Lawrence v. Dale

| New York Court of Chancery | Oct 1, 1817

The Chancellor.

The representatives of Fulton, and the two Livingstms, place their defence on very different grounds. The latter deny that Fulton had any authority to bind them, in whatever responsibility he may have incurred in his negotiations with the complainants.

I shall first consider the demand as it respects the defendants, Edward and Robert Livingston.

1. The only part of the printed proposals issued by Latrobe, in the spring of 1813, which contains any thing like a special covenant, is in the 3d and 4th articles, ,in which it is declared, that the boat shall be calculated to carry freight, and shall be built under the immediate direction of the patentees, who shall appoint an agent at Pittsburgh for the purpose, and that the patentees were to be “responsible for the perfect construction and performance of the boat.” In the agreement which was afterwards made and executed between Ftdton and a majority of the company, in respect to their shares, the same engagement, with some additions, was entered into, so far as Fulton was concerned. He was to be responsible for the perfect construction and performance of the boats, so as to carry at least 100 tons burden, and to run at least four miles an hour in still water. The whole gravamen (if any) to be deduced from the pleadings and proofs, appears to me to consist in the failure of the engagement as to the construction and performance of the boat.

The Livingstons deny that Latrobe was their agent, or that he made these proposals, by their authority, assent, or knowledge. They equally deny any authority in Fulton to bind them by such a contract.

The great point in the case is, whether there is evidence of any such authority existing at the time, or of any subsequent recognition of it.

The contract of partnership entered into between the late Robert R. Livingston and Fulton, on the 10th of October, 1802, does not appear to contain .any power that touches the case. That contract provides for the construction of a passage boat, moved by the power of the steam engine, to be used on the Hudson, and that the patent for such a boat should be taken in the name of Fulton, and the property thereof equally divided, and also the emoluments of it; and that the number of boats, offices and agents, should be augmented or diminished, as the parties should think proper, and that if either party should die within the 14 years, or before the termination of the patent, his heirs or assignee should be considered an active partner.

This was a very special partnership, and certainly contained no power in one party to bind the other, by a covenant as to the construction of boats to be built by third persons for their own use, under a patent license.

This wasEthe only instrument declaring the association between Livingston and Fulton, during the life time of the former. But, afterwards, on the 25th of July, 1814, there was a new agreement between Fulton and the two representatives of Robert R. Livingston, deceased. That agreement recited that they were sole proprietors and acting partners in the rights and privileges of steam navigation, for which patents had been issued, and divers statutes passed in favour of the parties, in pursuance of the agreement of October, 1802, and that they were desirous to modify the articles, as to the Hudson river, and to explain their rights in certain particulars, leaving the articles in force, in other respects. The parties to that agreement, in the 7th and 8tli articles of if, entered into certain stipulations, which referred to the personal services rendered by Fulton, in the concerns of the general establishment, and in superintending the making and completing the steam boats then building, viz. one for tbe Mississippi, one for the Ohio, and two for the Hudson ; and the 7th article evidently contemplated, that the profits of those personal services would have been a joint concern without the modification there agreed to.

The plaintiffs aver, that the boat alluded to in those articles, as building on the Ohio, was the one in question in this case, and the answer of the representatives of Fulton admits the fact, and the answer of the others does not deny it. They admit that the article may allude to their interest in those boats, as part owners of the patent rights and privileges. But if it does, what then ? The Livingstons had an interest, no doubt, under their articles of 1802, in all emoluments resulting from the patents for steam navigation, and the sales and licenses under them; and the Personal services alluded to in those articles, were, no doubt, those bestowed on subjects and property, in which the parties had a common interest. But did that interest bind them to Fulton’s contracts for building boats ? I think it would be dangerous to push to this extent, the authority of each partner under the articles of 1802, or the modification made, or construction given to them, by the agreement of 1814. A jointinterest in a patent may exist in full force, and yet have no connection with a special covenant to construct a boat for the benefit of an assignee. Such a power is no necessary part of the joint concern. The Livingstons may have an interest in all the branches of steam navigation arising under the patents, and even in the personal services of Fulton bestowed on their common concern, without being bound by his special undertakings. There must be some other authority to bind them than what is to be deduced from the articles of 1802. The modification in 1814, gave no new power to each partner. This was clearly not within its intention, It only regulated their then existing interests. A covenant to superintend the building of a boat for the benefit of a company, was quite a separate transaction. It had no more connection with the enjoyment and exercise of their community . of privileges under the patent, than if there had been a covenant to procure the wood and iron for the boat, or to superintend the navigation, and freight, or cargo of her, when in service. The price of a license to build and use a steamboat, may enure to the defendants jointly; so if an interest be reserved in the boat in connection with the purchasers, that interest might be joint. These are plain partnership rights which are intelligible to all. But if upon the sale, the purchaser should have contracted with Fulton, as he would with a shipwright, to build the boat, or as a captain to navigate her afterwards, would any person have naturally conceived that such a contract was also a partnership business, and bound equally all persons interested in the patent? These are, in their nature, personal, not partnership concerns, and to make the partnership liable, a special agreement from the partners must appear. There must be some authority beyond the mere circumstance of partnership, to bind the Livingstons to this- covenant.

Though Latrobe subscribed his printed proposals as agent for the Ohio steam boat, and for the patentees, there is no evidence that the Livingstons ever authorized or acknowledged his agency. He was the agent of Fulton, and of him only. Not a witness traces- any act or confession to the Livingstons, that contains the least recognition or acknowledgment of any authority from them, either in Latrobe or Fulton, to issue those proposals, or to carry them into effect. Those witnesses who understood or believed that the Livingstons were jointly concerned in circulating, or in avowing, or in acting under those proposal's of Latrobe, do not give us a single act or confession of theirs, to warrant the conclusion or belief. The expenses were’ defrayed by Fulton, and the drafts were all upon iiíni.: He declared to Hoffman, a clerk of the defendants, that the Livingstons were not interested in the expenses of that boat, and they told that witness the same thing. The only circumstance from which they could possibly be charged is, that knowing of those proposals, they preserved silence, without giving notice to the plaintiffs, or to the public, that they were not bound by Fulton’s engagement.

But what reason had they to presume that any person was in an error on that point 1 We have no evidence that the plaintiffs were imposed upon by that silence. The knowledge of the contract is not traced up to the Livingstons, at any very early period of it They had no interest whatever in the patents, when the proposals issued^ and were made known in' March, 1813. The interest of the late Robert R. Livingston was then vested, by will, in his widow. This will and its contents the defendants were called upon by the bill to disclose, and it is decisive that the proposals of Latrobs could not have been their proposal. Their existing rights did not accrue until October, 1813, and by that time the company was formed, and Latrobe as Fulton’s agent, had commenced the building of the boat. The case has no analogy to those in which silence is construed into tacit assent, and as evidence of imposition. These defendants never came in contact with the operation. They were never consulted or applied to on the subject. These two defendants were well known to most of the plaintiffs, and accessible to them almost daily; and yet, while this contract between the plaintiffs and Fulton was made, and was carrying into operation with great expense, and much correspondence and negotiations for the space oí two years, not one solitary communication was made from either of the plaintiffs to them. The plaintiffs dealt with Fulton exclusively, and took no notice of these defendants; yet they now contend that those defendants were parties to their contract, and equally responsible with Fulton. I do not think that the plaintiffs are entitled to complain of silence.

2. But admitting that the Livingstons were bound equally with Fulton, the next point to be considered is, were the plaintiffs entitled, under the circumstances of the case? on the 25th of April, 1815, to abandon the boats, and to-call upon the representatives of Fulton to refund- the moneys they had expended, with interest?

The plaintiffs cannot justify their attempt to rescind the contact from any delay in the progress of the work; for after the death of Fulton, they assumed the business themselves, and directed Cooke, their agent, to press on the work with all-diligence, and to start the boats as soon as possible. This is what one of the plaintiffs writes, on the 29th of March, 1815, as secretary'to the company, after stating that the company had met and taken a view of the whole case. It is also to be observed, that there was-no time limited, in any contract on the subject, for the completion of the boats.-

Nor does it appear to me that the plaintiffs- can be permitted to set up the extraordinary expenses incurred under the agency of Latrobe, as a justifiable cause for rescinding the contract. There is some explanation given of the cause of an excess, far exceeding the original calculations of the plaintiffs and of Latrobe, in the fact, that the then existing war had rendered labour and materials,especially iron, extremely dear. This is so stated by one of the witnesses. But though I can - readily suppose the plaintiffs were afflicted by their mistaken calculations of the expense, and that there was very justifiable cause for removing Latrobe, yet I do not perceive any specific engagement of Fulton on this point. He was to be responsible for the construction, but not for the expense of the boat. And when the plaintiffs, by their resolution of the 9th of September, 1814, requested the discharge of Latrobe, -*m.a he was accordingly discharged, and another agent agreeable to them appointed, the plaintiffs may be considered as renouncing their right to rescind the contract, an the ground of his extravagant expenditures. Above all, are they precluded from this objection, by their new agreement with Fulton, on the 7th of January, 1815, and which was signed by a majority of the plaintiffs in interest. They therein acknowledge that the expenses had then exceeded, by 12,000 dollars, the original capital stock, and yet they determine to persevere on a new plan, and with still increasing expenses.

I see no ground on which they could justifiably abandon the contract, unless it should be for a breach of it, as to the construction of the boat. There is no other specific engagement by Fulton, either in the printed proposals of Latrobe, or in the articles of agreement of January, 1815, which they can allege to have been broken.

The boat, according to Latrobe’s proposals, was to be built under the direction of the patentees, who were to appoint an agent for that purpose, and who were to be responsible for the perfect construction aud performance of the boat. Fulton assumed these proposals as his own, and recognised Latrobe as his agent in making them. He was, consequently, responsible to the company for the fulfilment of this contract, and how was it performed %

An agent was appointed for the purpose, and the building of the boat commenced at Pittsburgh, under his agency, in October, 1813. We hear no more of the business, until July 10th, 1814, when Fulton wrote a letter to Latrobe, (for I have looked at every paper without nicely weighing its competence, in order to inform myself of every fact,) and in that letter he acknowledged that a boat was to be built, in the best possible manner, to suit the waters of the Ohio, and that Latrobe had misapplied funds, by building shops, when Fulton had them of his own. In September following, the company met and insisted that i/aimbe should be discharged, and say that they would not advance any more funds until he was discharged. It was, accordingly, done; and the great head of complaint was his expenditures, and not the construction of the boat. David Cooke was appointed his successor, afid the steam boat was launched at the time Latrobe was disinissed. The work then goes forward, and, for any thing that appears in the case to the satisfaction of both parties, until the 7th of January, 1S15, which forms a new and important epoch in the history of the business. A majority in interest of the company and Fulton, enter into a new agreement, in .which, for the first tipie, the company appear to assume form and substance as a regular co-partnership. ■ We cannot doubt but that they possessed, at the time, all the knowledge that belonged to the subject. They knew what had been previously expended, and how extravagantly it had been expended, (if extravagant at al),) by Latrobe, i and they knew the apparent size and construction of the boat, and that she was already afloat. It cannot be suppo.sed that they were ignorant of all this, and they must have known as well as Fulton, .the depth of the waters of the Ohio, for this was a matter of public notoriety, and was a knowledge essential to the business they had assumed. They, then, armed with this information, enter into a new and very special agreement with Fulton, in which it was contemplated, no doubt, that the other defendants would become parties. This agreement recites the substance of the former proposals of Latrobe, under which the company had formed themselves and hitherto acted, and it declares that the building of the boat had been changed in plan, so as to add thereto a freight boat, to be towed; and, notwithstanding the expenditure then made of 37,000 dollars, they agree to advance the further moneys requisite to finish the boats, and they preserve the responsibility of Fulton, for the perfect construction and performance of the boats.

I cannot but be of opinion, that this new agreement superseded, altogether, the claims of the parties under the vague and undefined terms of the printed proposals. It was the substitution of a new and formal contract to that preliminary arrangement, in which the plaintiffs, for the first'time, appear distinctly as a regular associate body. They adopted the boat as she then was, and the question is, whether there was a.failure in the construction of the boat, in the April following, so as to warrant the plaintiffs to rescind or abandon the contract, and call for the return of their money?

The articles in January, seem to have defined the meaning of the engagement to be responsible for the perfect construction and performance of the boats, by adding thereto these words, so as to carry, at least, one hundred .tons burden, and run, at least, four miles an hour in still water. Nothing is here said as to her draft of water. Cooke says she drew three feet of water when empty. This fact must have been known when the agreement "in January was made. There is no doubt that the parties adopted the plan of the tow boat, to meet and avoid the inconvenience of the weight and draft of water of the steam boat; for Butler testifies, that in 1814, or 1815, Fulton suggested the plan of the tow boat, because it was ascertained that the steam boat, with her cargo, would draw too much water for the Ohio.

But, considering the covenant without any such accompanying explanation, and as meaning, by a perfect construction and performance, a boat suitable to the waters of the Ohio between Pittsburgh and Louisville, the question occurs, have not the plaintiffs adopted the boat as it was? and áre they not precluded from saying she was too large?

The difficulty and uncertainty of navigating on the Ohio, seems to have occurred from the beginning. The original proposals of Latrobe, contemplated that the boat would “lie by” in July and August, on account of the lowness of the water; and that she would not make more thap five or six trips, each way, during the year. The parties were ao cordingly, when they subscribed these proposals, duly ap pr}se¿i 0f this difficulty, and of the inevitable interruption of the navigation, .and all their contracts must be construed in reference to that navigation as it was then known and declared.

The lamented death of Fulton occurred soon after the execution of the agreement in January, and the plaintiffs then took into their own hands the care of finishing the boat, and pressed on the work, with zeal, until the 26th of April, 1815, when, in consequence of information received from Stoudenger, they came, suddenly, to the resolution, that the steam boat would not answer, and that the contract was, consequently, void, and demanded repayment of their money. What information they had received, which satisfied them the boat would not answer, is not stated. Nothing is shown to have existed then, which Was not known to them six months before; and the only complaint in the letter announcing the resolution to abandon, relates to the expense.

All the information we have, on the head of the failure of the contract in respect to the construction of the steam boat, (for there is no complaint of the tow boat,) is derived from the three witnesses at Pittsburgh. Frisbie, who undertook to finish the carpenter’s work of the boat, thinks the former work not quite so good as his own, though it would have borne inspection, and the boat was a littled hogged in launching. Cocke says the boat was, upon the whole, pretty well built, and better than the well-known Hudson river boats, Car of Neptune and Paragon ; and that the machinery was good. There is, then, no real objection to the workmanship of the boat, to justify the relinquishment of the contract; -and when the plaintiffs said she would not answer, they most certainly had no such imperfection in their view. It was the depth of water she drew to which they alluded.

Frisbie says, that the boat, according to her original plan or contrivance, would have drawn too much water, to have rendered her fit or convenient for the navigation intended for her; that she might have made one trip in the spring, and one in the fall; and, if ready when the waters were high, have made several trips in the year; Rowe speaks to the same effect. Cooke says, that the boat drew three feet when empty, and when loaded would have drawn four feet; and that she could have navigated the Ohio, except in very dry seasons, or in winter, and could have run, on an average, six months; but he admits that a boat, to navigate to the best advantage on the Ohio, ought not to exceed three feet draft

The answer to this testimony is, that the parties knew, when the boat was launched, in September, 1814, what water she would draw when empty. They modified the contract, and altered their plan in January following, to suit that draft of water, by adding the tow boat, and I cannot see what right or equity they have to complain now of the original construction of the boat. If they intended to have abandoned the boat for that cause, they should have . done it when she was launched, and when an accurate judgment could have been formed, and probably was formed, as to the water she was to draw. Instead of that, they go on and adopt her as she was, and continue their work upon her, and, afterwards, vary their original plan to meet the size and weight of the vessel. The construction of the boat was the same then, as when they gave up the contract.

But there is a material defect of testimony on the point of the navigation of the Ohio. Frisbie says he is not well acquainted with that part of the Ohio between Pittsburgh and Louisville, and he speaks from the information of others. Rowe says, also, that he is not well acquainted with the waters of the river; and all that Cooke knows seems to be from inquiries of others. There is the same want of precise and certain knowledge on this subject in the case before us, as there was when Latrobe issued his proposals, and gave his opinion as to the facility of the navigation of the Ohio. We have no chart, or soundings of the river, or testimony 6f men accustomed to navigate it. We have no actual experiment to inform us how far the boat was adapted to the river.-

, There is no fraud set up in this case, as a reason for re scinding the contract. There were no representations as to expense, however innocent, and however mistaken the' calculations, but what the plaintiffs, with full knowledge of the fact, and of all the circumstances, have, again and again, waived; and if the boat was of so large a construe-» tiori as to render her, in a great degree, unfit for the use intended, they should have taken their stand on the dis-covery of that construction, which discovery was made known to them, (as far, at least, as it is now made known,) when the vessel was launched. If the law allows a party to abandon a contract while in fieri, he'ought, at least, to act promptly and decidedly, on the very first discovery of the breach. If he negotiates with the party afterwards, and permits the work to go on, he certainly waives all right to abandon. There is not a cause to contradict this doctrine, which is founded on the plainest principles ofjustice: and if there had been no waiver, nor adoption of the boat, I should still think the testimony of the boat’s uni fitness for the Ohio, too imperfect to justify so extraordinary a measure, as the absolute renunciation of the'entire contract. Having carried the work so far, I think they ought to have brought the question- of the fitness of the boat to the waters, to the test of experiment. It does not appear, to this moment, but that the steam boat, with the aid of the tow boat, might have performed as many trips in a year as was in contemplation of the original proposals. Instead of waiting for a trial, the plaintiffs, in a moment of despair, and duly admonished of the fallacy and danger of such speculations, give up the contract,- and leave the boats to be sacrificed on execution, and now call upon this court to decree the repayment of their money from the representatives of Fulton. I feel and regret their-—t— misfortune, but I cannot transfer that misfortune to others, without better evidence than this case affords.

The bill, as. to all the defendants, must, consequently, be dismissed; and as to the two Livingstons, it must be dismissed with costs.

Decree accordingly.