36 F. 138 (E.D.Mo. 1888), Bowman v. Patrick

Citation:36 F. 138
Party Name:BOWMAN v. PATRICK et al.
Case Date:September 17, 1888
Court:United States Courts of Appeals, Court of Appeals for the Eighth Circuit
 
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Page 138

36 F. 138 (E.D.Mo. 1888)

BOWMAN

v.

PATRICK et al.

United States Circuit Court, E.D. Missouri, Eastern Division.

September 17, 1888

Page 139

Erasmus McGinnis, for complainant.

Cunningham & Eliot, for defendants.

BREWER, J.

This is an action brought by complainant to set aside a sale of his interest in certain mining property known as the 'Col. Sellers' and 'Accident' mines, situated near the town of Leadville, in the state of Colorado, and to compel the defendants to account for all moneys received by them as proceeds of the interest so sold. The case is submitted on pleadings and proofs. The fact undisputed are these: In February, 1882, T. C. Stebbins and others owned the Col. Sellers and Accidents mining locations. In that month a contract was made between these owners on one side and the complainant and defendant William F. Patrick on the other, by the terms of which contract complainant and Patrick were to sink a good and substantial shaft down to limestone in place or bed-rock, unless pay mineral was sooner found; also to make application for patent title to said mining claims, and in consideration thereof were to receive a deed to an undivided one-half of the property. A deed in pursuance of this contract was executed and placed in escrow. Complainant and his partner, Patrick, entered upon the performance of this contract, the shaft was sunk, mineral was discovered, the deed placed in escrow was delivered, and the mine became a very profitable one. On October 19, 1882, complainant conveyed to said defendant Patrick his interest in the property, and this is the sale which is challenged. Complainant and defendant Patrick were partners in this contract, and the first question to be considered is the law which controls in sales by one partner to another.

The rule for the federal courts is laid down in Brooks v. Martin, 2 Wall. 70. In that case the court, after noticing the fact that some authorities hold generally that the relation between partners is a fiduciary one, and, declining to express an opinion whether that rule is one of universal application, notices these features in that special partnership: First, that one partner was present, and in the sole charge and management of the business, while the other was at a distance; secondly, that this was by arrangement between the partners, and, therefore, that the managing partner

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was really an agent in charge. Upon such a state of facts, in case of a sale by the managing partner to the other, the court thus states the rule:

'We lay down this as applicable to the case before us, and to all others of like character, that, in order to sustain such a sale, it must be made to appear-- First, that the price paid approximates reasonably near to a fair and adequate consideration for the thing purchased; and, second, that all the information in the possession of the purchaser which was necessary to enable the seller to form a sound judgment of the value of what he sold should have been communicated by the former to the latter.'

The supreme court of the state of Missouri, the state in which complainant resided, and the supreme court of Colorado, the state in which the defendant lived, and where the property was situate, seem inclined to go even beyond the supreme court of the United States in asserting the fiduciary nature of the relations between partners. Pomeroy v. Benton, 57 Mo. 531; Caldwell v. Davis, (Colo.) 15 P. 696. In this case it is conceded that complainant lived in St. Louis, and was only once in Colorado between February and October; that said defendant Patrick lived in Leadville, and had the active management of the business, and this by arrangement between the partners; so that the case comes squarely under the rule laid down in Brooks v. Martin. That rule must therefore be regarded as controlling in this case.

The second question is, when did complainant make the sale to defendant? Unquestionably the conveyance was not made until October 19th; but defendant insists that a binding contract of sale had been entered into theretofore, and that from the moment it was entered into the fiduciary obligations arising from the partnership ceased. Fortunately the negotiations of the partners leading up to the sale were in writing, so that we do not have to depend upon the uncertain memory of witnesses. On June 19th the parties met in St. Louis,--the shaft having been sunk a hundred feet or more,-- and made a settlement. Patrick was indebted to complainant for moneys paid out for him by complainant in some business transaction outside of this, which were allowed in this settlement, and a balance of $288.69 found due from the complainant to defendant on account of the moneys expended in sinking the shaft. For that sum complainant gave his note, due in three months. Up to this time nothing had been said in reference to a sale. Patrick returned to Colorado, and complainant started to spend the summer in the woods in the northern part of Wisconsin, his post office address being Bayfield, Wis. On the 22nd of June Patrick wrote from Colorado to complainant a letter containing this proposition:

'In regard to your interest in the Col. Sellers, I think I know a man who will pay the note you gave me, $288.69, and take your interest off your hands, and let me go right ahead with the work, which I would very much like to do. If you are willing to let it go on these terms, which is the same proposition you made me in your office, please telegraph me immediately, and I will try to make the arrangement.'

On June 27th he wrote another letter, containing this language:

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'I would like to have an answer in regard to the proposition I made you about the Col. Sellers, to return you your note and forfeit your share in the contract. There is a party here who will take it.'

And on June 28th a third letter, containing this:

'Please let me know what we are to do in this new complication, and also about the Col. Sellers, as I am anxious to continue work on that property, and see what is there.'

These letters were forwarded to complainant in Wisconsin. On the 13th of July complainant came out of the woods to Ashland, where was a telegraph station, and sent this telegram to Patrick:

'Yours of June 22nd received yesterday; proposition accepted; send note.'

On July 15th Patrick answered by this telegram:

'Acceptance too late. Proposition was dependent on immediate acceptance in St. Louis. See my letter of fifth.'

On July 16th, from St. Paul, complainant wrote this...

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