Whitehill v. Shickle

• Decision Date: 31 March 1869
• Citation: 43 Mo. 537
• Parties: JAMES C. WHITEHILL, Respondent, v. F. J. SHICKLE and E. RANDALL, Appellants.
• Court: Missouri Supreme Court

43 Mo. 537

JAMES C. WHITEHILL, Respondent,

v.F. J. SHICKLE and E. RANDALL, Appellants.

Supreme Court of Missouri.

March Term, 1869.

Appeal from St. Louis Circuit Court.

This suit was an action at law brought by plaintiff on certain articles of agreement concerning the manufacture of “Magic Filters,” signed by plaintiff and defendants, and which provided, among other agreements, the following: “The parties of the first part” (Randall & Shickle) “agree with the party of the second part” (Whitehill) “to give, and do hereby give him, one-third of the net profits arising from the sale of said filters, and from the sale of all patent rights wherever the same may be introduced, on the following conditions, to-wit: The said party of the second part is to devote his time and attention to the management and conducting of the business pertaining to the manufacture and sale of the various styles of the filters, and furnish the necessary capital and funds to defray all the expenses incurred in patenting, manufacturing, advertising, and selling of the filters as aforesaid, until the proceeds arising from the profits of the filters shall be sufficient to meet all expenses. The said party of the second part agrees to keep a correct account of all moneys received and expended by him in the business, which account shall be kept in books which are to be opened for the inspection of the said parties of the first part whenever required by either of them; and said party of the second part shall, whenever required by the parties of the first part, or either of them (but not oftener than once in each month), make out a correct and full statement of the receipts and expenditures in the said business, and shall, after repaying to himself the amount of capital advanced by him in the commencement of the business, pay over to the said parties of the first part, in equal amounts, the net proceeds of said sales and profits, after deducting one-third of the same for his own interest as before stated, which amount shall be received as a full equivalent for his services as aforesaid; and if he fails or refuses to do and perform the same as aforesaid, he is to forfeit and pay to said parties of the first part five thousand dollars, and also forfeit all his interest in the ‘Magic Filter,’ and all rights and interest under this contract. * * * The said parties of the first part hereby agree to indemnify the said party of the second part against any loss which may occur in the said business, for the period of four months from the above date, and no longer, at the expiration of which time the said party of the second part shall make a full, correct, and entire exhibit of the receipts and expenditures, and all matters pertaining to the said business; and said parties of the first part hereby agree to pay to the said party of the second part any loss, in part or whole as aforesaid, should any occur, of the capital advanced by said party of the second part in conducting said business; the said business to be conducted on the cash system, and, until otherwise agreed upon, the said business shall be conducted and carried on under the name of J. C. Whitehill. It is further covenanted and agreed, by and between said parties as aforesaid, that if the said party of the second part shall faithfully keep and perform the covenants and agreements and conditions herein contained, then the said parties of the first part will assign, on or before the 20th day of April, 1867, to said party of the second part, one-third of the patent of said ‘Magic Filter,’ if one shall be issued.”

The petition closed with the usual prayer for judgment, without asking for any account or other equitable relief. Defendants, in their answer, admitted the execution of the articles of agreement, but denied generally the allegations of plaintiff's petition, and alleged divers violations of his covenant by plaintiff. The case was referred to T. A. Post, referee, to try the issues; and, on hearing of the cause, the contract was objected to as being unstamped at the time of its execution, which omission was admitted by plaintiff. At the outset, moreover, all testimony was objected to as irrelevant, on the ground that the contract was in effect a partnership agreement; that, in the premises, an action at law was improper; that the only remedy was a bill in equity praying a dissolution of partnership and an account showing the profits and losses of the concern. Both objections were overruled. The case proceeded. Exceptions to the report of the referee were duly filed, and overruled by the Circuit Court, and the case comes here by appeal.

A further statement of the case will be found in the opinion of the court.

Ladue, Birge & Thayer, for appellants.

I. The referee below erred in admitting the contract in evidence and in allowing suit to be maintained upon what was acknowledged to be a void instrument. (U. S. Laws 1863-4, pp. 293, 295, §§ 153, 163; Act of March 3, 1865, U. S. Laws 1864, pp. 69, 70.)

II. ( a) As a proceeding in the nature of a bill in equity for an account and dissolution of the partnership, the petition was manifestly defective. No such relief is demanded, nor does it state facts entitling plaintiff to such relief. This defect has not been waived by subsequent proceedings. (Maguire v. Vice, 20 Mo. 431; Richardson v. Means, 22 Mo. 497; Morin v. Martin, 25 Mo. 362; Meyer v. Field, 37 Mo. 434, 442; Mooney v. Kennett, 19 Mo. 551, and 18 Mo. 143-4; Hathaway v. Foy, 40 Mo. 540.) ( b) An action at law could not formerly have been maintained in a case like the present. The rule requiring partners to enforce their rights against each other in equity has only three enumerated exceptions, but the present case falls under neither. It is true the action is brought on an express covenant entered into by appellants, as urged by the referee; but whether there had been any breach of the covenant required an investigation of the entire partnership transactions-- in other words, the taking of an account to ascertain if there had been any loss in the business. (Collier on Partnership, where the exceptions to the rule are enumerated and the case collated, ch. 3, § 2, ¶¶ 270, 272, 276, and ch. 1, p. 13, ¶ 18.) ( c) The finding of the referee, that the parties to this action were not copartners, is directly opposed to the decisions of this court in many similar cases. (37 Mo. 439.) It was also immaterial in answer to the objection raised by appellants, the fact of a copartnership having been admitted by the pleadings.

Krum, Decker & Krum, for respondent.

I. The referee properly admitted the contract sued on. ( a) Its execution was admitted by the appellants in their pleadings. ( b) The answer did not set up the defense that the contract was void for want of a stamp. (Gen. Stat. 1865, pp. 659, 660; Nellis v. Clark, 4 Hill, 424, 430; Pepper v. Haight, 20 Barb. 429, 435; Fenwick v. Laycock, 1 Gale, 27; Huffman v. Ackley, 34 Mo. 277; Rabsuhl v. Lack, 35 Mo. 316; Gardner v. Armstrong, 31 Mo. 536.) ( c) The appellants are parties to the contract, and have acted under it. They cannot deny its validity. (Welland Canal Co. v. Hathaway, 8 Wend. 480; Horwitz v. Equit. Ins. Co., 40 Mo. 557; 1 Greenl. on Ev. § 207.) ( d) The act of Congress of March 3, 1865, was not designed to cover a case like the one at bar. (Philpots v. Philpots, 1 J. Scott, 84.) Even under the act to invalidate the contract, there must have been “an intent to evade the provisions of the act.” (U. S. Laws, 1864-5, p. 481; Vorebeck v. Roe, 50 Barb. 302.) The consideration and subject matter of the contract are both legal. (Wetherill v. Jones, 3 B. & Ad. 221.) The object of the national legislature was merely to inflict a penalty on the offending party for the benefit of the revenue. (Smith et al. v. Mawhood, 14 Mees. & W. 450; Brown v. Duncan, 10 B. & C. 93.) ( e) The question is one of admissibility of evidence. The paper offered is not the contract, but evidence of the contract--evidence of the union of the minds of the parties. Shall the instrument be admitted? Can the respondent be prevented from proving a contract in itself moral and prohibited by no law? The power of Congress to “lay and collect taxes, duties, imports, and excises,” cannot be extended by implication to that of prescribing rules of evidence for State courts. (Const. U. S., art. X of Amend'ts.)

II. The contract sued on did not create a partnership. ( a) There is no communion of profits and losses in this case. The appellants agreed to indemnify the respondent against loss. They agreed to repay him all that he should advance. The contract may have contemplated the creation of a partnership, but it certainly did not create one. ( b) But even if the contract did create a partnership, the respondent can still recover in this action. (Adams on Eq. p. 450, § 240; Parsons on Part. 276.)

BLISS, Judge, delivered the opinion of the court.

Suit was brought upon a contract between the parties, by which the plaintiff agreed to devote his time and advance the necessary funds until the profits should meet the expenses, for the manufacture and sale of a patent filter invented by defendants. He was to receive one-third of the net profits arising from the sale of the filters and the disposition of rights to the patents, and, after deducting all his advances, he was to pay to defendants two-thirds of the net proceeds of the business, and reserve to himself one-third, both to cover his interest and pay for his services. The defendants agreed to indemnify him from any losses that should occur in the business for the first four months, and pay him the amount of these losses upon his making an exhibit. The business was to be conducted on the cash system, in the name of the plaintiff; and at the end of the year, if he did well, he was to receive a deed of one-third of the patent right; but if he should withdraw from the business within the year, he was to be paid for his services. The...