Curry v. Windsor. , 22 Ariz. 108 ( 1921 )

There must be a new trial in this case. The legal effect of the agreement entered into by the parties was to dissolve the partnership and settle the partnership affairs as between them. No other rational interpretation can be put upon the agreement. When two or more members of which a firm is composed settle their partnership affairs and dissolve the partnership, if one of the partners is defrauded in the settlement, the law furnishes him with the choice between two remedies; he may rescind the settlement, or bring an action on the case for deceit. If he elects to rescind, he must do so promptly upon discovery of the fraud and restore whatever he has received under the settlement. If this is done the parties are restored to their former rights and made subject to their former liabilities. Windsor, if he had obtained a rescission of the agreement of settlement, would have been in the same position as he was before the execution of the agreement, and he could proceed in an equitable action for a dissolution of the partnership and an adjustment of the partnership accounts and affairs. In such a proceeding Curry would be required to account for any moneys he received from Windsor for partnership purposes and misapplied by him.

Due to the confused and illogical state of the pleadings, it is a vexatious matter to determine just exactly what remedy Windsor was seeking in his cross-complaint. The only reasonable construction we are able to place upon the pleadings is that the cross-complaint constitutes an action on the case for deceit. If we are correct in this conclusion, then the true rule of damages in case of a verdict for Windsor is the difference between the actual value of the lots he received and their value if the alleged fact regarding them had been true. Curry is to make good his representations of fact as though he had given a warranty to that effect. This rule makes recovery exactly commensurate with the injury. The law will not allow Windsor to adhere to the settlement and resort to an action on the case for deceit and recover the whole or any portion of the moneys which he may have paid into the partnership and which Curry may have misappropriated. The very purpose of the agreement was to settle and adjust these payments.

The trial judge failed to give the jury any instructions upon damages. Generally speaking, the court should instruct the jury as to the proper measure of damages and the elements to be considered in fixing them. The jury cannot be left to find any damages to which they think the plaintiff may be entitled. If this were so, juries would become judges of the law as well as facts.

The judgment is reversed and new trial ordered.

ROSS, C. J., and McALISTER, J., concur.

On the question of fraud and deceit as affecting compromise and settlement of claim, see notes in 25 L.R.A. (N.S.) 308; 16 Ann.Cas. 935.

On effect of fraud by partner in relation to partnership real estate, see note in 28 L.R.A. 104.