not intended that Levleeb Investments, Inc. should succeed the corporation which held the 99-year lease on the Surfcomber Hotel but instead its purpose was to save income taxes. It is asserted that such creations have been repeatedly approved. Ross v. Commissioner of Internal Revenue, 5 Cir., 129 F.2d 310; Epsen Lithographers, Inc. v. O'Malley, D.C. 67 F. Supp. 181; Buffalo Meter Company v. Commissioners of Internal Revenue, 10 T.C. 83, are relied on to support this contention.
Appellees admit the general rule that a court of equity has no power to dissolve a corporation but they contend that a receiver may be appointed for a corporation and that such appointment does not necessarily work a dissolution of the corporation. Tampa Waterworks Co. v. Wood, cited in the preceding paragraph is relied on to support this contention. From the judgment appealed from it appears that the receiver was appointed for the properties and assets of every kind held by defendants. It appears that the parties to the cause participated in the management of the properties in different capacities and it is not possible to say at this time what form the final decree will take. There were many stockholders and different interests were involved. Appellees assert that they do not expect the corporation to be dissolved but that their objective is a dissolution of the partnership or joint venture on the part of the three groups of stockholders which may or may not actuate the sale of the corporate stock. Trustees System Company of Pennsylvania v. Payne, 3 Cir., 65 F.2d 103; Chicago Milwaukee and St. Paul Railway Co. v. Minneapolis Civic and Commerce Association, 247 U.S. 490, 38 S.Ct. 553, 62 L.Ed. 1229; and In re Rieger, Kapner Altmark, D.C., 157 F. 609, are relied on to support their position.
It is next contended that the receiver should not have been appointed because it has not been shown that the alleged discord among the parties to the cause has affected the business injuriously, that it is shown that the corporations have been operated profitably and it is apparent that the application for receiver comes from those who provoked the dissensions.
The very basis for the conduct of any business is confidence, good faith, square dealing and honesty among proprietors. It does not matter what regulation, prohibition, rule or requirement the law imposes, it can substitute nothing for these basic essentials. In controversies like this, they always enter into the chancellor's deliberations. He cannot divorce them from the picture. In business relations it is not enough to stay within the bounds of legal technicalities. The ethical aspect of human behavior becomes more important. One might as well contend that sheep and sheep-killing dogs would gambol harmoniously in the same pasture as to suspect that a partnership would run smoothly when confidence, good faith, square dealing and integrity among its members have been destroyed.
The record reveals that the operation of the Surfcomber and Seacomber Hotels was the business from which the partnership was supported. They are good properties and have been profitably operated, but ugly discord and animosities have arisen among the members of the different groups of owners. It is charged (1) that one of the appellees purloined the wife of one of the appellants, (2) that two of the appellants took $10,000 out of the partnership funds and purchased a yacht without the knowledge or consent of the other partners and did not so much as ask appellees to ride in it, (3) that one of appellants took $2,000 out of the partnership funds to make a trip to Europe, (4) that two of appellants bought $600 worth of clothes at a high priced New York Men's shop and charged them to the partnership as advertising expenses, (5) that appellants permitted the insurance policies on the business, to the extent of $7,500, to lapse for want of payment, (6) that they purchased a parking lot with partnership funds and took title in the name of a third party, (7) that the same appellants borrowed large sums of money on the partnership account and attempted to hide the fraud, and (8) that they "doctored" the books of the company to disguise or cover up these transactions; that they had reached the point of calling each other thieves; and that in other ways the business of the company was being conducted in a very unbusinesslike and fraudulent manner.
The law is settled in this country that a court of equity may appoint a receiver for a business on the showing of bad faith, breach of duty or violation of partnership agreement. Reed v. Beals, 77 Fla. 801, 82 So. 234; Ferrick v. Barry, 320 Mass. 217, 68 N.E.2d 690; Owen v. Cohen, 19 Cal.2d 147, 119 P.2d 713; Fewell v. Tappan, 223 Minn. 483, 27 N.W.2d 648. The dissensions and discord, the attempted unlawful acts of some of the partners, the breach of fiduciary relationships and the disregard of partnership responsibility charged in this case was such that it would be difficult to match as a predicate for the appointment of a receiver.
It was a matter in which the chancellor had a liberal discretion and we find his order to be well predicated in law and fact.
Affirmed.
SEBRING, C.J., and THOMAS and HOBSON, JJ., concur.