Statement of the Case.

tion or reservation whatsoever, pertaining to the business of the said firm and be, as he is, alone entitled to sign the name of said firm on all checks, bills of exchange, acceptances, bills of lading, promissory notes or other obligations of said firm; and that in the event of any other partner or partners infring ing or violating this agreement by sending any orders to Europe or elsewhere or by signing any other documents whatsoever, then, and in such an event, the interest of the defaulting partner or partners shall at once cease and determine.

"Fourth. That said Oteri shall, as he is hereby empowered to, delegate all or part of his powers herein by power of attorney to one or more persons wherever in his judgment he shall deem the same expedient.

"Fifth. Books of account shall be kept in which all the dealings and transactions of said firm shall be entered from day to day and fairly written, from which trial balances shall be taken monthly and a final balance at the end of each year, which books shall be kept at all times open to the inspection of all parties in interest.

"Sixth. All profits, gains and increases arising or accruing from said business, and all losses, charges and expenses whatsoever incidental thereto shall be shared and divided and borne out and paid by the parties hereto in the proportions of one-third to each of said Oteri and Scalzo and the remaining one-third to said firm of Randazzo and Di Christina.

"It is furthermore hereby agreed that neither the capital invested in said partnership nor the profits arising therefrom shall be withdrawn by said copartners during the continuance of this contract, save and except that each of said partners shall have the right of withdrawing at the end of each business year one-half of his share in the profits of the concern.

"It is furthermore agreed that in addition to the interest of said Antonio Di Christina as a member of said firm of Randazzo and Di Christina herein he shall be entitled to and receive out of the net profits of the business of said firm of Joseph Oteri & Co. at the end of each of its business years two per cent as an extra compensation for services to be rendered by him to the business of said firm.

Statement of the Case.

"Seventh. In the event of the death of either of said Oteri and Scalzo or both said Randazzo and Di Christina the partnership shall by the fact at once be dissolved and the remaining partner or partners allowed four months from the time of such dissolution to liquidate the affairs of the concern."

The cause being at issue, an examiner was appointed to take testimony, and report the same to the court, and the cause thereafterwards came on to be heard on the pleadings and proofs, and "was thereupon argued by counsel for the respective parties and referred by consent to J. W. Gurley, Esq., as master to pass upon the accounts herein and to report thereon at as early a day as possible." This was on March 4, 1887, and on the 18th of the following May the master filed his report. This report dealt only with the questions relating to the partnership, those arising in reference to damages for defamation of character having been reserved. He found that some time after the formation of the partnership, Oteri, Scalzo, Di Christina, and their bookkeeper, Terni, went to Europe in the business interests of the firm; and that the charge made in the cash book of the firm of $2538.32 for the expenses of the trip, which complainants contended was an overcharge, was correct and should be allowed: that at the time of the departure for Europe, Scalzo had paid into the capital $2000, and Randazzo and Di Christina $2500: "3. That Oteri while in Europe made business arrangements in the interest of the firm. 4. That Vincenzo Scalzo remained in Europe for some time after the departure of Oteri for home," but "had no right to make contracts for the firm." "5. That some time after Scalzo's return from Europe near the middle of September, as near as the master can determine, Scalzo and Randazzo & Di Christina paid the balance due by them on the capital of the firm, viz.: Scalzo $3000 and Randazzo & Di Christina $2500. 6. That the books of the firm were not kept in strictly mercantile manner. 7. That Oteri did for a time after the formation of the partnership and before the 14th of November, 1884, drop the name of the firm and carry on the business in his own name. 8. That Oteri did not furnish his copartners monthly trial balances. 9. That on the 14th November, 1884, both

Statement of the Case.

Terni, the bookkeeper, & A. Di Christina, the partner of Randazzo, wrote, with the approval of Oteri, to their correspondents in Europe that all the troubles between the members of the firm of Joseph Oteri & Co. had been adjusted; that Vincenzo Scalzo and Randazzo and Di Christina had paid in their share of the capital, and that the business would thereafter be conducted in the firm's name." He held that Oteri had violated the act of partnership in the particulars named, and also that there was a violation on the part of the other partners in not completing, until November, the payment of their share of the capital, which was due in July, but that on November 14, 1884, "all the acts theretofore committed, or omitted, by any of the partners in violation of the partnership agreement were mutually condoned, and that harmony was restored between the members of the firm, A. Di Christina himself actively aiding in making the announcement." The report discussed the evidence bearing upon the contention of complainants in avoidance of that adjustment, but concluded that all matters in controversy prior to November 14, 1884, were amicably adjusted on that day and should be considered settled."

The master further found that the evidence did not show "that Oteri ever profited to the exclusion of his partners, nor an instance in which a loss of money to the firm resulted from an unauthorized act of any of the partners," and was of opinion that all the losses were attributable "to the depressed condition of the fruit market at the time of the arrival of the consignments and not to the acts of any of the partners." He recommended that the results from the books, as stated by witnesses, should be accepted as correct, and held that "the partnership should be considered as continuing uninterrupted from 1st July, 1884, to the 2d Feb'y, 1885, at which date Oteri was called to answer in the state court the suit of his copartners for its dissolution; that from the 2d Feb'y, 1885, Oteri had no authority to enter into any new engagements for, or on behalf of his copartners, but it remained his duty to conduct to conclusion all obligations and contracts made or commenced before that date."

Argument for Appellee.

The master was satisfied from the evidence that no amicable djustment of the partnership could or would have been made oy the partners, but that a suit was necessary to settle their affairs, and recommended that the costs be equally divided between the three.

To this report elaborate exceptions were filed, which were considered by the master and overruled. Randazzo and Di Christina subsequently assigned to Scalzo all their right and interest in the suit. The case having been heard on the exceptions to the master's report, it was decreed "that the complainant Vincenzo Scalzo, for himself and as subrogee of the other complainants, the firm of Randazzo & Di Christina, do have and recover of and from the defendant, Joseph Oteri, the sum of ten thousand dollars ($10,000), the amount put in the partnership by said complainants, less of $2538.32, expended in the interest of the partnership, with legal interest, to wit, 5% per annum, thereon from the date of judicial demand, June 11, 1885, until paid; that the other exceptions be overruled, and in other respects, that the master's report be approved and confirmed. It is further ordered, adjudged and decreed that the complainants' bill of complaint be dismissed without prejudice to their right in some other form of action, as they may be advised, to prosecute the matter of defamation of character set forth in the bill of complaint. It is further ordered, adjudged and decreed that the costs be paid by the defendant."

A motion for rehearing was made and argued and a rehearing refused, and the case brought up on appeal.

Mr. Joseph P. Hornor and Mr. Guy M. Hornor, for appellant.

Mr. George A. King (with whom was Mr. Charles W. Hornor on the brief) for appellee.

On the question of our right to a rescission we refer your honors to Mycock v. Beatson, 13 Ch. D. 384; Stoughton v. Lynch, 1 Johns. Ch. 466; Gridley v. Conner, 2 La. Ann. 87; Pillans v. Harkness, Colles P. C. 442.

Opinion of the Court

"If one partner withdraws or uses the partnership funds in his own private trade or speculations, he must account not only for the interest on the moneys so withdrawn, but for the profits of that trade." Stoughton v. Lynch, 1 Johns. Ch. 466. The liability in such a case is as for money converted to his own use. Reis v. Hellman, 25 Ohio St. 180.

When a partner takes possession of all the stock, books, etc., and in a settlement furnishes no evidence of the insolvency of the debtors or unsuccessful diligence in collecting the claims, they will be regarded as cash in his hands. Bush v. Guion, 6 La. Ann. 797.

MR. CHIEF JUSTICE FULLER delivered the opinion of the

court.

Undoubtedly equity has jurisdiction, where a person has been induced, by fraudulent representations, to enter into a partnership, to rescind the contract at his instance, and put an end to it ab initio. Newbigging v. Adam, 34 Ch. Div. 582; Smith v. Everett, 126 Mass. 304; Fogg v. Johnston, 27 Alabama, 432; Story Part. §§ 232, 285; 2 Lindley Part. (Wentworth's ed.) 554.

And it is contended that even though the formation of the partnership may have been free from that taint, there may be such fraud, misconduct and breach of duty in the conduct of its affairs from the inception, as to justify, upon dissolution, as between the parties, the restoration of his capital to the injured partner.

This bill alleged that complainants "are entitled to be refunded their said capital, with legal interest from 24th day of June, 1884, and they now make demand therefor;" and it prayed, among other things, that the partnership might "be decreed to be dissolved as if the same had never been made, by reason of the acts of said defendant; that an account of its business may be taken under the direction of this court, and that its legal liabilities may be paid and charged against the said Joseph Oteri, and that the capital of your orators, with interest, [may be,] restored to them in the premises, or otherwise