Court Opinion

ID: 8302053
Source: CourtListenerOpinion
Date Created: 2022-10-17 11:14:05.765902+00
Date Added: 2024-06-11T16:44:22.669056
License: Public Domain

ÜN PETITION EOE REHEARING.
This cause is before us upon the complainant’s petition to rehear on four questions, viz.:
1. What was the effect of the defendant company’s knowledge of Samuel Pritchett’s insanity at the time the sale of the stock in question was made?
2. Were Pritchett and Stockell agents for each other and their firm during the existence of the partnership and Pritchett’s insanity?
3. Did Stockell assume and undertake to act as partner in making the sale, and did the defendant company deal with him as partner in that transaction 2
4. Did Stockell have the power, merely as partner, and without the consent of his co-partner to sell the whole of *440the partnership property and thus terminate the partnership, independently of the question of insanity?
Upon the first proposition it is insisted by complainant that defendant’s knowledge, either actual or constructive, of Pritchett’s insanity, at the time of the purchase of the stock in question, was equivalent to a previous judgment of insanity and worked a dissolution of the partnership in so far as defendant is concerned.
This insistence is based on the authority of Isler v. Baker, 6 Humph., 815. In that case it was held that an inquisition of lunacy found as to one of the partners, ipso facto, dissolves the partnership. It is said by defendant that the only reason for such a holding is that, by the judgment of inquisition, third persons are affected with constructive notice of it, and such legal status being once established it continues until changed. It is insisted, therefore, that defendant having knowledge, either actual or constructive, of Pritchett’s insanity, at the time it purchased the stock in question, it can stand on no higher ground than a person who has purchased partnership property of a firm after one of the partners has be.en declared insane by an inquisition of lunacy.
The question determined in,the case of Isler v. Baker, supra, was decided without discussion, or citation of authority, and that ease stands alone among the decisions of this country and in England on the question. It is the only case that.can be found anywhere that holds a judgment of inquisition, ipso facto, dissolves the partnership.
In Raymond v. Vaughn, 128 Ill., 256, 21 N. E., 566, 4 L. R. A., 440, 15 Am. St. Rep., 112, it was held that the *441insanity of a partner does not, ipso facto, work a dissolution of the partnership, but may constitute sufficient grounds to justify a court of equity in decreeing its dis-. solution.
Chancellor Kent (3d Kent, Commentaries, 58) says:
“Insanity does not work a dissolution of partnership ipso facto. It depends upon circumstances under the sound discretion of the court of chancery. But, if the lunacy be confirmed and duly ascertained, it may now be laid down as a general rule, notwithstanding the decision of Lord Talbot to the contrary, that, as partners are respectively to contribute skill and industry as well as capital to the business of the concern, the inability of a partner by reason of lunacy is a sound and a just cause for the interference of the court of chancery to dissolve the partnership, and have the accounts taken and the property duly applied.”
And the same author (2d Kent, Commentaries, 645) says:
“In cases of partnership it would at least require a decree in chancery to dissolve the partnership on the ground of lunacy.”
Story, in his work on Partnership, section 295, says:
“The common law, . . . upon grounds of public policy or convenience, holds that insanity does not ordinarily, per se, amount to a positive dissolution of the partnership, but only to a good and sufficient cause for a court of equity to decree a dissolution.”
In R. C. L., vol. 20, section 184, it is said that insanity does not of itself terminate a partnership, but may constitute sufficient grounds for its termination.
*442To the same effect is 30 Cyc., 654; 20 Am. & Eng. Ency. of Law (2d Ed.), 209; 69 Am. St. Rep., 428, note; Ann. Cas., 1913D, 1148, note.
In all of these cases it was held, that the insanity of a partner does not, per se, work a dissolution of the partnership, hut may constitute sufficient grounds to justify a court of equity in decreeing its dissolution.
We think this is the better and more rational rule. At any rate, we do not féel justified in holding that mere knowledge, either actual or constructive, by one who deals with a partnership, of the insanity of one of the partners, effects a dissolution of the partnership in so far as he is concerned.
Upon the second proposition, i. e., whether Pritchett and Stockell were agents for each other and for their firm during the existence of the partnership, we do not think it can be seriously questioned that each partner is, in law, to he treated as the agent of the firm in all matters relating to the partnership, and within its scope, unless the articles of partnership limit such authority.
Upon the third proposition: Did Stockell assume and undertake to act as a partner in making the sale, and did defendant company deal with him as a partner of the firm? We think this question must he answered in the affirmative. It appears from the partnership agreement entered into between Pritchett and Stockell on January 22,1908, that a sale of the stock to be purchased by them as partners should he made at some future time, because the partnership agreement provides that “such profit as is made on the purchased stock is to be equally divided between us.” Further, the evidence shows thaf *443Mr. Stockell had been endeavoring to negotiate a sale of this stock for more than a year before he sold the same to the defendant. The fact that a sale of the stock was contemplated by the partners also appears from a letter written to complainant by Stockell on July 5, 1911, which was only a few days after the stock in question was sold to the defendant. In this letter to complainant Mr. Stockell was explaining to her the partnership dealings between him and her husband. The letter reads:
“I consented to join him (Pritchett) and we did purchase several hundred shares, making notes to carry it, thinking that when our friends got in, as they had complained of the reduction in dividend by Williams, they would at once advance the dividend again to at least four per cent, when we could sell at a safe figure, and perhaps at an advance over what it had cost. Our side, though, went back on us, and declined to advance the dividend, and we were unable to sell and just had to carry it along by renewals. I then began an effort to get rid of the stock at a price to save us harmless, but was unable to do this nntil I urged Mr. Plater to sell it all in a block at eighty cents, he agreeing that he could get more for it in this way,”
Mr. Plater testified that he understood that it was the partnership stock that he was buying from Stockell; in fact, it was known to all the parties that Stockell owned no stock in the Gas Company individually.
We think it is clear from the evidence that, in negotiating the sale to the defendant Plater & Co., Stockell was acting in his capacity as a partner and not as an individual, and it was so understood by the parties at the time.
*444Upon the fourth proposition, which is to the effect that Stockell did not have the power, merely as partner, and without the consent of his copartner, to sell the whole of the partnership stock independently of his copartner’s insanity.
The general rule is that each partner may hind the firm by any act or contract that is embraced in the general scope of the partnership business. Each partner is considered generally as the agent of the firm in all matters pertaining’ to ' its business, and as such may bind the other partners the same as if he apted under a duly executed power of attorney for that purpose. Schneider v. Sansom, 62 Tex., 201, 50 Am. Rep., 521; Blodgett v. Weed, 119 Mass., 215; Decker v. Howell, 42 Cal., 636; Campbell v. Dent, 54 Mo., 325; Pahlman v. Taylor, 75 Ill., 629; Kenney v. Altvater, 77 Pa., 34.
It is also well settled that one partner has the authority and may sell the whole.or any part of the assets of the firm in the regular course of business, or for the purpose of paying the debts of the firm, when'there is no fraud in the sale. Williams v. Roberts, 6 Cold., 493; Schneider v. Sansom, supra; Graser v. Stellwagen, 25 N. Y., 315; Williams v. Barnett, 10 Kan., 455; Halstead v. Shepard, 23 Ala., 558; Cayton v. Hardy, 27 Mo., 536; Arnold v. Brown, 24 Pick. (Mass.), 89, 35 Am. Dec., 296; Lamb v. Durant, 12 Mass., 54, 7 Am. Dec., 31.
The evidence shows that Stockell sold the stock in question for the purpose of paying the partnership indebtedness, which amounted to more than $60,000, and in doing so he acted in the utmost good faith, and for what then appeared to be to the best interest of the firm.
*445It results, therefore, that complainant’s petition to rehear -will be denied.
Defendant has also filed a petition to rehear on the question of the measure of recovery to which complainant is entitled, growing- out of the sale of the individual stock of her ward. It is insisted that the difference between the sale price ($80) and the highest market price at any time after complainant had notice of the sale to defendant Plater & Co., within a reasonable time — “say ninety days” — is the true measure of complainant’s recovery.
In support of its contention defendant cites Williston on Contracts, Elliott on Contracts, and pertain eases, none of which we think are controlling of the question .here. They all relate to the measure of damages in cases where the contracting parties were sane and competent to act. Complainant’s ward being insane and incapacitated to contract at the time he sold his individual stock, complainant, as guardian, was entitled to recover the stock in specie; but having elected to recover its value, less the price paid by defendant for it, she wás entitled to recover on the basis of the market value of the stock at the time of the trial, which was the only way the status quo of the parties could be restored. It was accordingly ruled in the opinion of the court filed in this cause on a former day of the term.
The defendant’s petition to rehear will therefore be denied.