McGraw v. Pulling

The Chancellor. It is necessary, to a correct understanding of this case, that I should advert to the leading facts as they appear in the pleadings and proof. The original bill states, that in January, 1837, McGraw, having on hand a stock of drugs and medicines in the city of Natchez, worth ten thousand dollars, proposed to the defendant, Pulling, (who was then acting as his clerk,) the formation of a partnership, on condition that Pulling should give his notes, with good security, payable thereafter, for five thousand dollars, being one half the estimated value of said stock of drugs and — 369 — medicines. That this proposition was assented to by Pulling, and that upon the faith that Pulling would comply with his part of the agreement, the parties were thereafter held out as partners in the business of buying and vending drugs and medicines. That Pulling took some blank notes, promising to sign them and have them indorsed by Walter Irwin, which were to be returned to McGraw in payment of one half of said stock. That Pulling has never executed and delivered the notes aforesaid, or paid any part of the five thousand dollars, but refuses to do either; and has neglected the business and withdrawn money from the house, &c.; and prays that Pulling may be perpetually injoined from interfering with the concern, upon his giving him a bond of indemnity against any partnership liability. Pulling admits in his answer the proposition for a partnership, but denies that the execution and delivery of the notes was a condition precedent to the commencement of the partnership, and insists that the contract of partnership was complete on the first of January, 1837. He admits that he refused to sign the articles of partnership, offered as exhibit (A) to complainant’s bill, and says that the notes which he was to give were to be held up until they could be paid out of the profits of the concern. He has filed a cross bill, in which he prays for a dissolution of the partnership and for.an account, &c. The most of the testimony in the case is directed to the establishment of various acts and admissions on the part of McGraw, with reference to the existence of a co-partnership between himself and Pulling. Both parties distinctly admit that there was an agreement for a partnership; but it is insisted by McGraw that this agreement was not carried into effect in consequence of Pulling’s failure to comply with his part of the agreement, and that a partnership, therefore, never did exist as between them. There is no question here as to the right of third persons to treat these parties as partners; the question is, are they to be considered as partners as between themselves? To constitute a partnership, as between the parties thereto, there must be a joint ownership of the partnership [property, and an agreement, either expressed or implied, to participate in the profits and share in the loss of the business. Story on Partnership, 20; Chase v. Barrett, — 370 — 4 Paige 148. Was there such joint ownership in this case? It is not pretended that the notes which were agreed to be given by Pulling were ever delivered; his right therefore to one half of McGraw’s stock in trade must depend, first, upon whether the delivery of the notes was a condition precedent to such rights, and to the commencement of the contemplated partnership? and if so, secondly, whether the conduct of McGraw, in recognizing the existence of a partnership, was a waiver of that condition. The testimony of Edwards proves that Pulling was to become a partner and give his notes for five thousand dollars, but whether the notes were to be given prior or subsequent to the commencement of the partnership he does not know; that he was called on to draft articles of partnership, but understood that they were not executed, because McGraw was to get Pulling’s notes and have them indorsed. Mark Izod proves that he understood from the parties that Pulling was to become McGraw’s partner, on condition that he executed two notes to the amount of five thousand dollars; that in an attempt at a settlement between the parties, he heard McGraw demand the execution and delivery of the notes, which Pulling refused to give; saying he had possession, and could not be turned out except by force. The deposition of Daly, taken by Pulling,' proves that the condition upon which the partnership was formed was, that Pulling should give his notes to McGraw for half the stock; that McGraw expressed a confidence that he could get the notes at any time. From this reference to the testimony, I conclude that the agreement between the parties was virtually a contract on the part of Pulling to buy one half of McGraw’s stock of drugs and medicines, and then carry on the business jointly as partners; and that the execution and delivery of the notes was a condition precedent; and that no right vested in Pulling until he complied with it, or it was distinctly waived by McGraw. It is 'a general and familiar principle of law, that in sales of goods, to be paid for in cash or secured by note, the payment of the one or the delivery of the other is a condition precedent, implied in the contract of sale. 2 Kent’s Com. 492. And in such case, if the goods are even delivered, yet if the delivery is made subject to the delivery of the note to be given, the right of prop — 371 — erty. in the goods is not changed. 2 Kent 497, 489; Barrett v. Pritchard, 2 Pick. 512; Copland v. Bosquet, 4 Wash C. C. R. 588; Whitewell v. Vincent, 4 Pick. 451. But it is said that although the terms of the original agreement may have required a delivery of the notes to be given by Pulling before the commencement of any interest on his part in tlm goods, and as antecedent to a partnership, yet that the subsequent conduct of the parties, in holding themselves out to the world as partners, opening partnership books, and vending goods under a partnership name, is evidence that McGraw waived or dispensed with that condition. I have no doubt that the original terms of a partnership may be waived or tacitly changed by the conduct of the partners, so as to substitute new terms and conditions. Where the partners have, by common consent, acted upon a rule variant from their original agreement, I can see no reason why they should not beheld to have adopted such rule as a part of the terms of their association. This seems to have been the doctrine of Lord Eldon in the case of Const v. Harris, 1 Turner & Russell, 496. But before the terms of the original agreement can be considered as waived, superseded or dispensed with, it must appear that some new terms have been agreed upon as a substitute. In the case of Robinson v. Paige, 3 Keys, 114, it was held that a mere treaty for a change in the terms of a contract, does not amount to a waiver, unless it, is shown that it was the intention of the parties that there should be an absolute abandonment of those terms. Was there any substitution of new terms in the contract in this case, or any intention shown to absolutely abandon those in the original agreement? I think not. Although such an inference seems warrantable from the conduct of the parties, yet the testimony shows that such inference is not consistent with the truth of the case. The deposition of Daly, on cross examination, shows that McGraw expressed a confidence that he could get Pulling’s notes at any time. This deposition shows two things: 1. That McGraw did not waive nor intend to waive the execution and delivery of the notes, and that he considered such delivery as indispensable to vest Pulling with an equal interest in his stock of medicines. — 372 — 2. McGraw’s confidence that he could get the notes at any time accounts for his speaking of the partnership as already existing, and of proceeding to business as though the contract were complete. The fact proven by Edwards, that the written articles of partnership were left open, because the notes had not been made, and the fact that those articles were not afterwards signed by the parties, are full evidence to my mind that the parties themselves did not consider their contract as complete without the execution and delivery of the notes to be made by Pulling. Then, although Pulling was ostensibly admitted as a partner entitled to one half of the stock, yet it is clear that he was so admitted upon the condition and understanding that he would execute and deliver his notes well indorsed, according to the agreement; and there is nothing in the testimony to show any distinct act of waiver of this condition on the part of McGraw. If, then, there was a delivery of the goods in part to Pulling, it was a conditional delivery. In the case of Whitewell v. Vincent, 4 Pick. 451, the court say: “It is not necessary, in order to make the delivery conditional, that an express declaration should be made to that effect, afr the time of the delivery. It is sufficient if enough appears to show'that such was the intention of the parties.” And it was held in that case, that where goods are sold upon condition that the vendee gives a satisfactory note for the price, and he does not comply, the property does not pass. The same rule was laid down in the case of Copland v. Bosquet, 4 Wash. C. C. Rep. 588. And I know of nothing in the nature of a contract by which one party agrees to sell to the other one half of his stock in trade, with a view to a partnership, which would change the application of the rule. , It is laid down that where one of several partners agrees to contribute goods as a part of his stock, this agreement does not transfer the right of property to the partnership unless there is a delivery. Story on Part. 130, 131, note. I think it clear that Pulling was permitted to act and to be held out as a partner upon the condition that he was to comply with the agreement, and that his possession imder these circumstances did not change the right of property as to one half the stock of goods. In the case of Stevens v. Guppy, 3 Russ. 171, it was held that the — 373 — purchaser of a share in a copartnership business does not waive objections to the title by taking possession of the property, and acting as a partner, where it appeared that it was the intention of the parties that possession should immediately commence, and the conveyance be made at a future day. I think that the inference drawn from Pulling continuing in the store and exercising acts of ownership, is satisfactorily accounted for, as well from the fact that he was, at the time of the proposed partnership, acting as a clerk in the concern, as from the reliance which the complainant alleges he continued to place upon Pulling’s promise to make and deliver his notes in payment for a share of the goods. McGraw does not appear at any time to have waived a compliance with this condition. On the contrary, we find him, according to the testimony of Cotter, calling for an execution and delivery of the notes a short time after the partnership was to commence; and according to the testimony of Izod, again renewing that call about January, 1838, when Pulling still refused to comply with his contract in the manner agreed upon. I am clearly of opinion that Pulling’s failure to comply when urged so to do, amounted to an abandonment of the contract on his part, and that McGraw was at liberty to consider the agreement at an end, and to call upon this court for an injunction against any interference on the part of Pulling with the books, stock, or money of the concern. Where by the terms of a contract the acts to be performed are mutual, and dependant, either party may abandon the contract upon the failure of the other to cómply with his part of it. Ketchum v. Evertson, 13 John. R. 359; 12 John. 274. So where goods are to be paid for on delivery, if on the delivery the vendee refuses to pay for them, the vendor has a lien for the price, and may resume the possession of the goods, upon the ground that the delivery was conditional. Palmer v. Hand, 13 John. 434. Pulling’s proposition in his cross bill to execute the notes, comes too late. This is not the kind of case in which a court of equity will extend indulgence to a party by giving him time to complete his contract. From this view of the case I conclude that no interest in the stock of goods was to vest in Pulling until he gave his notes therefor; and that this condition was not waived by McGraw. — 374 — But suppose the partnership is to be considered as complete, by reason of McGraw’s neglect to enforce an execution and delivery of the notes from Pulling, and by his having suffered him to be held out as a partner, would this materially change the rights of Pulling? Would it be equitable and just that he should be allowed to come in and share one half the profits of McGraw’s capital, without having advanced a dollar to the common stock? Pulling says in his answer that it was understood that he was to pay for his half out of the profits of the concern. I find nothing in the testimony to support this extraordinary pretension. According to this, McGraw was to give him one half of his stock of goods and wait till Pulling could realize enough from the profits arising from the sale thereof to pay for them. This would indeed be like the fabled partnership for hunting formed between the lion and other beasts of the forest, in which the lion graciously appropriated the whole prey to his own use. I understand that the first canon of the law of partnership is, that each party must bring something either in money, property or labor into the common stock or fund, and that a partnership formed upon any other basis would be a mere nullity. Story on Part. 23; 3 Kent 24. Upon the whole, I shall direct a decree dismissing the cross bill, and perpetually enjoining Pulling from interfering in any manner with the stock of drugs and medicines which formed the subject of the contract. The injunction to take effect upon McGraw’s executing a bond with security, to be approved by me, conditioned to indemnify Pulling against any liability he may have incurred to third persons, by having been held out as a partner of McGraw. The neglect of McGraw to put an end to the agreement at an earlier period, I think properly subjects him to the costs of the suit. He will accordingly be decreed to pay all costs.