Tiffany v. Short

[532]

SHENK, J.

The plaintiff commenced this action for the dissolution of a partnership, for an accounting and for the appointment of a receiver. Defendants filed a cross-complaint seeking rescission of the contract. The court decreed a dissolution of the partnership, and made an order settling the account. On their appeal the defendants contend that the evidence supports the issue raised by their cross-complaint and that the trial court erred in finding that fraud was not committed by the plaintiff. They also urge error in the trial court’s division of the assets of the partnership upon dissolution.

On February 17, 1940, the plaintiff, Tiffany, and the defendants Short and Hill, entered into a written “Joint Venture Agreement” for the production and sale of an ultraviolet ray device designed to “prevent and cure and alleviate deafness.” The device had been developed by Tiffany and he was to supervise its manufacture in his own laboratory. Short was to advance sums from time to time to carry on the work. Hill was to assist with the sale of the product. The “Net income” was to be shared equally by the parties. Short advanced $2,060 before the dissension arose, which was about four months after the agreement had been signed and work on the enterprise had commenced. In June Hill asked Tiffany for an accounting. The request was not complied with. Tiffany suggested a purchase by him of the interests of Short and Hill for $2,060 plus interest at 7% from March 1, 1940. Tiffany was given an option to purchase until August 20, 1940. The option was not exercised. Negotiations continued until some time in March, 1941, when counsel for Hill and Short demanded an accounting. Tiffany thereupon filed the present action.

The defendants contend that they are entitled to a rescission not only on the ground of fraud but on the additional ground of failure of consideration. They charged fraud in that Tiffany had represented that the instrument or device was already perfected and would be demonstrated at the Hard of Hearing Congress in June 1940, but that no such demonstration was made; that he would obtain Letters Patent covering the ultra-violet ray device, but that no steps were taken to that end; that certain tools were his own property which he had in fact purchased with partnership funds; and that he claimed to have paid prices for tubes and transformers higher than he actually paid. Tiffany’s account charged the