McKinley v. Lynch.
| Decision Date | 11 May 1905 |
| Parties | McKinley v. Lynch. |
| Court | West Virginia Supreme Court |
All the effects of a partnership are held in trust and each partner is a trustee, and also a cestui que trust, a trustee so far as his own duties bind him, a cestui que trust, so far as duties rest on his co-partners, (p. 57.)
Wherein a partnership for procuring options on coal and making sale thereof, and the duties were divided between the partners, two of them to work in the field procuring options and other two to negotiate for the sale of the coal, and the partners having charge of the correspondence relating to negotiations for the sale thereof, intending to purchase the interests of one or both of the partners whose duties were to procure options, must make a full, clear and frank disclosure of all correspondence and negotiations concerning such proposed sale, otherwise the purchase of such partner's interest may be avoided by him. (p. 59.)
It is the duty of partners towards each other to refrain from all concealment in the transaction of the partnership business. If a partner be guilty of any such concealment and derive a benefit therefrom, he will be treated in equity as a trustee for the firm and compelled to account to his co-partner, (p. 58.)
Appeal from Circuit Court, Harrison County.
Bill by George C. McKinley against Peter I. Lynch. Decree for defendant. Plaintiff appeals.
Reversed.
E. G. Smith, Davis & Davis, Sperry & Sperry, and Edward A. Brannon, for appellant.
John Bassel and C. W. Lynch, for appellee.
In January, 1900, George C. McKinley, James II. Moore and C. D. Elliott entered into a verbal contract of partnership to option and sell a large body of coal in the counties of Lewis, Doddridge and Harrison. Said McKinley and Moore were to get the options and said Elliott to find a purchaser or purchasers of the coal so optioned, and afterwards Peter I. Lynch was taken into the partnership for the purpose of assisting in making a sale, and all negotiations in relation to the sale were committed to the said Lynch and Elliott and placed in their control. On the 1st clay of May, 1900, the said four partners entered into an agreement in writing wherein it was agreed that the said Moore and McKinley had secured and were to secure certain options on coal extending from near Jarvisville, in Harrison county, eastward and including Mineral Point, Goodhope and other points towards West Milford, embracing about seven thousand acres of coal or coal lands, some of which options were taken in the name of Moore, some in the name of McKinley, and others in the name of Moore & Co., or McKinley & Co., or otherwise. It was set forth in the agreement that said Moore and McKinley were to bear the expenses incident to the taking of said options and said Lynch and Elliott to bear all the expenses incident to securing buyers therefor, "All other expenses to be borne by the parties hereto, equally," and the surplus remaining after paying for said coal and deducting the expenses, which were to be borne equally as aforesaid, and the first cost of said coal as agreed in said option or the profits of said coal field were to be shared equally by the parties to said agreement and each was to have an equal one-fourth in such surplus or profits whether said coal field should be sold under any option then existing thereon or that might thereafter exist thereon or whether secured by the said Moore and McKinley or said Lynch and Elliott or either or any of them, or thereafter to be so secured. It was further agreed that no one or more of them should thereafter give an option on said coal or coal field without first having obtained the consent by 'phone or otherwise, to the giving of such option and the price and terms thereof to the other parties to said agreement. On the 12th day of Sep- tember, 1900, the said partners made a contract between themselves and J. C. Menoher & Co, of Pittsburg-, whereby for the sum of $750.00, cash, they assigned and set over to said Mtenoher the one-fifth interest in and to the coal optioned and located and wherein it was agreed to make sale of all such coal at the rate of $22 per acre and the parties to share in the net profits, each, one equal one-fifth part, and that if such sale should not be effected before the expiration of any of such options the said Lynch, Elliott, McKinley and Moore were to diligently endeavor to secure the extension thereof for as long a time as might be had, or, on such of them as such extension might be obtained to such an extent as to command or control the said coal field, the money necessary for that purpose was to be furnished by Menoher & Co.; and attached to said contract a schedule of the options on the various properties. Correspondence by letter and telegraph was carried on between J. C. Menoher and Peter I. Lynch and C. D. Elliott in relation to the sale, Menoher being in Pittsburg and negotiating the sale of said coal. On the 12th day of December, 1900, late in the afternoon or at night of that day, Moore and McKinley, having been summoned in from the coal field to Clarksburg by Peter I. Lynch, by telephone, were in the store of T. J. Lynch & Co., the sons of Peter I. Lynch, when the question came up about the sale by McKinley of his interest in the partnership, when Peter I. Lynch purchased one-half of the interest of McKinley for the sum of $500.00, one hundred paid in cash and the residue on time, with interest.
At the April rules, 1902, George C. McKinley filed his bill in the circuit court of Harrison county against Peter I. Lynch, alleging that the said Lynch had defrauded him in the purchase of the one-half of his said interest by fraudulently withholding and concealing from him information in regard to the sale of said coal, and the correspondence and contract between said Lynch and Elliott and J. C. Menoher and had misrepresented to him the true condition of the negotiations for the sale of the said coal, with intent to deceive and mislead plaintiff and to fraudulently procure from him the contract of sale of his interest, at a price much below its true value, and prayed that defendant be required to answer and to produce and file all the contracts and letters and correspondence touching or concerning the consummation of said sale of coal lands or the negotiations leading thereto, and-that the contract of plaintiff's sale to Lynch on December 12, 1900, be cancelled, annulled and set aside and defendant be required to pay plaintiff the equal one-fifth part of all profits accrued or thereafter to accrue to said partnership, and offering to return to said Lynch the $500.00 paid by him to plaintiff for such interest.
The defendant, Lynch, filed his answer to said bill denying all fraud and fraudulent misrepresentations and the withholding or concealing of correspondence, or information, from plaintiff. Upon the filing of said answer the plaintiff filed an amended supplemental bill exhibiting the correspondence brought out by the answer of the defendant, especially the telegrams between J. C. Menoher and Peter I. Lynch, dated December 10, 11 and 12, 1900, and numbered respectively, 11, 12, 13 and 14.
Some three hundred pages of depositions were taken and filed in the cause and on the 29th day of January, 1904, the cause was heard upon the original bill and answer of defendants thereto, and general replication to such answer; on the amended bill and the answer of the defendant thereto, and general replication to such answer; on the depositions taken by both parties and filed in the cause. Upon such hearing the court being of the opinion that the plaintiff was not entitled to the relief prayed for in his bills, the same were dismissed and costs awarded the defendant; from which decree dismissing his bill the plaintiff appealed.
The partnership consisting of the said McKinley, Elliott, Lynch, Moore and Menoher & Co., had acquired options upon some ten thousand acres of coal at $15.00 per acre and were negotiating sale of the same at the price of $22.00 per acre, making a profit to the partners of about $70,000.00. On the 12th day of December, 1900, it seems the negotiations were about being brought to a close and the sale consummated; Moore and McKinley were called in from the field, whether on that day or on the 10th or 11th, the evidence is somewhat conflicting, but the decided preponderence of evidence is that they were called for over the telephone about noon of the 12th and went to Clarksburg afternoon, on that day. Both Moore and McKinley testify posi- lively that it was on the 12th and are fully corroborated by Mrs. Clara A. McKinley, wife of plaintiff, and by Owen Moore, son of J. H. Moore, who caught his father's horse for him in the afternoon for his father to ride to Clarksburg, that he returned home the next evening or night, having sold his interest in the options. And J. W. Coffman says McKinley and Moore came to his office one evening or night between eight and nine o'clock and he tried to secure an option on the Jarvisville coal field, which they represented and the same evening Mrs. McKinley called him on the 'phone and said George had left home about one o'clock and asked him if he had arrived or whether he had seen him. It is not disputed that their interview with Coffman was on the same night of the contract between McKinley and Lynch, thus McKinley and Moore are further corroborated by this circumstance which places it beyond doubt that they were called in on December 12th, and not on the 10th or 11th. On the 10th day of December, J. C. Menoher sent a telegram to Peter I. Lynch: ' And on the 10th the following telegram: ...
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