Engeman v. Taylor

Citation33 S.E. 922,46 W.Va. 669
PartiesENGEMAN. v. TAYLOR et al.
Decision Date09 September 1899
CourtSupreme Court of West Virginia

33 S.E. 922
46 W.Va. 669

ENGEMAN.
v.
TAYLOR et al.

Supreme Court of Appeals of West Virginia.

Sept. 9, 1899.


RESCISSION OF CONTRACT—FRAUDULENT REPRESENTATIONS.

1. A contract may be rescinded for fraudulent misrepresentations, though the means of obtaining information were fully open to the party deceived, when from the circumstances he was induced to rely upon the other party's representations.

2. Any contract the making of which is induced by fraud of either party practiced upon the other at the time the contract is made, or while negotiations in regard to it are being carried on, is voidable, and may be rescinded at the election of the party defrauded.

3. Palse representations or fraudulent concealment in respect to the subject-matter of the contract will entitle the injured party to rescission of the contract.

4. The court will not inquire into the extent of the prejudice. It is sufficient if the party misled has been slightly prejudiced, if the amount is at all appreciable.

(Syllabus by the Court.)

Appeal from circuit court, Grant county; R. W. Dailey, Jr., Judge.

Bill by William A. Engeman against James S. Taylor and John E. Taylor. Decree for defendants, and plaintiff appeals. Reversed.

Flick, Westenhaver & Baker, Benj. Dailey, and H. B. Gilkerson. for appellant.

F. M. Reynolds, L. J. Forrnan, and J. N. McMullan, for appellees.

McWHORTER, J. On the 26th day of November, 1890, W. A. Engeman, of Brooklyn, N. Y., and John E. Taylor and James S. Taylor, of Hampshire county, W. Va., entered into a written agreement of that date forming a partnership to continue for the period of 10 years from the date of agreement, for the purpose of erecting and building a tannery near the town of Petersburg, in Grant county, and for the purpose of carrying on and operating said tannery, and buying bark lands and bark rights; the capital stock to be $60,000; said Engeman to contribute one-half, and each of the Taylors one-fourth, of said capital; said capital stock to be increased from time to time as the parties might agree upon, the interests to be held by them, respectively, in the proportion stated. There was to be a settlement of the affairs of the co-partnership on the 1st day of July, 1891, and on the 1st day of January and 1st day of July in each year thereafter, at which said settlements the profits of said copartnership, if any, should be ascertained. It was agreed that nothing whatever should be drawn out of the business of said concern by any of the co-partners until the settlement of July 1, 1892, at which time the profits should be ascertained and divided in the proportion in which they held their stock, and the co-partners should then determine whether such profits should be paid to them in the proper proportions, or whether they should be invested in the business, and that at each subsequent settlement the profits should be ascertained and paid to the parties, or invested in the business of the copartnership, as they might agree; that said Engeman and J. S. Taylor should not be required to devote their time and attention to the management of the tannery; that John E. Taylor should be superintendent and manager, and should receive for his services as such $1,000 per year, to be paid by said copartnership, in consideration whereof he was to devote all his time and attention to the

[33 S.E. 923]

superintendence and management of the tannery; that any arrangement made by the co-partnership for the sale of the leather manufactured at said tannery in the Eastern markets should be with the consent of all the several co-partners; that there should be kept at all times perfect, just, and true books of accounts, for which purpose a competent bookkeeper should be employed; that each of said co-partners should duly enter and set down in said books of account all money received by him and all money expended by him in any manner pertaining to the business of said co-partnership, and that all sales and purchases of whatever kind made should be entered and set down in said books of accounts. Afterwards, on the 27th of June, 1892, it was agreed to increase the stock by $20,000; Engeman to contribute one-half, and each of the Taylors one-fourth, thereof.

On the 21st day of July, 1894, W. A. Engeman filed his bill in chancery in the circuit court of Grant county against the said John E. Taylor and James S. Taylor, setting up and exhibiting the said contract and the further agreement to increase the stock, alleging that plaintiff had paid into said firm the sum of $39,153.14 on his share of the capital; that plaintiff had been unable to ascertain definitely what amount of money had been paid in by the defendants, or either of them; that they claimed to have paid in together about $34,000, but, from facts and circumstances which had recently come to plaintiff's knowledge, he believed and charged that they had paid in a much smaller amount than they claimed, and called upon defendants to prove and show clearly what amount of money they had each contributed to the capital of the firm. Plaintiff alleged that at the time he entered into the partnership he was totally unfamiliar with the tanning business; that during its continuance he resided in the state of New York, and was only at said tannery for short periods several times during the course of each year; that the entire management and control of the erection and construction of all the buildings, machinery, and plant of said tannery were intrusted by him to said defendants, John E. and James S. Taylor, and that said defendants did erect and construct tannery buildings, and other buildings to be used in connection with said tannery, and procured the necessary machinery and appliances for operating said tannery, which said plant was located on land purchased by said firm; that all the buildings belonging to said firm were constructed under the direction and control of said defendants, who were thoroughly familiar with the costs and value of all said buildings; that after said buildings were erected the firm commenced to operate said tannery; that the control and management of said tannery and business was wholly in the hands of said defendants, the said John E. Taylor being the superintendent and James S. Taylor being the bookkeeper, or an assistant to said superintendent, at a salary of $800 a year, and they continued to manage and control the said business during the entire time of said partnership; that in carrying on and operating said tannery, they purchased bark, which was stacked on the premises, and they also purchased hides, which in the process of tanning was placed in the vats, and that said defendants were thoroughly familiar with the value of the bark and hides on hand at all times; that defendants, instead of owning separate interests in said firm as they claimed and pretended to plaintiff, were in fact acting together jointly in all their relations to said partnership; that whatever money they took in was put in on their joint account, and that there never was any division or separation of their interests in said firm as between themselves, although they led plaintiff to believe their interests were separate and distinct; that during the greater part of the continuance of said partnership the said John E. and James S. Taylor, who were brothers, were interested as partners with one William G. Harwood, their brother-in-law, in a mercantile establishment near said town; that they were so interested in said mercantile establishment up to and after the dissolution of the partnership between them and plaintiff, and that in conducting said tannery business they frequently paid the hands employed at the tannery, and also persons from whom they purchased bark, by giving them orders on said store in which they were so interested; that prior to the 29th of January, 1894, plaintiff became dissatisfied with the manner in which the business of the firm was being managed by the defendants, they having permitted the paper of said firm to go to protest and plaintiff came on from New York and proposed to withdraw from the firm; that after he came on the said J. S. Taylor left the state of West Virginia, and remained absent until plaintiff returned to New York, so that plaintiff was unable to carry out his purpose of retiring from the firm; that John E. Taylor represented to plaintiff that the mismanagement of the business was to be attributed to said James S. Taylor, and urged plaintiff to remain in the firm, stating that he would endeavor to induce James S. to retire from the firm, and plaintiff agreed that, if James retired, he would form a partnership with John E. Taylor to conduct the business; that some time after he returned to New York he was informed by John that James was willing to retire from the firm by selling his interest to plaintiff and John E. Taylor; that in pursuance of that understanding in the latter part of January, 1894, plaintiff went to Petersburg, and it was mutually agreed between the said partners that the interest of said James S. Taylor in the firm should be ascertained by taking an inventory and valuation of the assets and ascertaining the liabilities

[33 S.E. 924]

of the firm, and that the value of his interest in said firm should be paid to him by plaintiff and said John E. Taylor, who were to constitute the new firm; that an inventory and valuation of the assets of the firm was made, and the liabilities of the firm ascertained (and he filed with his bill such inventory and valuation of the assets); that, at the time of making such inventory and valuation, plaintiff was totally unfamiliar with and ignorant of the value of buildings which had been erected and then belonged to the firm, and also of the quantity and value of the bark and liquors on hand, and of the hides and leather in the vats, and of the leather in the hands of commission merchants in the East belonging to said firm, and was obliged to rely and did rely upon the statements and representations...

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    ......655; Hammond v. Pennock, 61 N.Y. 145, 151; Goldenbergh v. Hoffman, 69 N.Y. 322, 326.          ¶22 This doctrine is laid down in Engeman v. Taylor et al., 46 W. Va. 669, 33 S.E. 922, where the court, quoting from 2 Pomeroy, Equity Jurisprudence, says: "Any contract, the making of ......
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    ...of some benefit vitiates any right to receive the fruits of the contract or the benefits."); Syllabus Point 2, Engeman v. Taylor, 46 W.Va. 669, 33 S.E. 922 (1899) ("Any contract, the making of which is induced by fraud of either party practiced upon the other at the time the contract is mad......
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    ......Fouse v. Shelly, 64 W.Va. 425, 63 S.E. 208; Engeman v. Taylor, 46 W.Va. 669, 33 S.E. 922. It controls as well in mining partnerships as in those of a general commercial character. Kimberly v. Arms, ......
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    ...... Fouse v. Shelly, 64 W. Va. 425, 63 S. E. 208; Engeman v. Taylor, 46 W. Va. 669, 33 S. E. 922. It controls as well in mining partnerships as in those of a general commercial character. Kimberly v. ......
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