Chester v. Dickerson

(dissenting.) The rule of law which makes one innocent partner liable for the frauds of his copartners, committed during the existence of the copartnership, is firmly established. It applies as well to partnerships created for the purchase and sale of lands, as to ordinary mercantile partnership. The principle on which the liability rests, namely; that, “seeing somebody must be a loser by this deceit, it is more reason, that he that employs and confides in the deceiver should be a loser, than a stranger,” equally governs both kinds of partnerships. (Per Holt, Ch. J. Hern v. Nichols, 1 Salk. 298. Story on Part. § 108.)

The objection was taken that a partnership in lands, *362could not be created by parol. It has been repeatedly held in England, that it may be so created. (Forster v. Hale, 5 Ves. 309. Essex v. Essex, 20 Beav. 449. Dale v. Hamilton, 5 Hern. 369; aff. 2 Ph. 266. Cowell v. Watt, 2 H. & T. W. 224.) But the authority of these cases,' has been shaken to some extent by the decision of the lord chancellor in Caddish v. Simpson, (2 DeG. & J. 52.) Story, in his commentaries on •partnership, says: “ Such- a contract must from the nature of the case, and the positive rules of law, and the statute of frauds, be reduced to writing, and then the stipulation of the parties will constitute the sole rule, to ascertain their intention, and to enforce their respective rights.” (§ 83.) I am not aware of any case in this state, in which this question has been distinctly decided. The judgment of Chancellor Walworth in Smith v. Tarlton, (2 Barb. Ch. 336,) is, however, an authority to show that all partnerships may be created by parol; and I can perceive no reason for any distinction founded on the mode of investment of the capital, or funds of the partnership—whether in merchandise or lands. The effect of the contract is to establish the legal relation. The substance of this is, the right to share profits, and the liability to bear losses. All the rest is incidental. If the partnership properly consists of land, the legal title to it maybe vested in all the partners as tenants in common, or in one or more of them, for the benefit of the partnership. In the latter case, it will be treated in equity as personalty. My opinion, therefore, is that the judge ruled correctly on this subject.

Upon the trial, the plaintiffs proved the partnership between the defendants by a formal agreement, dated ¡November 28, 1864. The defendant Jones was examined as a witness for the defendants. On his cross-examination, this occurred, viz: “ Q. When did this partnership operation of yours first exist between you, ¡Reed, Dickerson and De Wint ? A. I think it was in the fall. Q.' How *363early in the fall ? A. September. Q. It was not put in writing until sometime afterwards, was it? A. Ho sir. Q. Did it exist in September, you think? A. Tes sir.” Ho other evidence of the existence of a partnership between the defendants was given. The defendant Dickerson afterwards testified, that he never saw his co-defendant De "Wint until December, 1864; that he never saw said Jones at all, and there is no evidence, showing that the name of Dickerson was mentioned in connection with any of the transactions in controversy, before the making of' the written agreement of partnership. It is also satisfactorily proved that Mr. Dickerson did not act, in respect to the partnership, or the business thereof, and that he did not in any manner hold himself out, and that he was not held out by others, as a partner, before the date of the written agreement aforesaid.

The court charged the jury, that this partnership was a thing entirely in doubt; that there was no proof when this partnership was formed; the written paper is dated Hovember, 1864; that there was the general proof of Jones, that it existed some time before, and then submitted it to the jury to say, when the partnership was formed, at the same time telling, them that they might consider the acts of Reed alone, in determining that question. I am of opinion, that this instruction was erroneous.

The question, whether a partnership does, or does not subsist between any particular persons, is a mixed question of law and fact, and not a mere question of fact. The existence of a partnership can be established only by showing, either a distinct agreement, in so many words, or an agreement to share profit and loss; or an agreement to share profits; or such a state of things as is sufficient to establish a quasi partnership; namely, a holding out as a partner, or an actual sharing of profits during the disputed period. (1 Lindley on Part. 847.) It cannot be established by the conduct or declarations of any other *364person than the defendant sought to he charged. (Collyer on Part. § 776. McPherson v. Rathbone, 7 Wend. 216.)

The appeal being from an order refusing a new trial, as well as from the judgment, this error is properly before us for correction, although no specific exception to the ruling was taken. (Keyes v. Devlin, 3 E. D. Smith, 523. Macy v. Wheeler, 30 N. Y. Rep. 235.)

The point was fairly raised, by the motion for a nonsuit and by the defendants’ request to the court, to charge the jury that no partnership existed between the defendants before the execution of the written • agreement, dated November 28, 1864, which could make any of the defendants liable for the others. The court refused the nonsuit, and the request to charge, and the counsel for the defendants excepted to such refusal. The exceptions, I think, are good. The testimony of Jones is, that partnership operations commenced in September, but it discloses no fact justifying the inference of the actual making of a partnership agreement prior to the written contract, or any fact implicating the defendant Dickerson in the slightest degree, in any such antecedent relation. Especially does it not warrant the charge of the judge that the proof of Jones was that "it existed some time before the written agreement. At most, his evidence amounts to the expression of an opinion or conclusion of his own, without any apparent basis of fact. The evidence of Dickerson, on the contrary, shows that the partnership could not have existed prior to the written contract. No inference can be drawn from his omission to contradict Jones more explicitly, because he could have had no personal knowledge of the “ operations ” to which Jones’ testimony related. (Taylor’s Eh. § 581.) There was nothing therefore, to warrant the submission to the jury of the question whether a partnership existed prior to the written agreement in which Dickerson was a partner, and the court should have decided it as a question of law. At all events, it does *365not apear but that the jury found Dickerson was a partner before November 28, 1864. There is no evidénce to support such a verdict, and it ought, therefore, to be set aside. (30 N. Y. Rep. sup.)

That the errors committed were of vital importance, is manifest. The alleged fraud consisted in creating false and deceptive appearances, upon the lands purchased by the plaintiffs. They could not have been deceived, before they saw the land. The evidence of the plaintiffs shows that none of them saw the land before the 8th or 9th of December, being at least ten days after the date of the agreement of partnership, and there is no evidence which proves that any of the alleged fraudulent acts were committed between the date of the partnership agreement, and the time the plaintiffs saw the land. On the contrary, I think it more probable that all the frauds alleged were perpetrated before the making of the partnership agreement, and that Mr. Dickerson was cheated by the same acts that deceived the plaintiffs. Indeed the formation of a company,' in which Mr. Dickerson and his associates retained stock, was in substance only an enlargement of the partnership by the addition of new members, and Mr. Dickerson was, no doubt, as much deceived when he took his stock, as any of his co-corporators.

I also think the judge erred in admitting testimony by the witness Higgs, as to' what he did upon the lands, after the plaintiffs had purchased them; and that the error was not cured by the judge instructing the jury that the defendants were not liable for the acts of Higgs after such sale. He should have stricken the evidence from the case, and told the jury distinctly to disregard it. Not having done so, the legal intendment is, that the jury considered it for some purpose, and that this injuriously affected the verdict. (People v. Parish, 4 Denio, 153. Erben v. Lorillard, 19 N. Y. Rep. 299. Green v. Hudson River R. R. Co., 32 Barb. 34.)

*366The only remaining question on this branch of the case is, one which, so far as the case shows, was for the first time presented on this appeal, namely: whether the receipt by the defendant Dickerson, of his share of the amount paid by the plaintiffs, on the purchase of the property, makes him liable, on the principle, that- by so doing he adopted and ratified the fraud by which the plaintiffs were induced to make such purchase. This question is, perhaps, not properly before us. Still I am of opinion that that fact alone does not make him liable. A ratification is, no doubt, equivalent to á prior command, but no one can ratify what he does not know. To make an innocent defendant answerable, on the ground of ratification, it should at least appear, that he knew of the fraud, when the proceeds of sale were paid over, or refused to return them after it had been discovered. There is no such evidence in the case, but the fact of such knowledge on the part of Dickerson, is affirmatively disproved. He did, it is true, ratify the sale; but the fraud is no part of the sale—no part of the contract—it is collateral to it. It might have been committed by some one m no way connected with the defendants. But nobody would contend that the owner, in such a case, by selling to a buyer, so influenced, would be responsible for the fraud. Hor do the cases, which hold that when an authorized agent, acting within the scope of his authority, perpetrates a fraud for the benefit of his principal, and the latter receives the fruits thereof, he is liable as for his own wrong, (Bennett v. Judson, 21 N. Y. Rep. 238; Elwell v. Chamberlin, 31 id. 611,) apply to the case before us, so far as the defendant Dickerson is concerned; because, as before stated, the evidence does not establish that the fraud in question was perpetrated by an authorized, agent; in other words, that it was committed during the existence of the partnership. (Doggett v. Emmerson, 3 Story, 700. Brass v. Worth, 40 Barb. 654. Smith v. Tracy, 36 N. Y. Rep. 79.) And the verdict may rest wholly upon *367the erroneous rulings stated. Again: sales vitiated by fraud are voidable or void at the election of the party defrauded. The mere receipt of the fruits, therefore, creates no liability. It is the subsequent attempt to retain scuh fruits which makes the person so acting liable. I think, therefore, that the principle that no one can profit by a wrong without becoming a wrongdoer, ought to be limited, not by the amount paid to the partnership, but by the amount actually received by each individual. When, as in this case, such attempt is made, if made at all, after the partnership has ended, and the moneys have been distributed* some to guilty, and some to innocent partners, it would seem to be wrong to hold the innocent members liable for the subsequent conduct of persons no longer associated with them. (Cases supra.)

Without considering the other points presented, I am of opinion, that for the errors mentioned, the. judgment and order, refusing a new trial, should be reversed, and a new trial granted, with costs to abide the event.

Judgment affirmed.

Bolt, J. F. Barnard, Gilbert and Tappen, Justices.]

This action was originally commenced against four parties. One, (De Wint,) died before the trial, and the issue was continued against the three present defendants, Dickerson, Jones, and Reed. The action was for a wrong, for damage occasioned by reason of the plaintiffs having been cheated and defrauded in the purchase of lands of the defendants. The fraudulent practice being charged to be the placing of petroleum oil by the defendants on the lands, thereby inducing the belief that the oil was the production of the lands. There are two leading principles to be kept in mind at the beginning of the examination of the points presented by the appeal. First, that the defendants committing a fraud like this are jointly and severally liable; evidence, therefore, which implicates one and not all is admissable, and, if sufficient, will justify a verdict against one alone. The second principle is that a person com-f mitting a wrong like this is liable to whomsoever suffers by the fraud; no matter whether there be any privity between the person perpetrating the fraud and the person receiving the damage by reason of it. Applying these \ principles to this ease it follows that Jones, who is proved ■ to have personally assisted in creating these fraudulent *359appearances before Ms partnership with the other defendants was formed, is liable to the plaintiffs if they were deceived by the fraud, even if he passed the title to others and they sold to the plaintiffs. The evidence, then, that Jones did this thing in September, 1864, and shortly before the other defendants became interested in the lands, was admissible as to him. Between the 1st and 20th September, 1864, Reed appears upon the lands with Jones, he promises Higgs a dollar and a half a day, and §5000 “ if the thing worked as well as Jones thought it would,” and that he “ should have that amount of money if the land sold in a good condition, , which he and Jones thought it would.” This was at least some evidence against Reed, and was admissible as against him. The deceptive appearances were at short intervals created by Higgs, acting under direction of Jones, and perhaps Reed, until the 12th December, 1864, when the plaintiffs purchased the options of the defendants, that is the right to buy the lands on which these appearances had been created, for §39,000. Subsequently the plaintiffs did acquire the lands from the owners, taMng the last title early in April, 1865. Dickerson and perhaps Reed are to be charged upon another principle of law. The three defendants, survivors of the deceased De Wint, were partners in these' lands. The written agreement is dated 28th Uovember, 1864, and has been expressly adjudged by the court to be a partnership agreement with lan,ds for its subject. (Anthony v. Dickerson et al. unreported.) Jones testified on the trial that the agreement existed in parol as early as September, 1864; Reed was called as a witness an'd did not deny it; Dickerson was subsequently sworn as a witness, and did not deny it. He does say he had not personally seen Jones and De Wint until some time after the writing was in fact signed, but the agreement shows it was signed at different places, and with different witnesses, Reed and Dickerson signing in presence of one witness, and De Wint *360and Jones signing before another witness. That it had existed before this in parol, hi either of the parties who could deny the fact did so. Surely under this state of the evidence it could safely be said that the parol agreement existed as early as September, 1864, and the charge of the judge, which left it to the jury to fix the time during which this agreement existed, in parol, if at all, before the writing, was not erroneous. The principle of law which is to charge Dickerson is, that he, one of the parties, is liable for the acts of his partner Jones, while the partnership existed, whereby these deceptive appearances were created, upon the subject of the partnership and whereby the partnership realized the proceeds of the fraud. And this principle is good as well while the agreement of partnership was in parol as while it was in writing. ■ (Sage v. Sherman, 2 Comst. 417. Smith v. Tarlton, 2 Barb. Ch. 336. Sweet v. Bradley, 24 Barb. 549. Hawkins v. Appleby, 2 Sandf. 421.)

The remaining question in the ease is, the evidence admitted of the acts of Jones after the plaintiffs purchased of the defendants. A statement of the evidence will show this was not erroneous. The defendants sold on December 12, 1864, to the plaintiffs the options only, that is the defendants sold to the plaintiffs for $39,000 the right to buy these lands, which they then had, the plaintiffs having to pay for the lands to the owners. . The plaintiffs did not get the last of these lands until April, 1865. Could they not show that Jones continued to plant this oil up to the time they parted with the last dollar they did part with upon the-faith and credit of the false appearances ? Besides, there is no evidence when the plaintiffs did convey to this petroleum company. The company was formed, it is true, about the last of December, 1864, but the date of the conveyance to the company is nowhere given; in fact is not proved at all by any conveyance or writing; but a conveyance, if one was ever made, could not have been until after *361the plaintiffs got a title themselves, which was not until after the date of the last act was proved by Higgs. The charge in reference to the time when the parol agreement existed was right. Jones had fixed the date in general terms. Eeed and Dickerson had not denied the time. Eeed testified that on the 20th September he had not become interested in the lands, but that Jones was trying to get him interested. Eeed testified, further, that on the 20th ¡November, he then having become interested and having obtained nearly all the options, he told Higgs “he would drive.” The court told the jury that they could fix the date of the parol agreement. That Jones’ testimony had fixed such an agreement in general terms, but that Eeed denied, substantially, the partnership before the 20th of September, and admitted it substantially on the 20th of ¡November. That the jury might take this testimony into consideration in fixing the time, and not that they could take into consideration Seed’s acts as making a partnership for Dickerson. No exception was made to this part of the charge by the very able counsel who conducted the trial for the defendants. I see no error upon which this judgment should be reversed. It should be affirmed, with costs.