Summary
Appeal from the Chancery Court of Mobile.
Heard before the Hon. J. W. Leseske.
This bill was filed by Moses Waring, the appellee, against the heirs-at-law of Willis Lang, deceased, to obtain a divestiture of their legal title to a certain storehouse and lot in the city of Mobile, and to enjoin them from the further prosecution of an action at law to recover its possession. The complainant alleges, that this lot was purchased by the firm of 'McRae & Lang (which was composed of said Willis Lang and one Colin C. McRae) with partnership funds, and for partnership purposes, and was held by them as partnership property ; that Lang died in 188*7; that the said firm was largely insolvent at that time, and McRae was also individually insolvent ; that said McRae, as the surviving partner, proceeded to settle the affairs of the partnership, and disposed of all its assets, including said house and lot, and his own individual property, in payment of the firm'debts ; and that he died insolvent,-in 1843, leaving a balance of the partnership debts still unsatisfied. The complainant then deduces two distinct titles in himself to the said house and lot under mesne conveyances from the said McRae, as surviving partner of the said firm ; which may be thus stated-:
1. He alleges that said McRae & Lang, during the existence of the partnership, had endorsed a note for about $3,600; for the accommodation of one Ryland, due and payable to one James E. Bates ; and to secure them against their endorsement, Ryland had deposited in their hands for collection a note on one Graves for about the same amount; that they collected the note on Graves, but failed to apply the proceeds to the payment of Ryland’s note to Bates, and were thus indebted to Ryland, as well as liable to Bates, at the time of the dissolution of the firm by Lang’s death ; that after Lang’s death, McRae, as the surviving partner, executed a note to said Bates, in the firm name of McRae & Lang, for the said sum of $8,600, (which note was endorsed by Ryland,) and also executed a mortgage on said house and lot to secure its payment ; that said note was not paid at maturity, and accordingly the house-and lot were sold pursuant to the terms of the mortgage, at which sale it was purchased by Gayle & Phillips, they being the highest bidders, for the sum of $250 ; and that complainant, in 1845, purchased from said Gayle & Phillips, for the sum of $350, and received their quit-claim deed to the premises, thus obtaining- a complete equitable title.
2. In addition to the title thus derived through Gayle & Phillips, the complainant alleges, that the firm of McRae & Lang, at the time of its dissolution by Lang’s death, was largely indebted to. Bartlett & Waring, of which firm complainant was the surviving partner ; that complainant, as such survivor, obtained two judgments against said McRae, as surviving partner of the firm of McRae & Lang, on this indebtedness, amounting in the aggregate to about $15,000; that on these judgments, which were rendered in 1888, previous to the execution of the mortgage to Bates, executions were duly issued, which were levied on the said house and lot; that the widow of said Lang, who was also his administratrix, filed her bill in equity to enjoin the sale of said house and Lot under said executions, but her bill was finally dismissed,- find the' house and lot were then sold under said executions, and were purchased by complainant for the sum of $9,860; that a large balance was still due on said judgments, and complainant, after exhausting all the partnership property, commenced suits against the said administratrix of Lang to recover this balance out of his estate ; that these suits were litigated.for a long time, but complainant at length succeeded in obtaining .a judgment in one'of them, after which he.compromised the other suit with the administratrix, by receiving in satisfaction of the entire balance her acceptance for about $6,000 ; that the entire value of the house and Lot does not exceed $5,000, and yet the defendants have received more than twice that sum from complainant on account of it.
The defendants answered, insisting that' the notes on which Waring recovered judgments against McRae, as surviving partner of McRae & Lang, were endorsed by McRae, in the firm name, without the knowledge or consent of Lang, for the accommodation of one Dade, and therefore created no obligation or liability against said Lang or themselves; that they are not bound by the judgments recovered by the complainant against said McRae and the administratrix of Lang, and that complainant purchased with full knowledge of their title; that complainant, previous to the filing of his bill in the present case, filed a bill in equity against them touching these same matters, which bill, after a long litigation, was finally dismissed by the Supreme Court, at its June term, 1850, (see lí Ala. 145,) but without prejudice to the title which complainant might have under his alleged purchase from Gayle & Phillips ;• that complainant is precluded by this decree from again setting up any of the matters contained in his first bill, except his alleged purchase from Gayle & Phillips ; that respondents do not know anything of the alleged transactions between said McRae & Lang, during the existence of the partnership, and said Ryland and Bates ; but they allege that said notes and mortgage were executed by said McRae indi-, vidually after the dissolution of the firm, and therefore created no obligation against the firm, and could not affect them in any way.
, Such portions of the evidence as are relied on by the parties in support of the allegations in the pleadings, are detailed with sufficient particularity in the subjoined argument of- the appellee’s counsel; and. the material facts,- which bear upon the issues made by the bill and answers, will be readily understood from the statements contained in the opinion of the court. The chancellor sustained the bill, and granted the relief prayed; and his decree is. now assigned for error.
(No brief on file.)
The right under which we claim this property is based on these propositions : 1st, that it was partnership property, bought with partnership funds, and for the use of the trade of the partnership itself; 2d, that the firm was, at the time of the death of Lang, “ insolvent,” owing more just debts than it had assets to pay with ; 3d, that it was disposed of by the surviving partner, and by his act applied to discharge' debts of the firm ; 4th, that these were, in fact, debts for which the firm was bound ; 5th, that Waring has obtained this property by lawful conveyances, and that it has by passing into his hands, in truth and fact, extinguished debts of the firm to an amount greater than its utmost value.
That it was firm property is not in fact a debateable question. It is charged in the bill; not directly, but only evasively denied by the answer, and is fully proved. That the firm was insolvent, is also a fact well established, and all the facts in the cause are in harmony with that conclusion. That it was properly disposed of by the surviving partner, is controverted by the appellants ; and they also assert that the debts for which the property was sold were not debts, binding on the firm property. These two propositions embrace the main objections to our title, and those on which they rely, and must therefore be carefully examined.
We will have no great difficulty in settling the law of our case : we find it, in its main features, well settled by the decisions of this court. Indeed, it is declared that these propositions to which we allude, are no longer the subject of controversy, but that they are settled questions. These settled questions extend sufficiently far to cover our case. They are as follows : 1st, that “ in a court of equity, real estate belonging to the firm is considered as personal property, to this extent at least, that it is liable to pay the debts of the firm, in the same manner as if it had been personal instead of real estate2d, that “ the charges upon the real estate, being prior to the claims of the representatives of the deceased partner, override his wife's title to dower, as well as the title of his heir at law 3d, that “ as the real estate is considered as personal for the purpose of paying these debts, it must of necessity follow, that he has the right in equity to dispose of the real estate for this purpose 4th, that “ the heir at law holds the legal title, subvervient to, or in trust for; the surviving partner,, who is charged with the payment of the debts.” This is the language of the court in the case of Andrews’ Heirs and. Adm’r v. Brown’s Adm’r et al., 21 Ala.
The law,then on .these points being found, we have but to make the application of it, and meet the objections raised by the appellants. Did the surviving partner convey the property ? Did his deed to Bates pass the right ? It is argued that it did not, but passed only the individual half which belonged: to the surviving partner. Wo deny that there is such a thing, in equity, as an- individual half interest in partnership property ; although it is true, 'there is such a thing in relation' to title at law, as to real estate. It is only in a court of law that,the heir is considered as having the legal title cast on him by descent, but this is in reality a mere fiction, an dnothing else. It is necessarily, in all cases, a title-in trust for some one, and can in reality in no case .be held by the heir in his own right.' The moment it is ascertained that the property is firm property, it is at once established that the heir is a trustee. If the copartnership is solvent, and its value is not needed to satisfy the claims of creditors, then its value must be realized by the surviving partner, so that he may settle the firm affairs and strike a balance between himself and the representatives of the deceased partner, and he .must pay that balance to such representative. And here we will advance the proposition, that no partner, or 'his representative, . has the right to demand a division of property specifically : .each party has by our law a right-to demand a sale,. and the right of each is to the division of the net balance when realized, and to nothing else. — Story on Part. § § 356,- 354, 355, 347,'. 350, note 1, and authorities ¿ited ; Gow on Part. 257.
We will.next inquire who is entitled to this money balance on final settlement of the partnership affairs? We say the “ executor or administrator” of the deceased partner, not his heir. Gow says : “ In the absence of express negative stipulation, the executor has a right to insist upon the application of the joint property to the payment of the joint debts, and a division of the surplus ; and if, within a reasonable time, the survivor, do.not account with him and come to a settlement, a court of. equity will grant an injunction restraining him from disposing of the. joint stock, and from receiving outstanding debts.” — Gow on Part. 378 ; Collyer on Part. 141 to 144 ; 10 Leigh.- Thus we see that the surplus or balance struck goes to the administrator, as personal estate, for payment, first,, of the debts of the deceased partner, and then'for distribution among his widow and heirs according to law; and it is only thus, and as distributee, that the heir -can take, if any. thing be left, and not as heir by direct descent. If then the firm be solvent, the heir is trustee of ah individual half of the legal title to the lands of the partnership,'and the trust is to convey it to whomever the surviving partner shall sell it to, for the purpose of settlement, so that the balance may be paid to the personal representative, which properly comes to him. But if the firm be insolvent, then the heir can have no interest whatever in it: it is a fund for the payment of the creditors of the firm, so far as it will extend, and it is the right-and the duty of the surviving partner to apply it in payment, and it is the duty of the heir to convey it accordingly. In this case he is a bare, naked, legal trustee, — has no interest in the property, and has no claim, right, or title of his own, and cannot be allowed to attempt to assert his title at law. The profits made from the property, as well as the property itself, after the decease of one partner, still belong to the joint stock till settled, as accession of capital. — G-ow on Part. 380. The rents, therefore, cannot go into the hands of the heir, but belong to, and are subject to, the control of the surviving partner.
Thus we see this right at law is a mere fiction, as we have before stated. True, he has a title at law; but courts of law do not settle copartnership concerns : it is only in equity that they are to be settled, and equity treats real estate, “ in all respects,” as personal property. ' We say “ in all respects,”— so is the text, and it must be carried out accordingly. — See Story on Part., p. 126,128; Collyer 117; 1 Sumn. R. 182,186. The principle regulating the trust is stated in the above cited case of Andrews v. Brown, 21 Ala. 443 • and in addition to what has been cited from that case, we find the following language used : “Inasmuch as the real estate is considered as personal, for the purpose of paying the debts of the firm, and the surviving partner is charged with the duty of paying these debts, it must of necessity follow, that he has the right in equity to dispose of the real estate for this purpose; for it would never do to charge him with the duty of paying the debts, and at the same time to take from him the means of doing it. Therefore, although he cannot, by his deed, pass the legal title to the purchaser, which descended to the heir of the deceased partner ; yet as the heir holds the title in trust to pay the debts, and the survivor is charged with this duty, his deed will convey this equity to his purchaser, and through it, he may call on the heir for the legal title, and compel him to convey.” — p. 443.
We conclude, then, that McRae had the power to convey the whole title.
The remaining question then is, did he do so ? That he did, we think, is very clearly shown; and the authox-ities in relation to the effect of that deed, we believe, are conclusive in our favor. The deed of mortgage by McRae purports to convey all the title or interest he could convey, and we have seen he could convey the whole, and he did so, and he intended to convey all he could convey. There is no limitation whatever in his deed. It is expressly as surviving partner that he conveys, and not in his individual right alone. We have seen, it is true, that be could not convey the legal title, but he could convey all the interest of the firm in the property ; his deed in equity is binding on the heir, and the heir is bound to conform to it. The construction to be put on the deed is conclusively shown by the decision in the case of Dundas v. Hitchcock, 12 How. Sup. Ct. U. S. 271. The rule is there laid down, as a settled rule of construction, in these words : “ Whoever conveys to a purchaser, without restraining the operation of his conveyance, shall be deemed to convey in every character which enabled him to give effect to his deed.” Sugden on Powers 82, and Cox v. Chamberlain, 4 Vesey, Jr., 637, are cited in support of this rule. In the case before the court, McRae recites, that he conveys expressly as surviving partner, and of course all the title of the firm passes.
We do not suppose it can be successfully maintained that he could sell, but could not mortgage. Such a position would be untenable. The surviving partner has clearly the right to prefer one creditor to another. — 3 Paige 518, 525 ; 2 Sanf. Oh. R. 366 ; 1 Brock. 456 ; Collyer on Part. 362 •; 1 Metcalf 515. In the case of Andrews v. Brown, 21 Ala. R. 437, this point was made in argument denying the right of the surviving partner to secure one particular creditor, which was. the case there, but the objection was not sustained. Again ; this is a question in which the heir has no possible interest, as before shown, the firm being insolvent. Such a question could only arise between conflicting creditors : it is their interest only which would be affected. The right of the surviving partner to dispose of the partnership property is absolute.— He, and he alone, has the right to decide who shall be first paid, and may even secure the creditor he prefers by an assignment, “without the assent or concurrence of the representative of the deceased party, in such manner, and by giving such preference as he may think proper.” — Egberts v.Wood, 3 Paige 525-6.
The argument used that the surviving partner has but a lien on the land, that he has no title, except as to half, and that consequently he cannot himself convey, but that it is only a decree of a court of chancery that can dispose of the land, and that the deed of the surviving partner operates nothing beyond the disposal of his own proper half, will do very well to use in a court of law ; but is at war with the whole system when we are in a court of chancery. This argument we have already sufficiently answered.
The defence set up that the conveyance was not made to secure firm debts, is predicated upon the argument that the giving of the notes by McRae to Bates was a discharge of the obligation of the firm, and a substitution of the individual responsibility of McRae in its place. On this point we will refer to the-authorities cited. — 8 Cowen 77, 141 ; 4 M. & K. 108; 6 Ala. 673; 10 Barb. Sup. Ct. R. 372, &c. It is a question of intention; a party is considered as releasing, where from his act it is supposed he intended so to do. It is the intent which must be inquired into. — 4 Watts & Sergt. 100 ; 12 Johns. 409 ; 15 Sergt. & Rawle, 162. In this case, the manner of signing both the notes and the mortgage, conclusively shows what the intent was. They are signed as surviving partner, and not in the maker’s individual character. The manner of signing is always looked to for the intent.— Whether a partner giving a bond for an antecedent debt discharges the debt or not, depends on the circumstances. — 6 Watts & Sergt. 168 ; 4 Watts 878. But the question here is not that of a partner giving his own jpaper for a firm debt : it is the case of a surviving partner settling the firm debts.
At law the surviving partner is the sole debtor; he alone can be sued; he alone must pay; the assets of the firm are vested in him to pay with. The assets are a fund for the satisfaction of those debts ; the creditors have the right in equity to satisfaction out of those assets. By law, the debt cast on the supyivor is a sole and personal debt, and such a claim yagaiqst'lmm may be joined in an action with a demand personally vEup by himself. The surviving partner could apply , the firin 7i|roperty to pay a note which he individually had given for' a firm debt. Why not ? He could sell the property for mpney io pay the debt with ; then if be gives his note, even his o:wn note, he can sell the firm property to pay that -note'-with, or even reimburse himself, if he has paid it. He has the full power to dispose of the firm property, and owes only a settlement to the representatives of his partner, a money balance if any be due.
If we were now suing the estate of the deceased partner, there would be more plausibility in the argument; but we are looking to the firm property only. Suppose the surviving partner had sold all the property at public sale immediately after the decease of Lang, to raise funds to settle the debts, and had afterwards given us his own private note even: where would be the difference in the result? Certainly that would have been a lawful disposition of the property. There were in this case more debts than value of assets; a sale of the property was indispensable in any event. The authorities, in cases of partnership debts, do not treat this subject as in other cases ; even among living, partners, the partnership liability is not held discharged on light grounds. — G-ow on Part. Even in cases where partners give their individual obligations to satisfy firm debts, they are considered as sureties for the firm, and may apply the firm property to pay such obligations. •Averill v. Louck, 6 Barb. S. C. Rep. 471; Hosteller v. Best, 7 Iredell’s Eq. 39. Where one partner pays for the firm, he has the right to be reimbursed out of the firm property.
The inadequacy of price is alleged as an objection. This objection must be considered in three points of view : 1. Is there such inadequacy of price as would invalidate the sale, and would the objection, as here presented, be sufficient of itself in any case? 2.'Are the defendants parties competent to setup such an objection? 3. Would a court of equity, under all the circumstances of this case, deprive the complainant of the property which he has paid for, for which he has given more than it was ever worth, and who did not purchase it voluntarily, or on speculation, but as payment which he could not obtain in any other way, and when he has constant^ offered to yield it up, on being refunded what it We think the case is against the defendants on emrj^BÜte-bf these propositions. |
1. As to the first point: Where there is a pubIMjAW, SCHOOL^ the highest bidder, the objection does not apply, unless there is some unfairness shown. The mere fact that tffis Ji’idl-Üs-A-S'Y. ^ low, is not, of itself, sufficient. Here no legal objefetia£Lffi shown. It was agreed it should be so sold, and it was soí as agreed, with due notice to all persons. What price would the court require to make it a valid sale ? Where is the line or point, under which the sale would be bad, and over which it would be good ?
2. But if the objection is a good one, can these parties set it up ? Does the price affect them in any way ? It did affect McRae, because the sale at a low price left him a large bal-' anee of the debt to pay ; he, however, made no objection, nor did any one representing him. It did affect Bates, because he did not by this sale obtain full payment of his debt j but he did not stop the sale, nor advertise to re-sell it: he carried out the sale without objection. It affected Ryland still more than it did him ; because Ryland was bound to Bates for any deficiency which the property would fail to produce as to the larger debt secured by it. He had a deep interest in the price, but he had full notice of the sale, and would not give more ; nor did he question the validity of the sale in any way. Gayle and Phillips, who purchased, voluntarily re-sold it, and they were content with a very small price; yet they knew its value as well as any one. The administratrix of Lang was the party to receive from the surviving partner any surplus or share of the partnership property after all debts were paid, and thus would, if the firm was solvent, have had' an interest; but she liad full notice of the sale, — the firm was insolvent,— nothing could come to her in any event. She made no objection, and with her we have fully settled. The administratrix is the true representative of the rights of the deceased partner, as we have seen, and if there was any surplus, it would be assets in her hands to pay debts of Lang first, before the distribution to the heii’s. Thus, it seems, these appellants have no interest whatever in the question of inadequacy of pi’ice. If it had sold for its.full value, the result to them would be precisely the same: no part would in any event go to them. The court will not do an idle thing without purpose or object, and entertain litigation where no results can follow.
3. But would a court of equity sustain such an objection in a case like this ? Equity will look to the general result, no matter how that result has been arrived at. In this case a result has been attained, which is precisely what a court of equity would have decreed as between the parties to this suit. Waring represents a creditor to whom there was due $15,000 and more.. The fii-m was insolvent, but owned this property. Waring was diligent as a creditor to endeavor to obtain payment of his debt: he has obtained a portion only, and actually released a part. And this property, worth from $5,000 to $6,000, say the witnesses, he bought at the sheriff’s sale for nearly $10,000, under a mistake, supposing he bought the whole interest in it. These payments he has obtained on fully establishing his rights, against the surviving partner, and against the administratrix, and after the most harassing liti-gations at law and in equity, in all of Which the court always gave judgment in his favor. His abandonment of a part of his debt, on settlement with the administratrix, was founded on the then admitted fact, that he had.the whole title to the s.tore, which she concedes. By legal construction he was deprived of half the title ; but morally and equitably he certainly was entitled to the whole : he had paid a full price for it, and had settled with the administratrix on that footing. Waring then had purchased in good faith, and supposed he owned the whole; and when a doubt was suggested that his deed did not cover the whole, but one half only, he was advised to fortify and supply his title by purchasing the title to the other half from the party who claimed it, which he did. This he had the full right to do, and equity would uphold such a course, and not condemn it.
It is said, the low price of the sale made by Bates was caused by the fact that the property had already been sold by the sheriff, and was claimed by, and was supposed to belong to, Waring; that Bates thought so, and that Gayle and Phillips thought so; and after they had failed to recover on their title against Waring, they sold for a small price to Waring, supposing their title not to be good. Let all this be admitted ; we say, Waring also supposed his right to the whole, to be complete ; but if his purchase did create this belief, this whole matter was based upon his having paid the full value of the whole title. That fact prevents any wrong being laid at his door in a court of equity. A court of chancery would allow him to hold the property in payment of his debt, because that is both lawful and equitable, and will require but one condition of him — that is, that he shall have given adequate value for it. This he has done, and it matters not how or in what shape, so that Lang’s estate shall have obtained the full benefit of the fair value; this it has done. Equity will sustain a result which accomplishes that which it would have compelled if it had been applied to, however unauthorized or illegal may have been the proceedings by which that result is arrived at. Butler v. Merchants’ Ins. Co., 8 Ala. 146.
Those transactions involved in the former case, then — that is, the purchase at sheriff’s sale, and settlement with the ad-ministratrix — are not set forth here as creating sufficient title, but merely to satisfy the court in its discretion, and to show that it should not act on any question of inadequacy of price, because it would not be right, but would be wrong to do so. We suffered already by our misconception of the law, when we were told that, though we purchased the whole of the sheriff, wo obtained only one half, and had no return of part of the price, or means of obtaining it back. Now, if we have purchased a good right, at a low price, the equities are balanced and satisfied. The rule should work both ways ; and the result of the whole is, that we have paid the full value fairly for the property, and there is in fact no inadequacy of price.
The fact of the litigation, settlement and compromise made between Waring and the administratrix of Lang, is, and should be, conclusive against the claim of the heirs of Lang, there being no collusion on her part; because, as we have before insisted, the heirs could never in any event take anything out of the partnership property, except by way of distributive share from the administratrix of Lang’s estate, in a general distribution by her, after satisfying all Lang’s debts. Hence her act is conclusive. She was the proper party to claim of the surviving partner the proper balance coming to Lang’s estate, if any, and that in money; and she alone could compel him to account in equity. This position, it seems to us, shows that the heir has no interest in the question in this case, and cannot be heard here. It results that this whole transaction having been litigated, decided, compromised and settled, and acquiesced in by the surviving partner, the administratrix, and the conflicting creditors and purchasers, — the whole matter is closed, and these heirs have no interest whatever in the subject in any way. They hold the legal title as bare, naked trustees, for our use, and without any interest whatever in themselves, and are bound to convoy to us.
Syllabus and headnotes are prepared by the reporter or publisher, not the court, and are not part of the opinion.
