37 N.J. Eq. 137 | New York Court of Chancery | 1883
The questions now before the court for decision arise on a petition presented, in this suit, by Joseph W. McElroy, praying that an order may be made, directing the receiver appointed m this cause to pay to him the sum remaining due on a judgment recovered by him against James Ludlum, as surviving member of the firm of James Horner & Co. For many years prior to the 9th of June, 1874, James Horner and James Ludlum were engaged, as copartners, in the manufacture of steel, at Pompton, in the county of Passaic, under the name of James Horner & Co. On the date last named the partnership was dissolved by the death of Mr. Horner. Mr. Horner left a will by which, after a few unimportant gifts to others, he gave the whole residue of his estate to his daughter, Alice Buckingham. Very soon after the death of Mr. Horner, serious disputes arose between Mrs. Buck
The petitioner, Joseph W. McElroy, acted as superintendent of the steel works of the firm from July 1st, 1869 to the date of its dissolution. The service thus rendered, he claims, was rendered under a contract, by which the firm agreed that he should be entitled to receive, as compensation for his services, one-eighth of the yearly profits made in the manufacture of steel, they guaranteeing that his share of the profits should not, in any year, be less than $3,000. It is admitted that the contract was not in writing, and that it was made some time before he commenced service under it, so that it was not performable within a year of its date. The petitioner, in 1877, brought an action in this court against Ludlum and the other persons in interest, on the alleged contract, asking an account of the profits. Ludlum answered, admitting the contract; Mrs. Buckingham, by her answer, denied it, and on the issues thus raised, this court, and the court of errors and appeals, both decided that the petitioner was not entitled to an account. The decision of both courts was put upon two grounds; first, that a definite and complete contract, such as would entitle him to an account, was not proved; and second, if it had been it could not be enforced, it being invalid by the statute of frauds. McElroy v. Ludlum, 5 Stew. Eq. 828.
The petitioner, subsequently, on the 10th of September, 1880, brought an action at law against Ludlum, as surviving partner,
The fact that the petitioner’s services were rendered under an invalid' contract, does not in the slightest degree, impair his right to recover their reasonable value, for it is a well-established legal principle that where one person renders valuable services to another, under a contract invalid by the statute of frauds, and the person to whom the services are rendered, after getting them, refuses to perform his part of the contract, the person rendering the services may, in such event, treat the contract as a nullity and recover the value of his services in an action on the quantum meruit. Smith v. Smith’s Admr., 4 Dutch. 208; Rutan v. Hinchman, 1 Vr. 255, [2 Vr. 496;] McElroy v. Ludlum, 5 Stew. Eq. 828. This principle, it will be observed, is both just and logical. It is just because it prevents the person to. whom the services were rendered from getting them without making compensation; and it is logical because his' promise being invalid, is no promise in law, and the matter stands, therefore, just as it would if the services had been rendered in the absence of an express promise.
Nor do I think the petitioner’s right to recover in this proceeding is at all affected by the judgment of dismissal pronounced against him in his action for an account of profits. There can be no doubt that a prior judgment, pronounced by a competent court, between the same parties, on the same cause of action, and
Ñor do I think it can be held that the judgment recovered by the petitioner, at law, against the surviving member of the firm, binds or concludes the receiver or Mrs. Buckingham. It is, however, admissible in evidence for the purpose of showing what steps have been taken by the petitioner, by means of legal remedies, for the enforcement of his debt, and also to show that he has unsuccessfully exhausted the means provided by the law for its collection. As a general rule, a judgment concludes parties and privies, but not strangers. And by parties is meant all those who had a right to make defence, or to control the proceeding and to appeal from the judgment. Persons not having these rights are regarded as strangers. And by privies is meant such persons as are privies in estate—as donor and donee, lessor and lessee, and joint tenants; or privies in blood—as heir and ancestor; or privies in representation—as executor and testator, or administrator and intestate; or privies in law—where the law, without privity in blood or estate, casts land upon another by escheat. Taking this as the rule of decision, it is clear that the receiver and Mrs. Buckingham stand as strangers to the pe
The case stands, then, in this position: the petitioner has rendered valuable services to this firm, for which, he alleges, he has not been paid; he has established his debt against the surviving partner by a judgment at law, and has unsuccessfully exhausted all the means the law provides for its enforcement; this court, at the instance of the representative of the deceased partner, has taken possession of a'll the firm property, and it is now subject to its order; the petitioner’s debt, if honest and legal, is a valid charge both at law and in equity against the firm assets, and ought to be paid out of them.; they can only be reached through the intervention of this court. In this condition of affairs, it seems to be plain that, in order to prevent a failure of justice, this court is bound to hear the petitioner’s application, and if his debt is found to be just and. legal, to direct its payment.
No objection is made to the method in which the petitioner seeks ' relief. It is not insisted that relief of the nature asked can only be given in a suit regularly brought, to which all persons in interest are made parties and afforded an opportunity to make defence. In addition to those already discussed, the petitioner’s application is mainly resisted on two grounds—rfirst, that he has already received full compensation ■ and, second, if he has not, his remedy is barred by the statute of limitations.
Compensation to the extent of $3,000 a year has already been made. This, it is insisted, is all the petitioner’s services were reasonably worth. I cannot concur in that view. Careful and patient consideration of the evidence has produced a strong conviction in my mind that his services were worth more, aud would readily have commanded more in a rival establishment.
At the time of the commencement of his service, in 1869, he had been a worker in iron for over twenty-five years; he had in vented, and patented a process for making steel from pig iron;
The remaining question is, Is the petitioner’s remedy, against the partnership assets, in the hands of the court, barred or not by lapse of time ? His debt was in full force, and his cause of action perfect when this court took possession of the partnership assets. His term of service commenced July 1st, 1869, and closed June 9th, 1874, and the receiver was appointed November 17th, 1874. As already stated, the order appointing the receiver empowered him to pay the debts of the firm. In this respect, it followed the prayer of the bill.
It will be remembered that- Mrs. Buckingham, by her bill, among other things, asked that Ludlum should be required to account, that the partnership affairs might be settled, and, after the debts of the firm were paid, that the surplus assets might be divided. Now, if the order appointing the receiver created a trust in favor of the creditors, it is entirely clear, I think, that their debts were relieved from the operation of the statute of limitations. The trust was one which this court alone could administer and enforce. Not a penny of the money realized from the trust properly could be applied-except in accordance with the orders of the chancellor. ■ The rule is settled. Trusts which are not cognizable at law, but fall within the proper, peculiar and exclusive jurisdiction of courts of equity, are not subject to the statute of limitations. Wanmaker v. Van Buskirk, Sax. 685; Marsh v. Oliver, 1 McCart. 259; McClane’s Administratrix v. Shepherd’s Executrix, 6 C. E. Gr. 76. Chancellor Kent defined the rule as follows: “ The trusts which are not within the statute [of limitations] are those which are the creatures of courts of equity, and not within the cognizance of a law court, and that, as to those other trusts which are the ground of an action at law, the statute is, and in reason ought to be, as much a bar in one court as in the other.” Kane v. Bloodgood, 7 Johns. Ch. 90, 113. And Judge Story, in speaking on the same subject, said : “ As to cases of merely constructive trusts, ere
The judicial action taken in the ease under consideration, effected, substantially, the same result that a debtor who makes an assignment for the benefit of his creditors, accomplishes by his own voluntary act. He makes over his property in trust, first, for the payment of his debts, and, second, if anything shall be left, that it may be returned to him. The court here, at the instance of the litigants, sequestered the partnership property, first, for the payment of the debts of the firm, and, second, to enable it to adjust the rights of the parties in the surplus assets, and then make a division of them in accordance with such adjustment. Can it be successfully contended that such a sequestration, because it is effected by judicial action, taken in the due course of the administration of justice, and with the consent of the litigants, is less effectual for the protection of the creditors, whose right it was, at the time of the sequestration, to look first, and to the exclusion of all others, to the property sequestered, for the payment of their debts, than a voluntary assignment, made for the same purpose, would be ? I do not think it can.
But whether the action of the court created a trust or not, it is clear, I think, that in taking possession of the partnership property, the court changed the remedy of the creditors against the assets from a legal to an equitable remedy. After the assets were in court they could not be reached or touched except by permission of the chancellor. No action at law would lie against the receiver for the debts of the firm, nor could such an action be maintained against the representative of the deceased partner, and a judgment against the surviving partner would be utterly ineffectual against the property under the control of this court. No levy could be made upon it without the permission of the chancellor. It may safely be’ said, then, that after the partnership assets were in court, the remedy of the creditors of the firm against them was exclusively equitable. To such remedies the statute of limitations does not apply. Courts of equity are not
Lapse of time does not bar the debt, but simply the remedy, and in deciding whether the creditor has lost his remedy or not, ■courts of equity generally govern their action by the principle laid down by Lord Camden in Smith v. Clay, 3 Bro. C. C. 639, note ; A court of equity, which is never active in relief against conscience or public convenience, has always refused its aid to stale demands, where the party has slept upon his rights, and acquiesced for a great length of time. Nothing can call forth this court into activity but conscience, good faith and reasonable diligence. Where these are wanting, the court is passive and does ■nothing.”
The proofs show, I think, very clearly, that since the dissolution of the firm the petitioner has neither slept upon his rights, nor been slothful in their pursuit. Indeed, the judicial records •of the state bear testimony that since 1877 he has .been engaged in an almost constant struggle in the courts to secure their vindication. Prior to that time he had been lured into inaction.
But another rule of equity jurisprudence pertinent to the-question under consideration, remains to be mentioned. It has long been settled that a creditor of a firm may have relief in equity, for the payment of his debt, against the separate assets left by a deceased partner, if the surviving partner be insolvent and the firm assets exhausted. Lord King so held as early as-1692. Lane v. Williams, 2 Vern. 277, 292. Lord Eldon recognized this doctrine in Gray v. Chiswell, 9 Ves. 118, and in Ex parte Kendall, 17 Ves. 513, and Sir William Grant affirmed it in Devaynes v. Noble, 1 Mer. 528, 564. And Chancellor Kent applied it, in all its length and breadth, in Hamersley v. Lambert, 2 Johns. Ch. 508. There the firm was dissolved in 1803, by the death of one of the partners. The surviving partner made a payment on account of the complainant’s debt in 1806, and on January 1st, 1807, admitted the sum remaining due at that date, and in October, 1807, was discharged under the insolvent laws of the state of New York. In 1809, the guardian of two of the infant heirs of the deceased partner paid certain moneys into court belonging to his wards, which were afterwards invested in public stocks. In May, 1814, eleven years after the dissolution, the complainant filed his bill, asking a decree that his debt be paid out of the public stocks, which from the time of their purchase re
The petitioner is entitled to relief. In- my judgment, he reasonably deserved to have $4,000 a. year for his services, amounting in the whole to $19,766.68. Of this sum he has already received $15,000, leaving $4,766.68 still due. For this sum, with interest, he is entitled to an order, together with costs..