by legal proceedlngs,sought to enforce a sale to himself, he has no equity whioh will support a bill to set aside a oontract.of dissolution. made at the instanoe of his copartners upon discovering his wrongful use of the ftrIX1's credit. '
Where a bill to set aside an alleged fraudulent contract states that the facts con· cerning the fraud were communicated to the plaintil! nearly three years prior thereto. and it appears that in the mean time, at intervalil of every three months, he had a.coepted payment on a series of notes given under the contract, the fa fatal to ,his right to equitable relief.
InEquity. Anthony Higgins and S. S. HoUingmorth, for complainant. George (}ray and Benjamin Nieldil, for defendants. ACHESON, .Circuit Judge. In the year 1869 the plaintiff, Charles Richardson, and the defendants, Ephraim T. Walton and Francis N. Buck, entered into copartnership in the business of manufacturinp; superphosphate at Wilmington, Del., under the firm Walton, Whann & Co. By their written agreement the term of the partnership was limited to five years, but, without any formal or express renewal or extension thereof, they continued in the business until July 13, 1885, when they executed articles of dissolution, whereby the plaintiff sold and agreed to convey to the detEmdants aU his interest in the partnership business and property (except in certain scheduled claims and accounts) for the sum or price of 8123,436.74, payable as follows: 823,436.74 in cash; $60,000 in the defendants' 12 proUlissory notes, all dated July 6, 1885, each for $5,000, and payable, with interest, the first in three months, and the others respectively at the end of each consecutive three months thereafter; and the balance or sUUlof $40,000 on July 6,1890, with interest, payabJe semi-annually, secured by a bond and mortgage upon real estate. Accordingly thEldefendants, about, the date oOhe articles of dissolution, paid and delivered to the plaintiff the hand-money and the securities, and he executed a conveyance to them. The and alsp the defendants paiq. all their promissory ,no.tes as they semi-annual interest installments upon the mortgage, down to the filing of the bill in this case, on October 12, 1888. , ' The substantial purpose of the bill is to put a valuation upon thEl firm assets beyond the accepted value in the settlement, and to compel the defendants to pay the, plaintiff a larger sum for his interest in the firm than the agreed price. The first and principal prayer is as follows:
"(1) That the said articles of dissolution be declared to have been procured by fraud and duress, and that the same be. reformed in accordance with the real value of the firm's assets at the time of said dissolution."
The bill charges in substance that in the month of June, 1885, while the plaintiff was ill, and confined to his house, unable personally to attend to business, and at a time when he was "threatened with financial ruin if he was unable to arrange for meeting" commercial paper on which hEl was indorser, the defendants pressed upon him the dissolution of the copartnership; that in the negotiations which followed between the tiff, acting through his counsel, w.e. Spruance. Esq., and the defend-
presented utatement in .writing asabasis for settlement, be $50,000, and the value 'of the' plaintiff's in-terest In the firm to be$123,4M.7.4. '['hertext tW(),'paragragbs; of 'the" ,bill . think it.hest to'quote at length: we " ,',' " . .' ;',:' ',' , ' : . . , ,. ".: ,', ' ' -', A!(18) That. while .yolI:rora1;6f that the basls,.of settlement. the orllfitllliot which isiurthe handwriting oithe respondent. Buck. was incore recto and tltat yonr orator's share of the business, instE'ad"of being worth a little more than $128.000, was worth many thousand dollars more, yet your orator. in entering into the articles of dissolution hereafter referred to, on the the correc.tness of the bale ance-aheet of July 1. )V,88 taken .as the basis fOr ,tl1e estimate upon which the artieles of disBolution \\'ere and moreover, your orator's physil(ian him that his only chance of life was an absolute rest. and tbatlany ,Udtlen:shoclt: might result in instant death. 'L'1lI1.t under these eire ClI)nIlt.lQcea:yc >ur oratur .tothis stlttlement,andexecutea the articles copy as partbereof. (14) That believes, anli avers that the respondents knew, as the 16th ofiJune, 188S, that the vooks showed that the estimate of profits J:u1y 1,188B, be at least double the figures stated by them, vi:t·· $SO,O(}O,ln:the basls'bf he believes and avers that they knew in the value of·tilerealestate, lifIewit, $108,000, w.,:mllte tb<iD (15) charges that the balance-sheet of 1884, which to the plaintiff was entitled to (In July 1, 1884, was 'l!o falsebulan'ce-sheet. and known to the defendants to be -this 'charge',' nor' the one relating to .the matter of de. so.. ;was' seri6usly pressed at the argument; and .'does not sustain either of these' charges; cE!rtaihl.r'the evid therefote diSmiss them withbtit further comment. chargeSeriollS con$idertttion undet, the proofs is the one alleged knowledge, acquired ,as early as June towha:tthe profitS 'for the then current business year were, and tbe'Withholding 'of'tllatinfonnationfrom the plaintiff, whereby he wasiiebeive<i aud . This charge rests and; so far as dire'et upon the testimony of'William M. Frane cis, who was oithe firm .. He testifies that on June 11, to make up a statement showing' the' fot the year ending July 1st, and that he did so, and on JiHle 16tkhatidei'ltoBu'ck the statement. wllichshowed the profits to beabbtif $1'00,000/ On: the othethand, Buck, denies that he made land' he testifies that no statement of profits waS furnished him by or at any time until in the month of J:uly after the execufi&1 of theatrticles of dissolution; and that he acted in'tbe settleD;lent the plainUff without al-lY specific or certain were or would prpveto be when the books be settled up after the' close of the yettr'.s business; and that he,wPulcljhave sold his interest upon the estimll,e of profits which entered into settlement. Walton test),fies to. tile effect. To de. terminEl.the weight to which the evidenr-e on this point isfairly entitled and theeffecHo be given.to it, it is necessary to advert to certain facts
t '.' i ' ;
and eircumstances Which led up to the of thecopartmirsbi p, and were closely connected, inpoitit of time. and otherwise, with the transaction. But'we will not particula:rly refer to the voluminous proofs touching partnership affairs, and some difl'erences between the partners of earlier and retnotedates, for we do not regard those' matters as materially afi'eotingthe issue. It is shown that in the month of March, 1885, without informing bis copartners, the defendants,of bUiintention so to do, the. plaintiff purchased on his own private account the capital stock of the Wando Phosphate Company, whose wotkswere located at Charles: ton; S. C.,--a company engaged in the samebusineSSl\.8 Walton, Whann &00., and supplying fertilizers to the same region of country. Those works, if owned by Walton, Whann & Co., and operated in conjunction with the Wilmington works, would have been a great advantage to the finn; but, owned by the plaintifi',alld run on his individual accouJlt, i:he Wando works-especially by realSon of their nearness to the southern customers of the likely to come into dangerous rivalry with the firm. It appears that by letter dated Philadelphia, March 21,1885, and addressed to William M. Francis, who was thenat'Macon, Ga., upon business of Walton, Whann & Coo, the plaintiff advised Francis of his Wando purchase;stllted that he would be in Charlflston on the 25th of the month, and invited Francis to join him there, "to have a talk with me about future business, from Charleston." The letter thus ends: " All the above is in the strictest confidence. W., W.· & Co. as yet know . nothing of it." On April 7, 1885, the plaintiff wrote to Francis for immediate information as to the amount of the season's sales by Walton, Whann & Co. at their Macon office; and at the foot of the letter we find this injunction: "Let this be confidential." There is evidence. that this confidential correspondence between the plaintiff and Francis was kept up through most of the month of April. Before his purchase of the Wando stock, the plaintiff took into his confidence in reapect thereto George A. La Maistre, the superintendent of the manufacturing departr lDent of Walton, Whann & Co., and Albanis L. Anderson, their general manager at Baltimore, and 8U pervisor of sales of their prod ucts over a large portion of the southern country; and it is indisputably shown that the plaintiff had a secret arrangement-although, perhaps, not yet entirely definite in all details-with these two persons, who were old and invaluable employes of Walton, Whann & Co., that they should go into the service of the Wando company, and' have an interest therein. Under date of March 23, 1885, the plaintiff wrote a letter to La Maistre in which these expressions occur:
"1 see my way clear'to get on in my opening to W.and B. without a raw. My reason for wi,thdrawing my individual paper, etc., will be enough to urge to them for cutting down business, etc. I shall report the Wando Shall not name you or Anderson in connection With it. * '" * I feel confident (reasonably so) that my plan for handling them is a good one."
Writing to Anderson under date of March 31st, the plaintiff, after mentioning the absence of the detendants upon the occasion of his visit to Wilmington that day,
.' ...AIIthis wall very fortunate ,for me, as I hall no Interference In getting tbe pgures that I wanted, which I did. to my satisfaction. · . · · I expect to lQ!loltil my figures to-morrow, and to make my proposition tot!lem before tbe ena 'of the' week.'" .
o , · · ·' , , " ·· · ,,; ·
. "I.e Maistr& and Anderson testify that it was part of the ,plaintiff's plan, as dililc,losed;byhhn to them,toacquire the interest defendants in Walton,,:Wijann.& Co., and to run the two concerns under one management; but, if he could not bUy from the defendaJ:!ts, then· to put the Wilmington ooncern into the hands of a receiver, and the ;firm into liquidation; There is corroborative and convincing evidence that tbeplaiotiff had determined upon that line of action. ..In the course of his testimony he himself states: "I was advised that the partnership was a partnership at will, and, I had a right to .put it into liquidation on aoyJ.day I chose. " GeJ)rge W. Bush testifies that.about thelastof 1885 j 'in an interview with him, the plaintiff said" he was going to buy Qut, the business of Walton, Whann & Co.; that he had secured the services bf the superintentlent, the sales-agent, and the book-keeper; and that he expected to;buy the business of Walton. Whann & Co.,-buy out the concern. * . .".; He said he would compel them to sell, or ti18t he wo\'dd apply for lit receiver." . S. F. Osborn, who wa!'l a trttveling salesman of the firm, ,testifies that .in March or April, 1885, the plaintiff told him that he was'goingto buyout Walton and Buck, and in reply to the witness that he hoped he would have no difficulty, the plaintiff replied" be had them in. such a position that they. could not do anything; they would have to accedeto his terms." Several other witnesses testify that the plaintiff, about the same time, made tha like sta:t'6ments to them. On April.2d .the plaintiff.metthe defendants, told them bihis purGhase of thElWando works, and insisted upon the dissolution of the firm of Walton, Whann. & Co. The plaintiff states that he suggested either that th'll'defendants should buy him out, or that he should purchase their intere.stai but this the defendants deny, and theysay,·that the alternative he presented was a sale of t.heir interests to him odiquidation.. It isp1'oved. that in the year 1885 the plaintiff, without the consent or knowledge ,of the.defendan:ts, or either of them, had htid discounted, or had, used for his own personatbenefit, lit large ampunt of commercial ,paper oC;the firm,""!'""notes made by the firm, and notes of their agents to the order of the firm, and indorsed with the firm Dame by the plaintiff,,;.....agl/:r.egatillglDore than $100,000. The plaintiff alleges that at no one time had he so in use au amount of firm paper in excess of the surplus behacLill the,firm beyond the capital he was bound to keep therein. Thieis controverted, and we are not satisfied that the plaintiff's allegation. is correct. But, however this may be, 'the more important fact appears that iIi his' purchase of the Wando stock, which cost $1l6,000,tl1e plaintiff used i $22,000 raised by the discount of notes of Walton,. Whann:& Co;, and on a pledge of the stock itself raised $85,,000.. ThenI'll! intimiltion the defendants had that the plaintiff had made an unauthorized use of firm paper for his own private ends came
RICHARDSON V. WALTON.
to them on, AprJl 6, 1885, in a telegram from the National Bank of the Republic a,t Philadelphia, announcing a want of funds to meet a note bearing the firm's'indorsement. The plaintiff had overlooked the ,date of the maturity of this note, and thus had failed to make timely provisionjfor it. On June8d the plaintiff furnished to the defendants, inresp?nseto their demand, a list of notes 80 used by him; but the defendants testify that they soon discovered thltt the list was incomplete. On J 6th Walton made a formal demand on the pillintiff that he tum over to the firm the Wando stock. About this time the plaintiff took sick. His symptoms were alarming, and he was confined to his house for some weeks. But his mental faculties were in full vigor always, and alive to 4is own pecuniary interests. It should here be he stated that the plaintiff had taken an active part in the business of the firm, ,and his general knowledge of its affairs was not less than that of his oopartn,ers.Moreover. there is proof that he had repently sought and. acquired particular information touching the condition of the firm and the 'Value of its assets. On June 16th the defendants addressed a letter to the plaintiff, in which they said: .. Because of. transactions of yours in violation of the proper relations which should exist between partners in business, a knowledge of which, as you are aware. bas but lately been brought to our notice. we havedeterinined to bring to an end our present copartnership relations." -And to that end they requested an interview. No such personal interview took place, but in all the subsequent negotiatiops the plaintiff had the advice and active' assistance of able, experienced, and vigilant counsel. ' In the first proposition of purchase made by the defendants the profits for the current business year were estimated at $42,000, which was the plaintiff's own estimate in April; but in the course of'the further negotiations the estimate of profits was raised to $50,000, the estimated depreciation in. the real estate was increased, and the defendants finally abandoned their claim to the Wando stock, to which theretofore they had tenaciously adhered. , These terms were all eventually. agreed on and incorporated in the articles of dissolution. It is proper here to mention that for several months succeeding the dissolution Mr. Francis remained with the. defendants, but left them in November, 1885, and then went into the Eiervice of the Wando Phosphate Company, in whose employ he has remained. It is stated in the bill of complaint that in November, 1885, Mr. Francis communicated to the plaintiff that "the estimate of profits made the basis of the articles of dissolution was false, and that the respondents knew it was false at the time they presented it." As has been alreadyintimate<1, as respects the alleged fraudulent conduct of the defendants in secretly acquiring information concerning the year's profits which they suppressed in their dealings with the plaintiff, the only dii'ectevidence is that of Mr. Francis on the one hand and that of the two defendants on the other. This testimony is flatly contradictory. .The plaintiff with confidence relies, as corroborative of the testimony of Fr!ioIicis, upon certain letters, calling for immediate
specia(inforJ?ation 1 ,da.ted June),!? 1885, hillfse}f, s.¥gned wIth pame Of 'the firm at' BaltIInore, JacksonvIlle,Fla., and Macon. Ga. The deknd.hts,' explanation ,of the occasibri Of 'thes,e is' that they were in the of the, outunauthorI1Jed.lsfffieoHil'ID paper; and were anXIoUs to know speedifY' what the amount'of the firQ)'s quickassetswas,and. that 'thl;lY set, J!'raneis at work to ascertain this,'and not tt>m!akeup a statEmH'ntof current bushiessyear. .They positively that the first statement of profits that ,FrancIs exhIbIted to them showed the profits,'t61Je$60,315.98, and that this was made up after the dissolution agreement was executed. ' They produce, as confirmatory of their testirilony,'this paper, which confessedly is in Mr. Francis' handwriting, and was made by him about the middle of July" There is also in evi,another statement in thehabdwriting of Francis, and made by him afl;lw days 'after the one just melltioned, which sh,ows the profits to be $101,277.91, which figures are correct. These two papers, the plaintiffinsists, are only apparently and not really discrepant, the differences (as iii alleged) being merely a matter of hook-keeping, as one or other of two methods of making cl,osing entries is adopted. But, if this be so, the weighty fact yet remains that about the middle of July Mr. Francis made up,a statement which ,plainly showed, and to the common apprehension ''lVould be understood as meaning, that the year's profits were $60,375.98 only, ahd both defendants swear thatthat was the fi.-ststatement of profits he exhibited to thAm. Furthermore, the testimony of Mr. Bailey, who was an assistant to Mr. Francis in June, 1885, as to of the reports' from the branch offices, and as to the then what Francis was then engaged at,etc., taken in connection with the two Julysfutements, tends at least to excite doub,t as to the accuracy of Mr. recollection as to tilrie when he made up his first statement of profits. "The burden Of proof isupoD the plaintiff. The bill charge!! fraud, and a reformation of the articles of disSolution is sought. To entitle the plaintiff to relief the proofs should be free from all doubt, and convincing. But they do not appear so to be to us. Taking the proofs as a whole, tbis Inuch can be safely said: that the evidence is not ,so Clear and sl;ltisfactory as to justify a decree sustaining the ,,' , " " But, if a ,different conclusion upon the facts were admissible, still, in our judgiDent, the plaintiff would not be entitled to the relief he seeks, for reasons. In the first place, his secret purchase, on his Own account, of competitive works; his unauthon1Jed use of the notes of Whann & Co. in effeeting the purchase; his underhand old and valued 'employes of the firm, whereby their services were to be withdrawn from the firm and transferred to his rival establishmeoif;"i'ind-having thus acquired these adv/:lntages-his attempt copl1i'tners into selling their interesijl' to him under threat to coerce of liquidation by' legal proceedhlgs,-were acts so faithless and unfair to the delElDdants as to deprive the plaintiff of any standing in a court of
, RICHARDSONV.WALTOlf·. 1
It ,is here notable that plaintiff does not to'Ill-ake by Iuto .settlement the propose to, open the question of right thereto,but, 'li91ding' tp a1J.:the, benefits he has already from the settlemept, he., aSk$ tbatJbe .!1ccepted estimate of profits, be raised to augment the ''value of his inierjJst. ' ' , Again, seen, the plaintiff in his bill states that when he the he believed that its basis was incorrect, and that firm was "worth many tbousand dollars B,'.ut h,,. s,".,o,w,",n, :. t. I ny go. es., Jar, be.,yond this admission,,' Being under . examination In"cRlef in his;c>wn behalf, he "Question. Was your familiarity with the value of the assets ot the firm enable you to jUdge of the accuracy of this statement? An.\'wer. Oh, yes. Q. How accurate W8Sit? ,A. I wassatistiedthllt it, was inrotind $80,000 less to me than it should be, although; I 'knew it was possible it might be $25,000 ,more than that short of wha:tit should be. 'I '
"He to particularize wherein he then judged the stateIll-¢nt to namely, in "the deductions on real estate, guaranty of cunent sales, the estimate of profits for the year, and the deduction for dRubtful accounts.. " , Being asked why h,e accepted the basis of settleplep.t if he felt it gave him $80,000 lessthan he entitled to, he answered that}t was because of his critical physical condition, and the advice of his,physician to give up business. It is then perfectly clear that the plaintiff d,id not rely upon the correctness of the basis of settlement presented tqhim. Taking him at his qwn word, he was not deceived at all. He had sufficient knowledge of the real value of his hlterest in the firlll,and the alleged fraudulent statement of profits was not the determining cause of his entering into the settlement. Upon what principle, then, can the plaintiff be relieved from the consequences of his delii:>erate act? The partycomplaining ofmisrepresentation must have been ignorant ofthe true state of facts, and must have given credit to the misrepresentation, and have been actually Ill-isled thereby to his hurt. 1 Bigelow, Frauds, 521 j Slaughter'8 Adm'r v. Gerson, 13 Wall. 379. The motive which the plaintiff states induced him to make a settlement involving a known pecuniary loss, not having arisen out of anything for which the defendants are responsible, can, afford no ground for avoiding the settlement. But finally, the bill of complaint states that as early as NoveIll-ber, 1885, Francis ,communicated to the plaintiff not onltthat the estimate of profitS 'which was the basis of settlement..was faIse, but that the defendantsknew it was false at the time they presented it. Yet the bill was nQtt1led until October 12, 1888. Nothing has:been shown to excuse this delay. ,During tbis long perit>d the plaintiff uttered, no word no sign of dissatisfaction. Without challenging the settlenlent'bewent onacoepting under it, at the end of eachconsecutive three months, $5,000, until all the 12 promissory notes given by, the were paid. By thisacquiescen98 after full knowledge -by thlisreceiving and enjoying the fruits of tbe plain-
tiffhu precluded from equitable relief. Kerr, 30l. nhe meant to rescind or reform the settlement upon the ground of fraud he wasoound to I1nd his delayot nearly three years was 'fatal.'Gf'ymes v;8anders, 93 U.S. v. MUlilcwn, 185 U. S. '804, 10 Sup. Ct. Rep. 823. It has been repeatedly declared that there must be conscience, good faith, and reasonable diligence to call into action the powers ora court of McKnight v. Tay!()T', 1 How. 161; Creath's Adm.'r v. $:ffI.8, 5 How. 192. But these things are lacking in ,the plaintiff's case. It follows. then, from what has been said, thttt,so far as concerns the main issue;-the one we have discussed,-the bill of complaint niust be dismissed, with costs to the defendants. The articles 'of dissolution provide that the defendants shall collectthe scheduled excepted out of the contract of sale, and from time time,on request, account tothe plaintiff for his share; and the bill charges failure and refusal by the defendants to do so. The answer denies thi!! allegation, but admits that there is a balance of $699.30 in their hands belonging to.the plaintiff, which they are ready to pay ov:er to him. This part of the case rests upon tlle bill and answer.. W!!J have had some doubt whether we should dismiss the whole bill without prejudice to the. plaintiff's right to sue at law for the amount coming to him out of tHese claims, or retain the bill with .8 view to 8 decree that shall cover every matter in dispute. But we hitVe at length concluded to pursue the latter course. Perhaps the parties can agree upon the balance due to the plaintiff from these collections. But if they cannot dl,l so, we will appoint a master to the amount, raserving the question of the costs of the reference until the coming in of his report.· .
WALES. District JUdge,ooncuriJ.
BARBOUR '0. LYDDY.
(OfnmCt'CotCf't, D. New .Ttrsey. :Maroh §.1891.)
lhBBMSNU-CB.lII,A.TION Bl' DSRD-BoUNDING BY "STRUDT.-
A person owning a farm bordering on the sea, and interBlloted by a road running parallel.with'the shore, divided the same itlto lots running back from the sea to and beyond thll road, audJlrepared a map thereof, upon w/l.ieb lot 18 was marked as a street. Soon afterwards /I.e conveyed a, lot adjoining .t/l.ereto. describing lot 18 a8a "street 50 feet wide, to be kept open and used as a street for the benefit of tbose purohasing lots. " Held, that there immediately passed to the grantee, as appurteliant to bislot, a right of aocess to lot 18, and of passage to and fro over its whole length and breadth, togetber with an easement of light, ail', and prospect, and that no person 8uj)sequently title from the grantor /l.ad a rig/l.t to erect;. bath/l.ouse upon .said lot above the line of /l.igb water.
In Equity. .Suit by; S. Rebecca Barbour against Mary A. Lyddy to enjoin illterference with an easement. Granted.