Hill v. Palmer

14 N.W. 20, 56 Wis. 123, 1882 Wisc. LEXIS 266

• Court: Wisconsin Supreme Court
• Decided: November 21, 1882
• Status: Published

Opinions

LyoN, J.

Counsel agree that the learned circuit judge sustained the demurrer to the complaint on the ground that the facts therein stated show that the parties were partners in the contract with Cline, and in the execution thereof, and that the only remedy of the plaintiffs is by an action in equity for an accounting and settlement of the partnership affairs.

The question to be determined is, Does the complaint state facts which constitute a cause of action at law for the recovery of damages, or must the plaintiffs resort to an equitable action for relief ? It is a fairly debatable question whether it appears from the complaint that the agreement between the parties, in respect to the copartnership, was anything more than an executory agreement to enter into a partnership in the future, which was never executed. The agreement alleged is not in terms that the parties thereby formed a copartnership, but that “ it was agreed that the said parties should enter into a copartnership ” for the purposes therein specified. The breach of such agreement alleged in the complaint is that the defendant “ refused to comply with the conditions thereof by refusing to enter into or carry out said partnership.” But, however this may be, it seems clear that if any copartnership ever existed between these parties it commenced when the agreement between Cline and the defendant was executed. Giving to the complaint the most favorable construction for the defendant of which it will admit, and we think the agreement therein alleged is, in substance and effect, that if the defendant should succeed in making a contract with Cline which should be satisfactory to the plaintiffs, to out, log, and run Cline’s timber, then the parties should become partners in that enterprise on the terms and conditions stipulated between them.

In that view of the case there may have been a time when a copartnership actually existed between the parties; bub it was immediately terminated by the wrongful act of the defendant (so far as he could terminate it) and no business was transacted — nothing whatever was done by the parties as partners. The defendant excluded the plaintiffs from all participation whatever in his contract with Cline as soon as it was made, and they had no part in the performance thereof. By such wrongful act the defendant refused to launch the partnership business, and thus rendered the copartnership inoperative for the purposes for which it was formed. There is no doubt whatever that an action at law may be maintained by a party to an executory contract to form a future copartnership to recover damages for a wrongful refusal by the other party to execute such agreement. It is also well settled that the wrongful refusal by a party to a contract of copartnership to permit the firm to commence business, or, as it is sometimes termed, to lemneh the partnership business, is ground for an action at law by the injured partner to recover damages of the partner whose Avrongful act has defeated the purposes for Avhich the copart-nership was formed. The cases which so hold, both in England and this country, are very numerous. Indeed, the authorities seem to be quite uniform in so holding. The following are a few of the cases referred to: Venning v. Leckie, 13 East (Term R.), 7; Gale v. Leckie, 2 Stark., 107; Manning v. Wadsworth, 4 Md., 59; Glover v. Tuck, 24 Wend., 153; Bagley v. Smith, 10 N. Y., 489; Terrill v. Richards, 1 Nott & McC., 20; Ellison v. Chapman, 7 Blackf., 224; Williams v. Henshaw, 11 Pick., 79; Addams v. Totten, 39 Pa. St., 447; Vance v. Blair, 18 Ohio, 532; 1 Story’s Eq. Jur., § 665; Collyer on Part., § 245; 2 Lindley on Part. (4th ed.), 1025, and cases cited in notes. The subject is much discussed in some of the above cases, and many other cases asserting the same doctrine are cited in the opinions as well as in the above text-books.

■ The test seems to be that if the damages resulting from a breach of a covenant or stipulation in the partnership agreement by one partner belong exclusively to the other partner, and can be assessed without taking an account of the partnership business, covenant or assumpsit may be maintained by the injured partner against the other for such damages. Here, no partnership business was transacted; hence no account could he taken, and the damages claimed belong to the plaintiffs. This principle was applied in Sprout v. Crowley, 30 Wis., 187. Should it be conceded that by the alleged agreement of September, 1877, the parties became partners, this action can still be maintained under many of the cases above cited. This court has frequently held that one partner has no claim against his copartner individually, (that is to say, he cannot maintain an action at law against such copartner), on account of partnership transactions, although a final settlement of the affairs of the firm would show a balance in his favor. Tolford v. Tolford, 44 Wis., 547, and cases cited. But it has not held that if one partner, immediately after the contract of copartnership is made and before anything has been done under it, wrongfully repudiates the contract and prevents the firm from ever doing any business under it, the injured partner cannot maintain an action at law against his copartner, and recover the damages which he has suffered thereby.

In Tolford v. Tolford, supra, and also in Lower v. Denton, 9 Wis., 268, an accounting was necessary in order to determine the damages or compensation to which the plaintiff was entitled. These were actions at law. The same is true of Wood v. Beath, 23 Wis., 254, which was a suit in equity.

It follows from the foregoing views that the complaint states a valid cause of action at law.