Paquin v. Milliken

• Citation: 63 S.W. 417,163 Mo. 79
• Court: United States State Supreme Court of Missouri
• Decision Date: 21 May 1901
• Parties: PAQUIN et al. v. MILLIKEN.<SMALL><SUP>1</SUP></SMALL>

63 S.W. 417

163 Mo. 79

PAQUIN et al. v. MILLIKEN.¹

Supreme Court of Missouri, Division No. 2.

May 21, 1901.

EQUITY — CANCELLATION OF NOTES — FRAUD — ELECTION OF REMEDIES — FAILURE TO PLACE IN STATU QUO.

1. Plaintiffs executed to defendant three notes, payable in one, two, and three years, respectively, as a part of the consideration paid for the dissolution of a partnership. An action on the first note, when due, was brought against the plaintiffs, and, one week before the trial, plaintiffs discovered fraud on the part of the defendant in the contract of dissolution, and immediately brought this suit for an accounting and the cancellation of the three notes. Held, that plaintiff's election to rescind the contract was within a reasonable time after the discovery of the fraud, and hence plaintiffs were not remitted to an action for damages, the suit to rescind not being barred by delay.

2. Where, in an action against the maker of a note given as consideration for a partnership dissolution, a breach of the contract of dissolution after its execution was alleged in defense, and a counterclaim pleaded, such defense did not constitute a waiver of the maker's right to rescind the contract for the payee's fraud, existing before the contract of dissolution was executed, but not discovered until after the service of the answer in the action on the note.

3. A partnership engaged in the manufacture of anti-toxine for tuberculosis, and the conducting of experiments therefor, was dissolved; the withdrawing partner agreeing not to engage in the same business or experiments for a year thereafter, and receiving notes as part of the consideration for his interest in the firm. In a suit to cancel the notes, and for an accounting, for the fraud of the withdrawing partner in having experimented for the discovery of such anti-toxine, made during the year after the dissolution, a decree canceling the notes was entered. Held, that such decree was not erroneous as not rescinding the contract in toto, and restoring defendant to the status quo existing when the contract was made, as such rescission and restoration were rendered impossible by the nature of the circumstances and defendant's fraud.

Appeal from St. Louis circuit court; Jacob Klein, Judge.

Suit by Paul Paquin and others against John T. Milliken. From a decree in favor of complainants, defendant appeals. Affirmed.

This is a suit in equity for the cancellation of three certain notes executed by Paul Paquin and Robert L. Owen to defendant, Milliken. The original petition was filed July 1, 1897, and a temporary injunction granted. On July 6, 1897, the temporary injunction was continued in force. The cause was heard upon an amended petition filed December 20, 1897, at which time the Paul Paquin Laboratories Company, a corporation, was added as a party plaintiff. The petition, though lengthy, sets forth the facts upon which plaintiffs sought relief; and its reproduction will obviate any other statement of the case on the part of plaintiffs. It is in these words:

"By leave of court, the plaintiffs file their amended petition, and state that heretofore, to wit, on the 31st day of January, 1895, the defendant and the plaintiff Paul Paquin entered into the following agreement of partnership, to wit:

"`These articles of co-partnership, made and entered into this thirty-first day of January, 1895, by and between Paul Paquin, of the city of St. Louis and state of Missouri, of the one part, and John T. Milliken, of the same place, of the other part, witnesseth: First. The said parties hereby form a co-partnership, which shall continue from the day of the date hereof until dissolved by mutual consent. Second. The said co-partnership is formed for the purpose of manufacturing and selling serum for the cure of tuberculosis, according to the formula and discovery of the said Paquin, and according to any improvements that he may hereafter make or discover in connection therewith. Third. The said Paquin contributes, as his portion of the capital of said co-partnership, his said discovery and formula for the manufacture of serum for the purpose aforesaid, and any improvement or improvements that he may hereafter make or add thereto. Fourth. The said Milliken, on his part, contributes the amount of ten thousand dollars ($10,000), cash money, to said co-partnership, as his share of the capital thereof. Fifth. The said Paquin is to reduce his formula, and the method of preparing serum for the cure of tuberculosis according to said formula and his said discovery, to writing; and the said writing, it is agreed by the parties hereto, shall be placed in a box, to be rented for that purpose, of the Missouri Safe-Deposit Company, in the city of St. Louis, to which box each of the parties hereto shall have one key, and to which box either, during their joint lives and the continuance of this co-partnership, shall have access, but only in the company of the other. Sixth. The said Paquin shall devote all the time necessary to the manufacture and preparation of the said serum, in quantities as required, or shall superintend its preparation and manufacture, and, with the said Milliken, devote sufficient time towards bringing about the sale thereof as a commercial article. The said Paquin shall have charge of the laboratory work, and of the experimental work, either by himself or through assistants whose work he shall superintend. Seventh. The first ten thousand dollars ($10,000) of profit realized by the co-partnership shall belong to and be paid over to said Paquin. Thereafter all profits that may be realized shall be divided in the proportion of four-fifths (4/5) to said Paquin, and one-fifth (1/5) to said Milliken. Eighth. Losses, if any, in the said co-partnership business, shall be divided and borne in the proportion aforesaid. Ninth. Correct books of account shall be kept, correctly recording all co-partnership transactions, setting forth correctly all the moneys received and paid out by the said co-partnership, and said books shall at all times be open to the inspection of either partner. In witness whereof, the said parties have hereunto set their hands to duplicate copies hereof, at the city of St. Louis, the day and year first aforesaid. Paul Paquin. John T. Milliken.'

"That afterwards, to wit, on the 27th day of March, 1895, the said contract was modified by the parties thereto as follows, to wit:

"`By mutual consent, and for a valuable consideration, the foregoing agreement has been, and hereby is, modified so as to give the said John T. Milliken a two-fifths (2/5) interest in the profits, instead of a one-fifth (1/5) interest, as stated in paragraph 7; and said Milliken shall take an active part in the prosecution of the co-partnership business. St. Louis, March 27th, 1895. Paul Paquin, M. D. John T. Milliken.'

"That afterwards, to wit, on the 10th day of June, 1895, the said contract was further modified by the parties thereto as follows, to wit:

"`By mutual agreement, and in consideration of an additional sum of five thousand ($5,000) dollars invested in said co-partnership business by John T. Milliken, he is henceforth an equal partner with the said Paul Paquin, and entitled to an equal one-half of the profits, and shall act as, and be, the business manager of the said co-partnership's affairs. St. Louis, Mo., June 10th, 1895. Paul Paquin, M. D. John T. Milliken.'

"That under the said contract, and the modifications thereof, the operations of the said partnership, thereby created, were carried on until the 7th day of November, 1895, when the said partnership was dissolved, and the interest of the said defendant therein transferred to the plaintiff, Paul Paquin, by means and by virtue of the following agreement then and there entered into by the said parties, to wit:

"`This agreement, made by and between John T. Milliken, party of the first part, and Paul Paquin, party of the second part, both of the city of St. Louis, Mo., witnesseth: That the party of the second part, for and in consideration of the covenants and agreements hereinafter set forth, to be kept and performed by the party of the first part, to and with the party of the second part, and of the sale and transfer hereinafter mentioned, has paid to the party of the first part the sum of twenty-two thousand seven hundred and fifty dollars ($22,750.00), the receipt whereof is hereby acknowledged. And the party of the first part, in consideration thereof, agrees to make, and hereby does make, the covenants and agreements hereinafter set forth, to and with the party of the second part, and the sale and transfer following: That is to say, the party of the first part hereby bargains, grants, sells, transfers, and sets over unto the party of the second part all of his right, title, and interest of every kind and character in the firm of John T. Milliken & Co., including the formula and process of manufacturing and preparing anti-tubercule serum under said formula and process, and subsequent improvements, the same being the formula of Doctor Paul Paquin, together with the assets, credits, and effects of said firm, consisting of cash in bank, the eighteen horses immunized and now in the stable of the sanitarium owned by the firm on Grand avenue, in the city of St. Louis, together with the sanitarium, the lease thereof, the furniture, fixtures, and carpets, the laboratory thereof and its contents, and the typewriters, desks, safe, furniture, and appliances, as well as open accounts, credits, effects, books, letters, correspondence, advertisements, stationery, and literature of every name or nature, kind, character, or description, including the books of clippings and papers, medical journals, contracts, letter books, letter files, testimonials, certificates of every kind or character, and address books of said firm; in short, all and singular the property, assets, credits, and effects, including the good will of the firm...