The object of this action, brought by a member of a copartnership firm, as deduced from the pleadings, appears to be twofold.
1. To obtain dissolution of the copartnership existing, as alleged, between plainti F and defendant Vinson, in the firm name of W. E. Vinson & Co.;, to acquire an accounting, to ascertain and state the account of each member, touching their respective interests in and obligations to said firm; to provide for the payment of the firm’s debts out of the assets thereof; and then to make division of the property or proceeds remaining, according to the respective interests of the copartners; and, in general, to wind up the affairs of said firm.
2. To cancel and set aside a sale of certain property of said firm, made by defendant Vinson, one member thereof, acting on behalf of the firm, to defendant C. C. David, not a member of said firm, which sale is alleged to be fraudulent and void for the reasons hereinafter set forth, as alleged in the complaint.
To the end that these purposes of the action might be effectual, plaintiff asked, and, on commencement of the action, obtained, appointment of a receiver to take charge of all the property of said firm, including the property sold to defendant David, and also obtained an injunction restraining defendants from interfering with the property in question.
The amended complaint, on which the action is founded, sets forth: That in November, 1890, plaintiff and defendant Vinson entered into a copartnership, on equal terms and shares, for the purpose of engaging in and carrying on the business of sheep ranching in Meagher county, Montana, under the firm name and style of W. E. Vinson & Co., and thereupon engaged in and continued such business until about October 25, 1892. That, during the continuance of said copartnership business, defendant Vinson has wrongfully applied to his own use, out of the receipts of said business, certain money, the amount of which plaintiff is unable to state, because said defendant has neglected and refused to account to plaintiff therefor, although often requested so to do.
“ III. That on or about the twenty-fifth day of October, 1892, the said defendant W. E. Vinson, without the knowledge or assent of the plaintiff, assigned and transferred his interest in the said property of the said copartnership, being the property used for carrying on the business thereof, to the defendant C. C. David, who well knew of the plaintiff’s interest therein, and who now claims to be the owner thereof, and who also claims, as the plaintiff is informed, to be the owner of the entire partnership property of the said firm, by purchase from the said W. E. Vinson; and that the said C. C. David, without the knowledge or consent of the plaintiff, has taken exclusive possession of the said property, and refuses
“ IV. That the said sale and transfer was made for the purpose of defeating and defrauding this plaintiff, in this: That the said copartnership is indebted to this plaintiff, on account of moneys advanced by the said plaintiff to the said copartnership for the purpose of defraying the expenses and carrying on the business thereof, in the sum of three hundred (300) dollars over and above his share of the capital stock thereof, and also that the said copartnership is indebted in a large sum to other parties, for the payment of which the plaintiff is individually liable, all of which the defendant C. C. David well knew at the time of the sale and transfer.”
Following these allegations, the complaint sets forth a list of the property of said firm, and demands judgment: 1. That said copartnership be dissolved, and that an accounting be taken, etc., according to the usual practice in such cases; 2. That a receiver of the property of said firm be appointed, clothed with the usual power in such cases; 3. That defendants be restrained by injunction from interfering with said property; 4. That the effects of the firm be sold, and its liabilities discharged, and the surplus, if any, divided between the parties according to their respective interests.
In reviewing a case on the assignment that the findings or decision is not warranted by the evidence it is necessary to refer to the complaint to see what has been alleged as ground for the relief sought and obtained by the decision, and what issue has been formed thereon by the other pleadings, as a starting point from which to review and consider the evidence on such assignment. In looking into the complaint for the grounds alleged for annulling said sale it is found that all the averments relating thereto are comprised in paragraphs 3 and
Giving these averments all reasonable force and effect, or even going beyond the rule, and giving them the strongest interpretation admissible in favor of plaintiff’s case, and they fail to disclose sufficient ground to warrant the cancellation of the sale alleged; for, granting that the firm was indebted to plaintiff and others as alleged, that fact did not forbid a sale by Vinson of his interest in the firm, as alleged, if he could find any one willing to buy it. Nor did that fact relieve Vinson from liability to plaintiff for overdrafts out of the firm assets. Nor did it relieve Vinson from his liability, along with plaintiff, for the debts of the firm contracted prior to the sale of Vinson’s interest. Nor did such sale relieve the firm or defendant Vinson of their liabilities to plaintiff for his advancements in au accounting. This sale of Vinson’s interest may have, put his affairs in better condition to meet such liabilities; and if defendant David, having bought Vinson’s interest, undertook to assume the whole property of the firm as his own, and exclude plaintiff from his rights therein, as alleged, while such conduct was ground for dissolution, accounting, and Avinding up of the affairs of the copartnership, in the proper action, and by interposition of a receiver, it was not ground for the cancellation of the sale of Vinson’s inter
Defendants made separate answers. The answer of Vinson, after denying each allegation of the complaint, for further defense, by way of new matter, alleges that by the terms of a verbal agreement, whereby said copartnership was formed, Vinson was made the sole and exclusive agent and manager of its business, with power to buy, sell, and otherwise handle and manage the property and business thereof, and also empowered to contract debts on behalf of the firm, and secure the same, if necessary, by execution of a mortgage on the.firm property, or to sell the property of the firm to satisfy such debts; that, at the time of the formatiou of said copartnership, defendant Vinson was the owner and in possession of certain real and personal property, consisting of horses, cattle, sheep, and other personal property, together with certain corrals, fences, houses, and other improvements upon lands owned by said defendant, of the value of $4,000, as agreed by and between plaintiff and defendant Vinson.in said copartnership agreement; that, according to the terms of said copartnership agreement, the whole of said property was, by Vinson, transferred to said copartnership firm, as capital stock thereof, in consideration of which transfer plaintiff agreed to pay defendant Vinson for the one-half interest in said property and in the copartnership business the sum of $2,000; that although payment thereof had been often reqhested, plaintiff has failed and refused to pay the same, except the sum of $209.50 paid thereon by plaintiff; that in said copartnership agreement it was agreed between plaintiff and defendant, as members of said firm, that for his services as manager of the copartnership business, to be carried on as aforesaid, defendant Vinson was to receive from the
Tiie answer of defendant David specifically denies the allegations of the complaint relating to him, and to the alleged fraudulent purchase of said property, or an interest therein, by him, and further denies that he is insolvent, or unable to respond in damages to any extent which might be awarded to plaintiff for his interest in said property, and alleges that he (David) is the owner of real and personal property of the value of $20,000, subject to execution, but does not deny that he knew the property sold to him was copartnership effects, or that plaintiff had an interest therein as a member of said firm, or that the sale was made without plaintiff’s consent, and for further defense alleges, substantially, the same facts regarding the sale and delivery of certain described property of said firm to him by Vinson, subject to mortgage, and the payment of the consideration, as set forth in the answer of Vinson, and that said sale and purchase was made in good faith, and the consideration paid therefor was a'full and fair valuation of the property in question, and denies that he (defendant David) claims ownership of, or has ever taken possession of or assumed any control over, any property of said firm, except that bought by him as aforesaid; that, aside from that transaction, he has had nothing to do with, nor is concerned in, said copartnership firm.
Plaintiff, by replication, put in issue the new matter alleged in said answers, except that he does not deny the allegation of the answers that the sale to David was of certain property of the firm outright, and not of Vinson’s interest therein, only, as alleged in the complaint. But plaintiff denies that David paid therefor the sum stated in the answers, or the full, fair, or just valuation thereof. The replication also admits .that defendant Vinson is entitled to the sum of $960 for services rendered said firm under the provisions of the partnership agreement.
It therefore appears that two issues were raised as to the alleged fraudulent sale. One issue raised by the allegation of the complaint and answer was as to an alleged fraudulent sale of Vinson’s interest in said firm, which allegation of fraud
Therefore, it is apparent, and should be observed, that while defendant David may have been a proper party to the action for dissolution and accounting, as successor to Vinson’s interest in the firm, by purchase, that allegation presented no ground for cancellation of the sale of Vinson’s interest, and does not appear to have been relied on after defendant David answered, disclaiming ownership of any interest in the firm, but claiming to have purchased certain property thereof outright. But by the real issue relating to David, raised by the new and affirmative averments of the answer and denials of the replication, it really became an action involving two distinct causes, which could not be properly joined; that is, an action between partners for dissolution, etc., and also joining therewith an action against a stranger to the firm, to set aside a sale of firm property made to him on grounds of alleged fraud. But no question is raised as to this peculiar aspect of the case, and therefore the same is only noticed here to avoid the implication that such practice as appears in this case was sanctioned as proper.
At the trial plaintiff fell as far short of producing proof tending to show a fraudulent purpose on the part of either party to said sale as he did of alleging facts to that end-in the complaint. The evidence introduced by both parties, with scarcely any contradiction on material points, shows the state of facts alleged in Vinson’s answer regarding the condition of the firm in general when said sale was made,-and the facts relating thereto.
It appears from the evidence that plaintiff resided in the state of New York, while defendant Vinson was in sole charge and management of said copartnership business in Montana, except in so far as he was occasionally advised in relation thereto by plaintiff’s agent, "Walter A. Waite; that the firm was indebted substantially as alleged in Vinson’s answer; that plaintiff was in default somewhat in relation to said firm, but that question pertains to an accounting between the members, a question with which we have nothing to do in this appeal.
The sheep belonging to the firm were mortgaged, as alleged in Vinson’s answer, as to which mortgage, and debt secured thereby, and several renewals thereof, plaintiff appears to have had full knowledge, and there appears to have been no question raised as to its good faith and validity, so far as shown by the record; and, besides that mortgage debt, the firm was indebted to divers parties, aggregating about $2,000, as alleged by Vinson, over and above the amount due Vinson from the firm. Prior to the sale in controversy, it appears that there had been interviews between Vinson and plaintiff’s agent, Walter A. Waite, and with plaintiff himself, who appears on one occasion to have been in Montana, wherein the state of business of said firm was discussed, and an adjustment between the parties, and payment of the amount claimed to be due from plaintiff to the firm and to Vinson, was requested by the latter. The books and papers relating to the firm’s affairs were available for examination by plaintiff and his agent, and it appears from the testimony of Walter A. Waite that he examined said
Under these conditions defendant Vinson, on the 25th of October, 1892, sold to defendant David certain effects of the firm, described in a bill of sale thereof, for the'consideration of $2,714, paid by David therefor, subject, by express terms of the bill of sale, to the chattel mortgage thereon to secure the sum of $4,500. The jury found that such payment of $2,714 was made by David, and this finding is fully in áccord with the evidence; and there is no evidence in the record to support the modification of that finding by the court, to the effect that defendant David placed in the bank, to the credit of W. E. Vinson & Co., $2,000, “but as to what amount of that money was used by Vinson in paying the debts of the firm, and as to what amount was paid back to C. C. David, is a question the court will refer to a referee to decide, with other questions involving an account between the parties.” Such modification is wholly without support, because there was no evidence introduced to justify such intimation, and this record purports to contain all the evidence introduced. Fraud must be proved, and not presumed. According to the evidence disclosed by this record, David paid over to Vinson, in purchase of the property sold, said sum of $2,714, and Vinson used about $2,000 thereof in payment of the debts of the firm, as shown by a schedule of the debts paid, proved and introduced in evidence; and Vinson retained the residue of said purchase money
The only question of importance affecting said sale to David is whether such a sale of a large portion of the firm property by one member, without the concurrence of the other member—of which fact the vendee was cognizant—may be avoided, on complaint of the nonconcurring member, as for constructive or implied fraud in law. This question may, by liberal interpretation, be said to have been raised by the pleadings. The complaint alleges that when defendant David bought, he knew of plaintiff’s interest in said property as a member of said firm, and that the sale was without plaintiff’s
We return now to some further consideration of the facts shown in relation to the sale in question in the case at bar.
This is not an action by creditors to avoid the sale of property, on the ground that it was made with intent to defraud them of their rights. If it were, they would fail completely upon the facts shown in this case, because no fraud which would be sufficient to avoid said sale on the complaint of creditors has been shown. But this is an equitable action by one interested in the property, as joint owner, to rescind the sale because of alleged fraud perpetrated upon him through that transaction. In such a case the first inquiry which arises is whether he who seeks the equitable interference of the court has also done, or offered to do, equity in the premises. (Maloy v. Berkin, 11 Mont. 138.) That question arises here, and must be answered in the negative, against the plaintiff. As the case is disclosed by the record, this sale was made by one partner, for the full value of the property sold, as appeared when the sale was made; and for a price exceeding the real value of the property, according to the conditions unforeseen at that time; and a large part of the purchase price was used
Even where property is bought under circumstances of oppression and fraud, which are entirely absent from this case, equity does not cancel the sale without provision for restoration of the price paid. (Maloy v. Berkin, 11 Mont. 138, and cases cited.) But had such offer been made, or had defendant David’s proposition to that effect been accepted, it would not have been necessary to go to court to obtain a cancellation of said sale; for it appears, without dispute, from the evidence, that after the sale was made several interviews were had between plaintiff, represented by his attorney and agent, and David and Vinson, in respect to said sale, wherein it appears defendant repeatedly offered to rescind the sale, and deliver the property back, if the firm would restore to him the money he had paid in said purchase, and the expense he had been to in caring for the sheep after delivery to him. And, moreover, on one occasion, defendant David went further, and offered to plaintiff, through his agent and attorney, a complete rescission of said sale, and restoration of the property to the firm, on the repayment to him of the money which he had paid to the firm in said purchase, and he (David) would suffer the loss of such expense, amounting to about $400. And furthermore, there being a dispute between Waite and Vinson as to the portion of said purchase money retained by Vinson to apply on his claim against said firm, David offered to allow the sale to be rescinded on payment to him of the purchase price, which had been used directly for plaintiff’s benefit, in payment of the debts of the firm, to the amount of about $2,000, outside of Vinson’s claim; and David offered to depend upon Vinson, individually, to restore that portion of the purchase price which he had retained to apply on his claims against the firm. This offer eliminated, as far as defendant David was able, all disputed conditions upon which plaintiff Waite could rightfully refuse to concede to the equitable Condition'on which David offered a rescission of said sale. But it appears plaintiff and his counsel entirely ignored those propositions, and
The case, so far as it relates to said sale, and to defendant David, exhibits an abuse of the processes of the court. The facts shown were insufficient to warrant the cancellation of said sale to David, but warranted the contrary decision, which should have been made on the evidence produced.
The judgment declaring void said sale to defendant David should therefore be reversed, and the case is remanded, with direction to enter judgment in favor of defendant David, to the effect that no cause for cancellation of the sale of said partnership effects, described in said bill of sale to him, has been shown, and therefore that plaintiff take nothing by said action, so far as it relates to defendant David, and that said defendant have judgment against plaintiff for his costs expended therein; and it will be ordered accordingly.
Reversed.