Ingraham v. Foster

WALKER, J. — It is necessary to inquire in this case, what is the object of the complainant’s bill. Is it a bill for a specific performance, and is the complainant’s right to relief to be determined according to the rules which apply to suits for a specific performance of contracts ? It is certain that the complainant’s bill is not designed to be an application for the specific performance of a contract, for it avers the existence of the partnership, its continuance for some time, and the receipt of large profits, and only prays a recovery of the complainant’s share of the profits. Hpon the allegations and prayer of the bill, the complainant would not be entitled to the specific performance of an unexecuted contract. It may, therefore, be conceded that, if the proof makes a case where the complainant can only have relief by way of specific performance, the bill was properly dismissed by the chancellor;. — 129 — A specific performance is necessary, where tbo contract is executory — where the stipulation is to do something; as, for instance, to convey, as distinguished from an actual conveyance; or to form a partnership, as distinguished from a deed creating an actual partnership, or evidencing a subsisting partnership, and actually clothing the members of the concern with the character of partners. 2 Story’s Eq. Jur. §§ 714, 722. We find the distinction stated in Collyer on Partnership, § 202, as follows : 11 Before the partnership is actually constituted, there is frequently a written agreement between the parties to enter into partnership ; which agreement is not considered as the final contract between them, but merely as expressing an in tention that such contract shall be completed by subset quent acts, or by articles of partnership. It should be noticed, therefore, before we examine the different clauses of the articles themselves, that a court of equity will, under certain circumstances, compel the specific performance of an agreement to enter into partnership.” Was there between the parties, when this bill was filed, a subsisting partnership, or a mere agreement to form a partnership ? The copartnership articles witness that the parties uhave” entered into a partnership for the building of a steamboat, &c., of which each of the parties is to own one fourth. These articles evidence a subsisting partnership from their date; they contain no agreement to form a partnership. When no time is mentioned for the commencement of a partnership, it begins at the date of the articles. — Collyer on Partnership, § 213 ; Story on Partnership, § 194. Then the partnership in this case, between the complainant and Poster and two others, actually commenced on the 14th April, 1849, (the date of the articles,) and at that time the rights and obligations incident to the relation, both as between the parties and as to its creditors, attached. The proof shows, that the complainant was recognized and treated as a partner, until after the boat was built and brought to Mobile, in February, 1850. Now it is manifest, that here there was an actual and subsisting partnership, acknowledged and recognized for some time, and until a steamboat had been — 130 — built for the partnership, and. brought to Mobile in pursuance to the terms of the partnership. There is, therefore, no question in the case of a specific performance of a contract to form a partnership. The true question is, whether a partner who is such by the terms of the partnership, and who has been recognized and treated as such for a time, can be deprived of all participation in' the profits of the concern, because the funds which he carried into the partnership, as his equal contribution of the capital stock, had been procured by a gross fraud, perpetrated by him on one of his three copart-ners, in another and distinct partnership ; or, in other words, will the chancery court rescind or annul the contract of partnership, so far as it secures the rights of a partner to him who committed the fraud. The complainant is, by the contract, a partner. Iiis character as a partner is confirmed by the operations of the company, in pursuance to the articles, until some time in the year 1850. All the liability of a partner as to the creditors of the concern, and others with whom it may have had business, has been upon him. He is a partner, and needs •no decree of the court to constitute him a partner. He •has a partner’s right to participate in the profits, unless the court deprives him of that right by rescinding' the contract which constitutes him a partner. The question is, therefore, as to the rescission of the contract upon Foster’s cross bill. "Waiving the consideration of the point as to whether it is shown that the complainant, who is certainly liable to the creditors, would be placed in statu quo, we place the denial of a rescission upon the ground, that the fraud is in a different transaction, altogether separate and distinct from the contract of partnership. There was a partnership in two steamboats, called the Inda and Belle Creole, between complainant and Foster, which existed some time before the formation of the partnership between complainant, Foster, Hearne, and Gage. For Foster it is contended, that the complainant made fraudulent entries upon the books of the partnership in the Inda and Belle Creole; that he designedly omitted to charge himself, where he was — 131 — chargeable, and credited himself with improper sums; that the funds carried into the partnership in the Swan were the funds of the other partnership, and, upon a correct accounting, were due to Foster; and that, therefore, the complainant has fraudulently investedintlie Swan partnership money as his own, which good faith required him to pay over to Foster on a settlement of the other partnership. Conceding those facts, contended for on the part of Foster, to be true, the fraud was not one affecting the contract of partnership entered into by these four persons. That it did not enter into that contract at all, is shown by the fact, that it does not affect any of the partners besides Foster. It affects Foster, not in the 'relation produced by the last partnership, but in his relation of partner with tlie complainant alone in the Inda and Belle Creole. It is altogether a separate and distinct matter, and is, therefore, no ground for a rescission, as is settled by the decisions of this court, in Pulliam v. Owen & Russell, 25 Ala. 492, aud Byrd v. Odem, 9 Ala. 755. In this case, there were four partners. It would be unreasonable that Foster should, on account of a separate transaction between him and Ingraham, annul the partnership as to Ingraham, without the consent of the other partners, and thus create a new partnership between three, in which he takes one half the profits, notwithstanding the partnership agreed upon was between four persons, and each was to receive one fourth of the profits. If Foster can annul the partnership as to Ingraham, on account of a fraud in some independent transaction, it is conceivable, that cases might arise, in which one of four partners might annul the partnership as to each of the others, aird constitute himself the sole recipient of the profits, while as between the partners in the contract of partnership there was a total absence of fraud. It is contended for the appellees, that the demurrer to the amended bill should be sustained, because the matter of the amendment is repugnant to the original bill, and makes a new case. The original bill avers, that on the 9th April, 1851, the complainant sold to one Jaeoll B. "Walker his interest in the boat, and, from that time, — 132 — "Walker was entitled to the interest; but that the complainant was entitled to the earnings and profits up to that time. The amended bill varies those allegations, by-saying that the sale to Walker, though absolute in form, was designed to be a mere mortgage, or security, for advances in money made and to be made by Walker for Ingraham; and that, upon accounting, $2,221 62 was ascertained to be the amount due to Walker, who held the absolute title as a security for that amount. There is an inconsistency between the allegations of the original and amended bills ; but such inconsistency is not a fatal objection to an amendment, unless it have the effect of making a new case. To make an amendment improper, it is not enough that there be a mere inconsistency, or repugnancy of allegation ; there must be an inconsistency or repugnancy of the purposes of the bill, as contradis-tinguished from a modification of the relief. One of the purposes of a chancery amendment is, to correct an erroneous statement of the facts. The effect of the amendment allowed in this case, was not to make a new case, but to enlai’ge the measure of relief — to ■- remove a limitation placed upon the complainant’s relief by an erroneous allegation, and to extend its area, so as to include an additional matter of relief in the same case, excluded by the incorrect statement of the original bill. The contract, the evidence, and the defense, remain the same under the bill as amended. It may be, that the making of the incorrect statement in the original bill was the result of design, and not of mistake, and had its origin in a corrupt intent. If such was the case, it was a matter proper for the consideration of the chancellor, in determining whether the amendment should be allowed. The chancellor allowed the amendment. It does not appear from the record upon what evidence he acted in its allowance; and we cannot presume that such a corrupt intent existed, or was shown to the chancellor. The question of amendment in this case is not identical with the question in the State, ex rel. &c. v. Mayor of Mobile, 24 Ala. 701; and Larkins v. Biddle, — 133 — 21 Ala. 252. In those cases, the effect of the amendment would have been to have made a new case. The cross bill avers, and the evidence proves, the insolvency of Ingraham. The claim of Ingraham against Foster is one pertaining to a court of equity, and so is the claim of Foster against Ingraham. The claim of Foster is, therefore, a proper subject for an equitable set-off. — Carroll v. Malone, 28 Ala. 521; Wray v. Furniss, 27 Ala. 471; T. C. & D. R. R. Co. v. Rhodes, 8 Ala. 206. “A cross bill may be sustained, for the purpose of obtaining an equitable set-off.” — Goodwin v. McGehee, 15 Ala. 232. . There must be an account, for the purpose of ascertaining the measure of the complainant’s relief under,the original bill, and of the defendant’s relief under the cross bill. As the question arising upon the details of the account have not been argued before us, wo deem it safer to leave it to the chancellor, who will have the counsel before him to make the decree. The judgment of the court below is reversed, and the cause is remanded for further proceedings in pursuance to the foregoing opinion.