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Greenewald v. Rathfon.

No. 8514.

GREENEWALD v. RATHFON.

CONTRACT.- Partnership.-- Fraud. -- Receiver.-- Complaint.-- Verdict.-- Judgment.

-Excessive Damages.- Vendor and Purchaser.—Complaint in two paragraphs, alleging fraudulent representations whereby the plaintiff was induced to purchase for $1,281 an interest in the property, machinery and trade of a factory worth only $800, and become a partner. One paragraph prayed damages, the cancellation of a note given for part of the purchase-money, and for general relief; the other added a prayer to annul the contract. The verdict found for the plaintiff damages in the sum which had been paid, and that the note be cancelled, but was silent as

to annulling the contract. Held, that the complaint was good on demurrer. Held, also, that the damages were excessive, since a judgment in accor

dance with the verdict would leave the plaintiff owner of the property bought.

From the Cass Superior Court.
F. Swigart, for appellant.
M. Winfield and Q. A. Myers, for appellee.

NEWCOMB, C.-The appellee filed a complaint of two paragraphs against the appellant. The averments of each paragraph were similar, with one exception, and were to the effect that the appellant was engaged in the business of manufacturing cigar boxes in the city of Logansport, and that to induce appellee to purchase one-half of the stock in trade and machinery of said manufactory, and to become an equal partner with appellant in said business, the appellant made to appellee certain false and fraudulent representations touching the profits of said business; and that the appellee, being ignorant in the premises and relying on said representations as true, was thereby induced to and did purchase from appellant one-half of said machinery and stock in trade, for which he paid appellant $900 in money, and executed his notes for $381 additional, which were secured by a mortgage on the one-half of the machinery so purchased. As a part of the transaction, the parties entered into a written contract of partnership for

Greenewald v. Rathfon.

carrying on said box factory in the city of Logansport. This contract provided that each partner should furnish one-half of the machinery and stock of the concern, but was silent in regard to said purchase by appellee from the appellant.

It was further averred, that the plaintiff, under the terms of the partnership agreement, went into the box factory and engaged in the manual labor of manufacturing cigar boxes ; that he worked therein faithfully for a period of three and one-half months; that during all that period he was able to draw from the proceeds of said business only $11 for the support of his family; that said business was not profitable, but, on the contrary, was a losing business, and was such before plaintiff became such partner; that the representations, so made by the defendant to induce the plaintiff to make said purchase and enter into said contract of partnership, were known by the defendant to be false when he made them, and that they were made for the fraudulent purpose of cheating and defrauding the plaintiff; that, after so working for three and one-half months, plaintiff informed the defendant that he, plaintiff, must abandon the box factory and seek work elsewhere, by which he could support his family, to which defendant assented, and plaintiff did leave and seek employment elsewhere, leaving the machinery and other property of the partnership in possession of the defendant, who continuously thereafter held possession and enjoyed the same.

The first paragraph further charged that said stock and machinery were not, in fact, worth more than fifteen or sixteen hundred dollars, instead of $2,462, at which rate plaintiff paid for one-half thereof, in consequence of such fraudulent representations of the defendant.

The prayer of the first paragraph of the complaint was for a dissolution of the partnership, for one thousand dollars damages, the cancellation of said notes for $381, for the rent of the premises and machinery subsequent to September 4th, 1877; that a receiver be appointed to wind up the concern, and for all proper relief. The prayer of the second paragraph

Greenewald v. Rathfon.

was, that the contract of partnership be declared null and void ; that the defendant be compelled to surrender for cancellation said notes and mortgage, and be enjoined from transferring the same; that plaintiff recover back the money so paid to defendant, with interest, and for all other proper relief.

The court denied the application for the appointment of a receiver.

Demurrers to the separate paragraphs of the complaint were properly overruled; each contained facts sufficient at least to authorize a recovery of such damages as the plaintiff could show he had sustained by the alleged fraud of the defendant.

Issues of fact being joined, the cause was submitted to a jury, who returned the following verdict:

“We, the jury, find for the plaintiff, and assess his damages at ($979.90) nine hundred and seventy-nine dollars and ninety cents; and we do further find that the notes and mortgage executed by plaintiff to defendant, bearing date May 15th, 1877, and June 5th, 1877, and described in the complaint and cross complaint, should be surrendered and cancelled.

“SAMUEL H. SUELL, Foreman.” The defendant moved for a new trial, and among the causes therefor was the following: “The damages assessed by the jury are excessive.”

We think this objection to the verdict was well taken. The jury allowed the entire sum the plaintiff had paid in money, with interest thereon, and also found that the defendant should deliver up the plaintiff's notes and mortgage, thus placing the plaintiff in the most favorable attitude he could occupy, if he had rescinded the contracts of purchase and partnership on the ground of fraud. But no rescission, or attempt at rescission, was averred or proved; on the contrary, the complaint itself recognized the partnership as still existing, and prayed for its dissolution, and the appointment of a receiver. So far as appears from the record, the plaintiff, after this verdict and judgment, was still the owner of one-half the machinery, yet without doing anything to divest himself of such ownership,

Greenewald v. Rathfon.

and transfer it to the defendant, the plaintiff recovered the full price paid for it, with interest.

On the trial the defendant, Greenewald, testified that about two weeks after plaintiff left the factory, they agreed upon a dissolution of the partnership; that Rathfon invoiced the stock, and Greenewald took it at said invoice, and agreed to pay the debts of the partnership, and to pay Rathfon $50 per year for the rent of the machinery, and to pay building association dues of $6.75 per month for Rathfon, which he had continued to do since the dissolution.

No witness contradicted this testimony of the defendant touching a dissolution of the partnership and its terms. The plaintiff was called as a witness in rebuttal, and testified as follows on this subject: “It was agreed by both parties at the time we dissolved that the contract of dissolution should be reduced to writing. MeNary was to draw it up. I asked Greenewald why he had not signed the contract; said he had not signed it because it did not suit him.

* I did not ask Greenewald to pay building association dues after suit; my requests were all made before suit was brought. I asked him to pay building association dues after he had refused to sign the contract of dissolution. The agreement to reduce the contract to writing was made some weeks after I went to the railroad shop to work. We dissolved, I think, about two weeks after I went to the shop, and I went to it as soon as I left the box factory."

The reason given by Greenewald why the contract of dissolution had not been signed was, that when they called at McNary's for that purpose, they found that the writing did not correspond with the terms of the contract of dissolation.

The machinery was valued by the different witnesses, as follows: By the plaintiff, at $1,500; by Alfred McAllister, a machinist, at $1,700 to $1,800; hy Charles Knouse, also a machinist, at $1,600, and by the defendant at $2,200.

Taking the plaintiff's own testimony as the basis of value, he still had a property of $750 in the machinery, after obtain

Greenewald v. Rathfon.

ing a verdict and judgment for the recovery of all the consideration paid for it.

This statement of the evidence on the foregoing points shows conclusively that the damages found by the jury were excessive, and that the verdict ought to have been set aside. On the complaint and proofs, if entitled to recover, the plaintiff's measure of damages, so far as the purchase of the machinery and stock in trade were concerned, was not the contract price, but the deficiency in value below the contract price, in consequence of the unprofitable character of the business.

The court erred in overruling appellant's motion for a new trial, for which cause the judgment ought to be reversed.

PER CURIAM.—It is therefore ordered, on the foregoing opinion, that the judgment below be and the same is hereby reversed, at the costs of the appellee, and that said cause be remanded, with instructions to sustain the motion of the appellant for a new trial.

Ox PETITION FOR A REHEARING. FRANKLIN, C.--Appellee, in his petition for a rehearing, insists that the court erred in holding that the damages are excessive, which was the only question presented in the case.

There appears to be a difference of opinion between appellee's counsel and the court, in relation to the nature and purport of the action. If the action is for damages only resulting from the alleged fraud of appellant, as viewed by the court, the amount of damages assessed is excessive; but if the action is to cancel and set aside the contract and partnership, on account of fraud, and place the parties in statu quo, and the verdict of the jury and judgment of the court have that effect, the damages would then seem to be about right, and the judgment ought not to be reversed.

The complaint consists of two paragraphs.

The first sets out the contract, partnership, and false representations, and avers that the plaintiff was damaged by the alleged fraud in the sum of $1,000; prayer for a judgment of

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