31 Minn. 129 | Minn. | 1883
The allegations of plaintiff are, in brief, that defendants Cahill and Townshend held a lease of certain real estate from McKusick for a term of years, subject to a yearly rental, payable quarter-yearly, with the right on the part of the lessor to re-enter and take possession on default of payment of rent; that Cahill and Townshend subsequently conveyed an undivided third of this leasehold estate to defendant Proctor, who afterwards mortgaged it to plaintiff to secure payment of the sum of $8,000 and interest, which is now overdue and unpaid; that Cahill subsequently conveyed his interest to Townshend, who is now in exclusive possession of the premises; that defendants Townshend and Cannon fraudulently con
The first question presented is whether plaintiff can, in an action to foreclose, also have, as against defendants Cannon and Townshend, relief from this fraudulent termination and forfeiture of the estate covered by the mortgage. Defendants’ contention is that, in an action to foreclose, the mortgagee cannot bring in question a paramount title and have it adjudicated. This is undoubtedly true. Banning v. Bradford, 21 Minn. 308. But it is not here sought to litigate a paramount title, within the meaning of the rule. The object here-is to re-establish the mortgaged estate, which defendants, by their fraudulent acts, have attempted to wipe out. The equity to be relieved from these fraudulent acts is not defeated or affected by the fact that the forfeiture of the leasehold estate was attempted to be. accomplished by a title paramount to plaintiff’s, mortgage. In fact, that is the very injury complained of. It would be idle to foreclose and sell under the mortgage until it be determined whether there is now any estate covered by it. Cummings v. Freer, 26 Mich. 128; Wilkinson v. Green, 34 Mich. 221. It is no more onerous on defendants to try this question in this action than it would be in another suit brought by the purchaser at the foreclosure sale.
It is also suggested that plaintiff is not entitled to this equitable-relief, because she might have protected her mortgage interest by herself paying the rent. But if defendants were guilty of the fraud charged, it does not lie in their mouths to suggest that plaintiff might.
2. It is assumed by defendants, and does not seem to be disputed by plaintiff, that it stands admitted by the pleadings that this lease from MeKusick was, at the date of the execution of plaintiff’s mortgage, the copartnership property of the firm of Cahill, Townshend & Co., composed of the defendants, Cahill, Townshend, and Proctor, the premises having been purchased and being occupied and used for partnership purposes, and that plaintiff had notice of that fact when she took the mortgage from Proctor. From these facts, defendants claim that plaintiff took her mortgage on Proctor’s interest, subject to the equities of the partnership, and hence is only entitled to Proctor’s interest in the surplus after all the equities of the partnership have been fully adjusted; that this interest can only be ascertained by taking an accounting of the whole firm business. But they further claim that a mortgagee of one partner’s interest cannot call for such an accounting, but must first proceed against his mortgagor alone, foreclose the mortgage, and sell his unascertained interest, and then, when he has transformed his lien into title, and not before,
It would be sufficient answer to this position to suggest that, independently of the matter of accounting, this action would lie against Cannon and Townshend for the purpose of setting aside the alleged fraudulent forfeiture of the leasehold estate covered by the mortgage. In fact, as against Gannon, this is the only ground upon which he is a proper party to this action. But, with reference to another trial, it may be proper to consider the right of plaintiff to have an accounting, in this action, of the copartnership business, in order to ascertain what her mortgage in fact covers. It is unquestionably true, as urged by defendants, that real estate purchased by a partnership with firm funds for partnership purposes, and used and occupied as such, will be deemed firm property for all the purposes of the piartnership, and is subject to all the rules applicable to such property, as between the partners themselves and all persons claiming through them, with notice of the facts, although the legal title stands in the names of the individual members of the firm as tenants in common. Also that a person with notice, who takes from one partner a mortgage upon his interest in such partnership property, takes subject to all the equities of the partnership, not only for the purpose of paying the debts of the firm to third parties, but also to members of the firm inter sese. The mortgage must yield to any use or disposition of the property which the firm may make of it for the purposes of the partnership, and, in this respect, there is no distinction between equities existing at the time and those arising subsequently to the execution of the mortgage. Kelly v. Hutton, L. R. 3 Ch. App. 703; Cavander v. Bulteel, L. R. 9 Ch. App. 79; Lindsay v. Gibbs, 3 De Gex & J. 690, 697; Bank v. Fowle, 4 Jones, Eq. (N. C.) 8; Lovejoy v. Bowers, 11 N. H. 404; Mechanics’ Bank v. Godwin, 5 N. J. Eq. 334. Therefore, clearly, all that such mortgagee is entitled to is his mortgagor’s interest or share in what remains after all the equities of the copartnership are fully adjusted. The amount of this interest can only be determined by a full accounting of the business of the firm.
Defendants concede the right to such accounting to one who succeeds by purchase to the interest of one partner. Such right is abun
Our conclusion, therefore, is that the court erred in excluding the evidence offered by plaintiff, and dismissing the action. It may be that Sabin should have fyeen made a party to the action in order to enable plaintiff to obtain all the relief she asks, but this would be no ground for the dismissal of the action as to the present defendants.
It is alleged in the answer, and substantially admitted in the reply, that in August, 1875, the firm of Cahill, Townshend & Co. was dissolved by the withdrawal of Cahill, who sold his interest in the property and business to Townshend, and thereupon the two remaining partners, Townshend and Proctor, formed a new partnership, and continued to carry on the business, and occupy and use the property
Order reversed, and a new trial granted.