57 F. 774 | 7th Cir. | 1893
Lead Opinion
after stating the facts, delivered the ppinion of the court.
As by the terms of the agreements of May 25, 1855, and August 12, 1857, there was, in effect, community of interest in capital, profit and loss, and subject-matter, Ewing and Sweetser correctly referred to themselves as partners, and the executors to the “land partnership” between them. The enterprise was not limited to a particular adventure, nor merely to the purchase of land to be held for advance in value. Town sites, and interests in town sites, town lots, half-breed land scrip and other scrip, shares in land companies and associations, were to be acquired. If found advisable some of the property might be sold, and the proceeds divided, or reinvested for the joint account. The claims and purchases were referred to as joint capital or joint means. Each was to contribute equally to the expenses of the business. Joint land books, and regular accounts of expenses and costs, were to be kept. One-half of all the profits and gains, either in property or money, after all debts and advances were paid, belonged to each. ' Sweetser was-to cause land scrip to be located, and to sell lands, but to consult with Ewing in large transactions, and so on. The defendants rightly admitted the existence of the partnership in their answer.
The question to be determined is not whether the legal title to the undivided one-half in controversy passed to Sweetser by the deed of December 11, 1866, but whether, through a settlement of the affairs of the partnership by and between Ewing’s executors and Sweetser, the latter acquired such equitable right thereto as justified the decree of the circuit court. Unquestionably, this real estate belonged to the firm, and while the duration of the partnership was specified as five years from May 25, 1855, (including the extension,) purchases of many hundred acres were apparently made after that period expired, and the partnership affairs, confessedly, had not been closed up when Ewing died, May 29, 1866. The contention that by the execution of the declaration of trust of July 28, 1860, the lands therein embraced (‘.eased to be partnership real estate does not commend itself to our judgment. Under the agreement of May 25, 1855, the party in whom the title was vested to be held for sale for joint and mutual benefit was to execute a declaration of trust on request. This particular declaration was not executed on any settlement of accounts and -adjustment of equities between the partners, and lands were subsequently purchased; but, as far as it went, it furnished proper evidence that the lands named therein belonged to the enterprise, and not that the shares of an ascertained surplus were thereby transferred, and taken out of commerce.
Real estate purchased with partnership .funds for partnership uses, though the title be taken in the name of one partner, is in equity treated as personal property, so far as is necessary to pay
The opinion in Valentine v. Wysor, 123 Ind. 47, 23 K. E. Rep. 1076, discusses the general subject, with much citation of authority. That was the case of a hill filed by the heirs of one Jack to set, aside a conveyance by Jack’s executors to Wysor, his surviving: partner, in settlement of partnership affairs, and for an accounting, complainants offering to pay whatever might he found due. The conveyance was made in 1866, and the suit commenced in 1880. The court held that the power conferred by the will to settle, adjust, and compromise testator’s debts, and to settle with his partners, and to sell and convey his real estate, included the power to settle at discretion, and to sell and convey according to the executors’ host judgment; that a surviving partner has the right to the control and possession of the property of the firm, and may dispose of it in order to adjust the partnership accounts; that the rights of the heirs are subject to the adjustment of all claims between the partners, and attach only to the surplus which remains
By the agreement of August 12, 1857, Ewing and Sweetser declare their intention and belief that, if either or both parties die before the business is finally closed up, their legal representatives should, will be able to, and can do so; and the correspondence shows that Miner was fully authorized by Ewing to conduct the negotiations pending from January, 1866, to Ewing’s death, for a complete settlement and adjustment of the partnership affairs.
The will was executed February 17, 1866, and provided for the payment of testator’s debts, the improvement and lease of certain real estate, and the distribution of rents, issues, and profits; and the executors were empowered to sell and convey, after appraisal, such of testator’s lands in Ohio, Indiana, Illinois, Missouri, Minnesota, ' Wisconsin, and Kansas as should be necessary to carry out its objects and purposes; to make conveyances for such real estate as had been disposed of, and not conveyed; to receive rents and profits; and out of any moneys in their hands, arising from sale or otherwise, to pay taxes, expenses, salaries, and costs “of executing this will, or defending and protecting any of the property of which I may die seised.” By the thirteenth clause “in view of the long and intimate relations existing between myself and my worthy friend Byrum D. Miner,” the sum of $2,500 is bequeathed to Miner, and it is provided:
“And, in view of Ms long and intimate connection with, my general business, it is my will and desire that he' shall b© my active executor, and give his personal attention to Settling up and protecting my estate, and carrying out the provisions, meaning, and intention of this, my last.will and testament; and in consideration thereof I will and direct that he shall receive forty-five hundred dollars ($4,500) per annum for the term of ten years, should he continue so long my executor.”
Miner, accordingly, proceeded with the negotiation which had been commenced in Ewing’s lifetime, and was in his charge at the time of the execution of Ewing’s will, and of his death, and brought it to a conclusion in December, 1866.
April 30, 1866, Ewing had executed a conveyance to Sweetser of certain lands, which was left in Miner’s hands for delivery upon compliance with certain terms and conditions. Sweetser had offered $100 for Ewing’s interest, but it is not shown that he had agreed to the conditions prior' to December, 1866. On the 8th of December, 1866, the executors made their deed to Sweetser, reciting that, by
We concur with the circuit court that these papers are all to be taken together, and form parts of one and the same transaction. The money consideration of the deed of April 30, 1866, was $100, which was satisfied by the note of December 11th, and although the release bore date December 8th, we think that it and the deed of April were delivered with the instrument of December 11th, and on that day.
We conclude, therefore, that there existed a partnership between Ewing and Sweetser; that the land in question belonged to the estate in partnership, and was impressed With that character at the time of Ewing’s death; and that the transaction in December, 1866, was in complete adjustment and settlement of all the partnership 'affairs, and all outstanding indebtedness, and of all claims and equities between the partners. The complainant took possession in 1884 under recorded documents evidencing its equitable ownership, and was not called on to vindicate its rights until, in 3890, the proceeding in partition was instituted. There was some evidence tending to show that there were debts; that Sweetser made claims on his own behalf; that partnership property had been sold or conveyed; that partnership property was in litigation; that there was personalty belonging to the firm, apart from real estate. But all those matters were included in what must be presumed, on the face of the papers, to have been a final settlement upon an accounting, — a settlement prima facie valid and binding, and presumptively properly made, 'and in the exercise of authority properly
The averments of the answer (to he treated as equivalent to a cross bill) by which the settlement was sought to he impeached are. in brief,' that there were no partnership debts; that Sweetser had no claim after the execution of the deed of December 8, 1866; that' Sweetser falsely represented to the executors that there were claims against the partnership, that he had a valid claim, and that the real estate was of little or no value, whereby the executors were fraudulently induced to execute the deed of December 11, 1866. This hill was filed nearly 24 years after the transactions complained of, and these averments fall far short of the distinctness( and precision required where fraud and mistake are charged after such Lapse of time. Apart from this, we are to remember that Ewing, Sweetser, Miner, and the bookkeeper, Lytle, were all dead, and that the letters, papers, and hooks relating to the period prior to Mr. Ewing’s death were destroyed, or not produced. Inasmuch as Miner had been in the employment of Ewing since 1838; was his confidential friend, and familiar with his affairs; was intrusted wit.h the closing np of these very matters by Ewing, living, and especially charged by Ewing, in his will, to give his personal attention to settling np and protecting his estate, — while his diligence a.nd faithfulness are nowhere impugned, the theory of ignorance on his part is wholly inadmissible, and we find no evidence upon which the position that he was deceived in the premises can be sustained. Both parties, in their correspondence, refer to debts of the concern, and, in one of his letters, Sweetser claimed a balance due to him. So far from undervaluing the lands, the evidence discloses that Sweetser insisted that they were valuable, and that the ill success of the business was attributable to want of expected money advances. Land had been sold. Property was in litigation. In his letter of March 26th, Ewing says that the list of January 30th was “full and complete, except as to that then and now in litigation.” A. suit with one Bratt, in New York, is particularly mentioned. Miner declares, in the letter of January 30th, the matter “complicated,” and that he is determined “we will he rid of the annoyance and perplexity attending it.” These and other things appear, but the grave has closed over those who could have slated and explained all the facts, and the record keeps the silence they might have broken. We have not been unmindful of the testimony of W. A. Ewing, Mr. Miner’s coexecutor, but he was not at this time active in the management of the estate, and did not reside at its headquarters; and a careful examination of his
The instrument of December 11th declares that it wa.s the executors who proposed to make the final compromise and settlement upon the basis of that conveyance, and that Sweetser accepted; -and we are not constrained, by any -adequate proof, to a result adverse to the adjustment so made, which could only be reached
It is said in Hammond v. Hopkins, 143 U. S. 244-250, 12 Sup. Ct. Rep. 418:
“Xo rule of law is Loiter settled tlian that a court of equity will not aid a parly whose application is destitute of conscience, good faith, and reasonable diligence, but will discourage stale demands, for the peace of society,*792 by refusing to interfere where there have been gross laches in prosecuting rights, or where long acquiescence in the assertion of adverse rights has occurred. The rule is peculiarly applicable where the difficulty of doing entire justice arises through the death of the principal participants in the transactions complained of, or of the witness or witnesses, or by reason of the original transactions having become so obscure by time as to render the ascertainment of the exact facts impossible. Each case must necessarily be governed by its own circumstances, since, though the lapse of a few years may be sufficient to defeat the action in one ease, a longer period may be held requisite in another, dependent upon the situation of the parties, the extent of their knowledge or means of information, great changes in values, the want of probable grounds for the imputation of intentional fraud, the destruction of specific testimony, the absence of any reasonable impediment or hindrance to the assertion .of the alleged rights, and the like. ' Marsh v. Whitmore, 21 Wall. 178; Lansdale v. Smith, 106 U. S. 391, 1 Sup. Ct. Rep. 350; Norris v. Haggin, 136 U. S. 386, 10 Sup. Ct. Rep. 942; Mackall v. Casilear, 137 U. S. 556, 11 Sup. Ct. Rep. 178; Hanner v. Moulton, 138 U. S. 486, 11 Sup. Ct. Rep. 408.”
We think that the circumstances disclosed here require the application of this salutary rule to the attack upon the settlement. That settlement was made between Sweetser and the active executor, Miner, both of whom are dead. The papers were in the handwriting of the bookkeeper, Lytle, and he is dead. The deeds of December 8th and 11th were witnessed by Lytle and Kentner, and Kentner is dead. The release was witnessed by Lytle and George W. Ewing, one of the heirs, and Ewing is dead. The books and papers which might have shed light upon the transaction were destroyed by Miner, with the knowledge and consent of the then trustee, Holladay, before the bill was filed, though not until 16 to 19 years after the settlement. There was no adequate evidence of actual fraud, the instruments were duly recorded, the means of information were originally abundant, no concealment or suppression was shown, and the record demonstrates the utter in-practicability of restating an account between the partners. Evidence was given on both sides as to the value of the property in 1866, and thereafter, but it fails to convince us that at the time of the settlement the value of the half conveyed to Sweetser was so great as to raise any serious suspicion of fraud in that connection; and it is apparent therefrom that 17 years after, when the purchase was made by the company, the value had largely appreciated, while the enterprise upon which the company then embarked imparted an immense speculative increase.
By the settlement the property in question lost its partnership character, and became the separate property of Sweetser, and the principle of laches may justly be regarded as fatal to the maintenance of a suit to set aside that settlement, whether brought by the executqrs or the heirs,and devisees; and, moreover, without resting the decision on that point, we hold that defendants failed to overcome the presumptions in favor of the settlement arising upon the documents.
• The answer treated as a cross bill did not seek an accounting and adjustment of the partnership affairs, and discharge of the
(October 4, 1893.)
Dissenting Opinion
(dissenting.) The question in tbe case is of the validity and effect of the deed of December 11, 1866. I think it invalid, both for lack of consideration, and for want of authority in Ewing’s executors to make it. That the deed was made without consideration is clearly enough proven, and is put beyond question by the bill and answer. In considering the evidence, it is not necessary fo go beyond the statement ma,de by the chief justice1, which is full and fair.
The position of the appellants as defendants should not be confused with their position as cross complainants. As defendants, they are not chargeable with laches, and their claims, if not barred by statutory limitation, — of which there is no pretense, — should not be regarded with less favor on account of lapse of time, death of witnesses, destruction of papers, or other supposed ’oss or lack of evidence, for which they are not responsible. The appellee was not, an innocent purchaser, nor the grantee of one. Its immediate grantors, who bought out the Sweetsers, made the purchase for the appellee, and, recognizing the defective character of the title obtained, sought to perfect it by means of a quitclaim from the appellants. They refused to convey, and if, from the time of that refusal, there was negligence in bringing a suit to determine the ownership, it is attributable to tbe appellee, rather than to the appellants, who — -some of them being under legal disability — lived wide apart, and far from the land which 'is the subject of dispute. There is no apparent reason why the appellee should not have brought an early suit to establish its title, and its delay to do. so until after Miner and Lytle, whose importance as witnesses was as plain then as now, had died, demonstrates either its own negligence, or a prudent purpose on its part to profit by postponing the issue. It is not probable, however, as we shall see, that, if living, Miner and Lytle could have put in a different light any essential point which the pleadings have left open to controversy. Neither is it probable that the books and papers of Ewing, which Holladay and Miner destroyed as “being of no value” would have been of value to either party, and especially to the appellee. That the litigation was likely to come, and would turn upon the deed of December 11th, Holladay and Miner well understood ; and as one of them was interested to overthrow, and the other bound in honor to uphold, the deed, it is not to be presumed
There is, however, in the case, a notable omission of evidence, which the appellee ought to have supplied or explained. Sweetser was to be the active man in the business, and the contract of May 25, 1855, in terms, required him “to open and keep a set of joint land books, and to keep regular accounts showing all' proper ex-. penses and costs of making purchases, securing claims, etc., and to take necessary vouchers, etc.” It is to be presumed that Sweetser complied with that requirement of thfe contract, find that his books showed at least his own receipts and expenditures, and that, if favorable to its contention, the appellee would have produced them,1 or offered some excuse for the failure.
But, passing by matters of conjecture and suspicion, and considering the case as the record presents it, we find no lack of convincing evidence upon the one essential point of inquiry. The contract between the parties shows the original expectation to have been that Ewing would advance ihe money necessary for the prosecution of the scheme; and it is as clear as could well be — in fact, Sweetser’s letters imply, if they do not admit — that the advances which Ewing made far exceeded those of Sweetser, even if his salary for the entire time be included. And the great probability 'is that the one-half of his salary which was chargeable to Ewing did not remain unpaid. There is no claim to that effect in Sweetser’s letters. The supplemental agreement of August 12, 1857, shows that at that time Ewing’s advances had amounted to $8,000 or more, — a much larger amount of money than it was at first supposed would be needed,— and, there being no mention of anything due Sweetser, the fair inference is that nothing worthy of mention was then owing to him. It is little less certain that the money expended in the subsequent conduct of the business came from Ewing. Late in 1865, being anxious to have the business wound up; or off his hands, Ewing-proposed to sell his share in the property for original cost and interest, and, by his letter of January 7th, Sweetser accepted the offer.' This acceptance, though afterwards withdrawn, was equivalent to-an admission that Ewing’s interest in the property was worth what
The debts referred to in .the correspondence between Ewing and Sweetser, for the payment of which it was said the lands should he sold, were, without doubt, for the advances made by Ewing. So Miner understood, when, on January 30th, he said of a proposed sale of part of the' lands to Sweetser, “the proceeds will he used to refund to Ool. Ewing * * i:' the large sum of money which he has furnished juu from time to time for investment in that country.” In short, Ewing, while in life, with the knowledge and assistance of Miner, whom he appointed one of his executors, was demanding, and Sweetser was conceding to be due, and was will
But, if the evidence left the question open to doubt, it is established by the undenied averments of the bill that the deed of, December 11, 1866, was without consideration. It is alleged in the bill, not only “that the deed of December 8th was executed and delivered on that day,” but that thereafter “on the 11th day of December, -the deed bearing that date was executed;” and, without direct averment of the time when the release was executed, that paper is referred to in the bill as “Sweetser’s agreement and release executed -and dated December 8, 1866.” Undenied, these averments must be taken as true, and given full effect. They make it impossible to concur with the circuit court in saying “that these papers are all to be taken together, and form parts of one and the same transaction.” Wo matter what evidence to the contrary, the averments must prevail.
The contrary evidence, however, is not strong. The giving of the note for $100 was a small matter, and may have been overlooked on the 8th. The cancellation of the contracts and declaration of trust, after the - execution of the deed and release of December 8th, was a useless matter of form, evidently not done before, the 11th, but affording no proof of the time when other papers were delivered. The recitals of the second deed are, that “on the 8th of December” the executors made the first deed, and that Sweetser “has taken upon himself, and assumed to pay,” etc., “as per his agreement and release dated December 8, 1866.” The release itself bears date December 8, 1866. The cancellation of the revenue stamp is of the same date. The conveyance of April 30th is recited as a past or completed transaction, (made so, doubtless, by delivery on that day,) and there follows the recital that “on further settlement” the executors “have this day conveyed to me certain lands” described; and then follow the declaration that the contract of May 25th and the supplemental agreement are ended, and Sweetser’s agreement to- discharge the executors and the Ewing estate and heirs, and to take upon himself all liabilities, in terms quite as comprehensive as the conditions and obligations which the second deed purports to impose upon him. It was proper, as the parties evidently assumed, that the deed of December 8th should be made under the sixth clause of the will, “in compliance with the declaration of trust;” and the execution of the release by Sweetser at the same time was manifestly just and right, because the liabilities he assumed, it is clear, were less than the amount due from him to Ewing for the excess of the latter’s advancements over his own.
Aside from, as well as because of, its lack of consideration, there was, in my opinion, a want of power in the executors to execute that deed.' It is not to he questioned that, by their contracts, Ewing and Sweetser, in their land transactions, were partners, because the partnership is alleged both in the bill and the answer; and it is well settled that “real estate purchased with partnership funds for partnership uses, though the title he taken in the name of one partner, is, in equity, treated as personal property, so far as necessary to pay the debts of the partnership, and to adjust the equities of the partners.” “But,” as is added in Riddle v. Whitehill, 135 U. S. 621, 10 Sup. Ct. Rep. 924, whence the quotation is taken, “the principle of equitable conversion has no further application.” And none of the cases cited go to the extent. that the surviving partner, without the aid of a court of equity, can take possession of lands, of which both the title and possession were in his co-partner at the time of his death, and dispose of the same as personalty belonging to the firm.
It is not necessary here, however, to inquire into the powers of a surviving partner over partnership property, whether real or personal. Conceding his power to sell to third persons, he could not sell to himself, and if, by the deed in question, Sweetser acquired any interest, it was because of the power of the executors to make die grant. For their powers, we must look to the provisions of the will, as was done in Valentine v. Wysor, 123 Ind. 47, 23 N. E. Rep. 1076, or, if the* will is silent, to such statutes as may be applicable. The provision in Ewing’s will for the sale and disposition of personal property does not apply, and the direction given “to make sale of such of my real estate in the states of Ohio, Indiana, Illinois, Missouri, Minnesota, Wisconsin, and Kansas as shall he necessary to carry out and effect the objects and purposes of this will,” and the further provision that no sale should be made without appraisement, it is manifest, do apply to these lands; and this conveyance, treated as a conveyance of land, was not'only not authorized, it was forbidden, by the will.
“But,” it is said, “the executor of a deceased partner, if not a member of the firm, may agree with the survivor that the share of the deceased may he ascertained in a particular way, or be taken at a, certain value; and if the executor and the survivor, in good faith, come to an accounting respecting the partnership affairs, and settle the same as a. final account, such settlement cannot be overhauled except on the ground of fraud (or such unfairness as is equivalent thereto) or mistake.” Even by that rule, this settlement should not stand; but the doctrine stated rests on the com
The law of Indiana since 1852, if not longer, has been different; and, if these lands are to he treated as personalty, it is the law of Indiana, where Ewing lived and died, that must govern. By that law the title of personalty, as well as of real estafe, descends to the heir at law, unless otherwise; directed by will; and as the executor or administrator has statutory authority to sell only ai; public auction, unless otherwise ordered by the court, it is held that a private 'sale, without order of court or testamentary authority, confers no title. Weyer v. Bank, 57 Ind. 198.
It may he conceded that the executors in this case had authority to make a settlement with Sweetser, and, if a balance was found due him, to pay it with money of the estate in their hands, of which it is shown they had an abundance; hut, even if they were Avithout money, they had no authority, Avithout an order of court, to discharge the debt owing to Sweetser, or to other creditors, by transfer of property, Avhether personal or real, and especially not by a transfer of land, though capable, if there was necessity for it, of being treated as personalty, because it is the policy of the law, in Indiana, to protect the interests of the widow and heir at law in real estate, and to that end the personal estate of a decedent is made the primary fund for the payment of all debts, including mortgages and other liens upon real estate. Hunsucker v. Smith, 49 Ind. 114; Elliott v. Cale, 113 Ind. 383, 404, 14 N. E. Rep. 708, and cases cited. Indeed, the statute in force since 1852 requires the payment of “debts secured by liens upon the personal and real estate of the decedent, created or suffered by him in his lifetime,” before the payment of general debts and legacies. BeAdsion 1881, § 2378. It Avas therefore the duty of these executors, under the law, as Avell as by the requirements of the will, to pay Sweetser whatever was ascertained to he due him, out of moneys of the trust in their hands, and thereby preserve the land in question as real estate, and, if they had not ready money for that purpose, to obtain it out of the personal estate proper under the authority giAren them by the sixth clause of the will. They had no more right (unless given in the will, which is not pretended) to pay Mm by transferring Ewing’s interest in the partnership lands than they would Imve had to pay him by transferring real estate which had never belonged to the partnership.
■It is further to he obseded that by an act of the Indiana legislature approved March 5, 1859, (Ress. Laws 1859, p. 134,) which remained in force until 1877, when it was amended, a surviving partner Avas required, within 60 days after the death of the co-partner, to make a full, true, and complete inventory of the estate, goods, chattels, rights, credits, and effects within his knowledge, and to cause the same to be appraised, and to file with the clerk of the court an affldaAÚt that the schedule filed hv the ap
There is another reason why it was not competent,, on the 11th day of December, 1866, to treat, this huid as personalty. If that x-ight ever existed, it was extinguished by the transaction of December 8th. By the deed of that date, Sweeter accepted a conveyance of the undivided one-half of the land described, including That in suit, in discharge of the trust under which Ewing had held the title, thereby becoming tenant in common with the legatees of Ewing. By that act the partnership character of the land was lost', and if (he account between the partners was not then or thereby settled, or if “Sweetser’s agreement and release’’ of that, date was not delivered till later, the account then became a personal one, into the adjustment of which the lands could not be drawrn on the theory of being partnership assets. If the title and trust had been in Hweeter, instead of Ewing, and, in execution of the trust, he had conveyed the half interest to the Ewing legatees, he might (hereafter, with equal propriety, have taken a conveyance from the executors in adjustment of the partnership accounts and liabilities.
Upon no view of the case can T think the appellee entitled to affirmative relief in equity. If, by lapse of time or otherwise, it had acquired a legal right against the appellants, ox* any of them, before the suit for partition was brought, it may be set up as a defense to that px-ocedure.
