Slaughter vs. Huling.
COURT OF APPEALS OF KENTUCKY
34 Ky. 424; 1836 Ky. LEXIS 89; 4 Dana 424
October 10, 1836, Decided
PRIOR HISTORY: [**1] FROM THE CIRCUIT COURT FOR WAYNE COUNTY.
DISPOSITION: Decree reversed, set aside and annulled; and cause remanded.
COUNSEL: Mr. Owsley for plaintiff: no appearance for defendant.
JUDGES: Judge MARSHALL.
OPINION BY: MARSHALL
[*424] Judge MARSHALL delivered the Opinion of the Court.
MATTHEW SLAUGHTER, M. J. Ross and Marcus Huling were partners engaged in carrying on salt works, for the manufacturing of salt, under a lease which was to expire in December, 1833. On the first of March, 1827 [*425] Huling and Slaughter entered into a written contract, by which Huling transferred to Slaughter his entire interest in the concern for the remainder of the term, for the yearly rent of two thousand bushels of salt, to be paid to him quarterly, by Slaughter; who immediately took possession of Huling's interest in the well, furnace and all the apparatus used for carrying on the works; consisting of wagons, teams, kettles, &c. Shortly after the expiration of the first year, Huling obtained a judgment for the value of the rent then due, or a part of it; and subsequently commenced a second action for the recovery of further rent coming due according to the contract.
To enjoin further proceedings in this [**2] action, and also, upon the judgment which had been obtained, Slaughter filed this bill, in November, 1828--alleging that he had been seduced into the contract by the fraud of Huling, in concealing and misrepresenting the true quality of the water from which the works were to be supplied, and praying for a perpetual injunction, for a rescission of the contract, and for general relief.
The bill was answered, and many depositions taken; and on final hearing, the Court decreed a rescission of the contract, and a perpetuation of the injunction; but decreed also, that Slaughter should pay to Huling one third of the rent, or annual value of the works, estimated by commissioners at four hundred and seventy-five dollars, and one third of the value of the various articles of movable property which were in use when the contract was made, and which was estimated at three hundred and seventy-five dollars and twenty-two cents, making together the sum of $ 850 22, for which the decree is rendered.
To be relieved from this portion of the decree, Slaughter prosecutes this writ of error.
We are of opinion that, the decree is erroneous in several particulars.
In the first place, if it were proper [**3] to make any assessment of rents, in this suit, the assessment made by [*426] the commissioners, is too high. It does not exceed the estimate of the witnesses examined by them, but a greater number of witnesses who depose in the principal suit, and who had better opportunities of knowing, state that' in consequence of the weakness of the salt water, the works were unprofitable, and that no profit was made after Slaughter took possession of Huling's interest.
And as to the movables which were used in carrying on the works, and which constituted a part of the interest of Huling transferred to Slaughter, it is obviously unjust that Slaughter should be compelled to pay rent for the use of them, and also to pay their value at the time he received them. If there were no other relation between these parties, but such as grows out of the contract of the 1st of March, 1827, and out of its rescission on the ground of fraud, Slaughter, who is the defrauded party, ought certainly to be permitted to restore such of these articles as are in a condition to be restored, and should only be chargeable with such as are not, or cannot be, restored--estimating their value in the condition that they [**4] should have been in at the time of the rescission, if they had been prudently used in the manner intended by the contract.
But we think the decree is subject to a more radical objection than that of its non-conformity to these principles. Assuming, as in the present attitude of the case we are bound to assume, that Huling committed a fraud in the contract, which entitled Slaughter to a rescission, it follows, according to the well settled doctrines upon the subject, that as soon as Slaughter discovered the defect in the strength of the salt water, in concealing and misrepresenting which, the fraud had been committed, he had a right to put an end to the contract, and to consider it as terminated, by taking the proper steps for placing the parties in statu quo, or for enabling Huling to resume his former rights and interest.
It is proved, not only that Huling had knowledge of the condition of the water, and of the difficulties attending the manufacture of salt, after he parted with his interest, but that he was expressly notified by Slaughter, that the water had failed, and that he was at liberty to [*427] take possession of his interest again, which he refused to do. As the [**5] rescission of the contract would throw the parties back into their former condition as partners, in which condition Slaughter and Ross owned two undivided third parts of every thing connected with the works, and Huling the remaining undivided third, and the two former had a right to continue in possession, and carry on the works: it was not necessary that Slaughter, in tendering a rescission, should abandon any part of the possession, or make a corporal tender of any portion of the property. An offer to restore Huling to his interest, or, what is the same thing, a notice or request that he should come and take it, was all that could well have been done, or could reasonably have been required, in the way of tendering a rescission; and the notification given must be deemed sufficient for that purpose. Assuming, then, that the notice was given within a reasonable time after the defect in the salt water, upon fair and repeated experiments to remedy it, was found to be irremediable, (and the evidence justifies, not only this assumption, but the further assumption, that Huling knew of these experiments and their result,) the notice amounted in itself to a disaffirmance of the contract, in [**6] consequence of which the parties, when the right of rescission is afterwards established to the satisfaction of a Court, are to be considered as having been remitted to their former rights and relations, as if the contract had never been made.
If, as we have no doubt was the case, Slaughter had a right to a rescission of the contract, he did all that was necessary on his part to effect it; and he, in conjunction with Ross, had a right to prosecute, in a prudent manner, the ordinary business of the firm. In refusing to resume his interest and place as a partner, Huling, as it has turned out, put himself in the wrong. Had he then gone back into the firm, and thus, in effect, concurred in rescinding the contract, he could have required nothing more than a fair account of the transactions of the firm, during his temporary withdrawal. Has he, by standing out until a fraud has been established, and a rescission enforced upon him by the decree of a Court, entitled [*428] himself to any thing more? We think not. By the rescission of the contract he is restored to the rights and obligations of a partner. He has no rights, under the contract, which has been rescinded. That contract might [**7] have given him a separate interest from that of the firm. Its rescission has an opposite effect. And he has no separate right in the partnership effects, but such as may result from an account and settlement of the partnership affairs. Nor is either of the partners separately liable to him, for any use or abuse of the partnership effects, except as he may be made to appear so on such a settlement.
By the decree as rendered, one object, perhaps a principal one, of the contract which is rescinded as fraudulent, has in truth been effected. Huling has been let out of a business in which he anticipated loss; and moreover, the defrauded party has been compelled to purchase his interest in the firm at a high value, and without any regard to the actual state of its affairs. This seems to be unreasonable.
Had Huling made his answer a cross bill, and brought Ross, as well as Slaughter, before the Court, and prayed for an account and settlement &c. in case his contract with Slaughter should be rescinded, he would doubtless, have obtained a decree for an account, and might ultimately have been entitled to a decree for money against one or both of the partners. But as he has done nothing of this, [**8] having prayed only to have the benefit of the contract which has been rescinded; and as the rescission of that contract has created no separate responsibility on the part of Slaughter, and in his favor, we do not perceive that he is entitled to any relief as the case stands; or that the Circuit Court, after decreeing a rescission of the contract and a perpetuation of the injunction, with the costs of this suit, as it did, could rightfully proceed any further in the case.
We are of opinion, therefore, that the decree for eight hundred and fifty dollars and twenty-two cents, in favor of Huling and against Slaughter, is erroneous; and the same is reversed, set aside and annulled; and the cause is remanded.