14 Colo. 335 | Colo. | 1890
This is an appeal from a judgment and •decree rendered the 24th day of December, 1884, in a suit in equity brought by Clinton Reed, the appellee, to recover an undivided one-fourth interest in a, leasehold •estate in a certain lode mining claim, known as the “Felicia Grace,” situate in the consolidated ten-mile mining district, Summit county, Colorado, and for an accounting of the proceeds realized by the appellants in working that property.
The suit was predicated upon an alleged partnership .agreement between appellants and three other persons, who will be named hereafter, and the issues presented to this court are: First, whether the partnership was established by the evidence; and, second, whether such evidence was legal and competent.
The first question necessarily involves a review of the •evidence taken upon the trial. In the consideration of the case, only so much of the bill of complaint need be recited as defines the contract between the parties and their several interests in the property, and the proceeds •of the property in controversy. It is alleged that in the month of April, 1884, the defendant J. C. Meagher, the plaintiff Clinton Reed, A. A. Smith, and John Van Avery, by parol, entered into an agreement of copartnership, wherein and whereby it was agreed by and between the said several parties that they would together obtain a lease upon the property known as the “Felicia Grace” lode mining claim, and, after obtaining the lease of said property from the owners thereof, would together, as an association or copartnership, enter upon and into said mining property, and prosecute the work of developing
It is then alleged that after the execution and delivery of the lease, Meagher, on behalf of the copartnership, took possession, and began developing the property; that complainant, as he was bound to do, contributed materials and funds to aid in the prosecution of the common enterprise. It .is unnecessary to state the other allegations of the complaint, such allegations being such as are usually found in a suit brought between partners for an accounting and distribution of partnership property.
The answer put in issue the allegations of the complaint, and interposed, as a separate defense, the statute
By the twenty-third finding it is declared that the said lease will by its terms continue until October 21, 1885; that there has been opened in the said premises a large and valuable body of ore; that the developments show that during the continuance of the lease there will probably be taken, mined and removed from the said premises upwards of three thousand tons, at the rate at which said mine is now being worked; and that the ore so mined will be of the probable value of $50 per ton, and of the net value of upwards of $100,000, of which the said Seed’s share will be about $25,000.
By the twenty-fourth finding it is declared that the said Clinton Eeed is now the owner of an undivided seven-thirty-seconds in the said lease, and entitled to that extent to share in the benefits and advantages accruing thereunder, and to that proportion of the profits of all the ores mined; and that he is entitled to occupy, possess and enjoy the said premises under the said lease with the said Meagher and the other defendants interested in said lease.
It is first necessary, therefore, to determine by a review of the entire case whether the findings of the court are warranted by the facts disclosed and established by the evidence. The evidence tends to prove that for some time prior to April 1, 1884, the appellant J. C. Meagher was one of the owners of the property in question. The property was undeveloped and its value unknown. A shaft had been sunk upon the premises to a considerable depth, but no valuable deposit of mineral had been found. In an adjoining property, known as the “Robinson Lode Mining Claim,” a deposit of mineral had been discovered some time before, the dip or direction of which was towards the “Felicia Grace.” Meagher having learned of this discovery, and believing that the same deposit or a continuation of it might be found within the territory of the property named, became desirous of securing a lease from his co-owners for the purpose of developing the property and ascertaining whether this deposit of mineral could be found. Being without means it was .essential for him to associate others with him to aid in the enterprise. Some time in the month of March, 1884, Meagher met at Leadville one Dr. A. A. Smith, and had some conversation with him in relation to the matter. He succeeded in interesting Smith, and obtained from him a promise that he would undertake to pay one-fourth of the expense of developing the property if a lease was obtained, in consideration of the transfer to him of an undivided one-fourth interest in the lease when it was made. In this conversation it appears that Smith suggested that Clinton Reed would also take a quarter interest and pay one-fourth of the expenses. Before the lease was actually obtained a definite understanding was arrived at between Meagher, Smith and Reed that Reed and Smith would each pay one-fourth of the expense of developing the property, in consideration of which
After the execution and delivery of the lease it appears to have been delivered by Meagher to Smith, who seems to have retained it for a considerable time. It was recorded in the office of the clerk and recorder of Summit county, Colorado, May 20,1884. After the lease was secured Meagher and Patrick Barker immediately entered into the possession of the property, and began the work
Attention is now called to so much of the evidence as relates to the conduct of the parties under the agreement after possession was taken of the mine. On April 27, 1884, the day after the date df the lease, Meagher addressed a letter to Smith as follows: “Robinson, April 27, 1884. A. A. Smith, Esq.: I started to work yesterday in the sixty-foot shaft. I find by the Robinson mine maps that the.mineral in their tunnel is going straight for the Felicia Grace. I was in to see the new strike, and I think it is going to be as big an ore-shoot as the old one. It is ten feet high, and can’t tell how wide. John Hall was here and signed one copy of the lease. The other he will sign and send back. Sent it to him three or four days ago. I have taken this man Barker in. He is working with me here. I will have to put on another man. It will take three men to work this shaft. It is only about one hundred and twenty-five feet from the Robinson mineral, so I think we will get it in forty feet more, and if the water don’t stop us I think we will be able to get there in thirty days. If we get water we will have to put up an engine. The snow is four or five feet deep, so we will have a hard time to get an engine here. If you see Van Avery tell him not to go to any expense until he hears from me that other arrangements might be made. If you and Mr. Reed take half of the lease there will be no interest left for Van. George and I took one-eighth each, and Barker one-fourth. John.
The supplies above mentioned were purchased by Eeed, and sent about May 3d. On that day Smith wrote Meagher as follows: “Leadville, May 3, 1884. My dear John: Yours reached me on Tuesday, and, owing to the excitement of the convention, was not attended to at once, and Clint struck out for Denver, and only returned this morning, when I proceeded to bounce him roughshod, and have ordered the supplies, which will probably not reach you before Monday. As the express company will not take powder, it will have to go by freight. Clint and I take one-half of it. I think I will have plenty of money in a few days, and will not hesitate doing all in my power to push the work, and will not have to run Clint down every time anything is to be done. I regret the delay in your first order. You know I have always been prompt in our operations together heretofore. Let me hear from you. Smith.”
About the last of May it became necessary to obtain
It does not appear that Eeed had any knowledge that a letter of this tenor had been written by Smith, or that he had authorized or suggested that any sale of his interest should be made. June 14th another letter was addressed by Meagher to Eeed, as follows: “Dear Sir: Not hearing from you, I have made an arrangement for an engine which will answer for the present. I received a letter from Dr. Smith saying he would have to give up his interest. I am very sorry that he can’t carry his interest, as I think it is a good lease and must stop the Eobinson company from going through to the Champion ground. Mr. Hall is here and will take an interest in the lease, and I would like to know what you intend to do. I am not going to give up after spending what I have. Hoping to hear from you soon, I am very truly yours, J. C. Meagher. P. S. Please tell Dr. Smith to send the lease to me. J. C. M.” This letter was not received by Eeed until some time in July, nor until after a large body of mineral had been discovered in the property. It appears that he was absent continuously from Leadville, on professional business, from about June 16th until some time in July. June 16th Smith wrote the following letter to Meagher: “Dear John: I finally had an interview with Clint, and he don’t seem inclined to do anything at all, and tells me to sell the thing out; and if I could do so for enough to pay what we owe I would be glad to have you do it. I have not received any money yet. Would be very glad to stay in and put up, but I don’t see how I can at present. Clint is going east soon — liable to leave on any- train — to be gone a week or two. Can you see any chance to do anything? Let me hear from you at once. Smith.”
In relation to this letter Eeed testified that he never had the interview with Smith mentioned, and that he never authorized Smith to direct Meagher to sell his in
After the conversation between Beed and Meagher in May, no demand appears to have been made upon Beed for money or supplies. No communication seems to have been had between them except the two letters of June 'Tth and June 14th, in which Meagher asks Beed what he is going to do in relation to the engine. Neither does it appear that Beed ever offered to contribute either money or supplies after that conversation was had. As
It further appears that after receiving the letter from Smith of June 16th Meagher began to dispose of interests in the property. On June 14th he made an arrangement with Samuel Rice and L. O. Swain to lease an engine, for which he was to pay $25 per month. Afterwards, on July 1st, being unable to pay the rental of the engine, he transferred an eighth interest in the lease to Rice and Swain for the use of the engine and other considerations. Other interests were transferred by him for small sums of money and labor. In July a very large and valuable deposit of mineral was uncovered. When Reed returned to Leadville he demanded his interest in the lease and in the proceeds of the property, which was refused. Thereupon this suit was brought.
Upon the foregoing statement the first question naturally presented is whether a copartnership was ever actually entered into between Meagher, Reed, Smith and Van Avery, as declared by the court below by the first finding. A marked distinction exists in law between an agreement to enter into the copartnership relation at a future day and a copartnership actually consummated. It is an elementary principle that a partnership in fact cannot be predicated upon an agreement to enter into a copartnership at a future day unless it be shown that such agreement was actually consummated. In the language of the text-books, the partnership must be
Appellants’ counsel claim that the finding of the court declaring that Meagher, Reed, Smith and Van Avery entered into a copartnership is unsustained by the evidence; that the second finding, that Barker, by consent of the parties, succeeded to the interest of Van Avery, is in legal effect a finding that a partnership agreement was made and a partnership relation entered into, different from that alleged in the complaint as the basis
The second question suggested is whether a partnership relation between Meagher, Reed, Smith and Barker was established by the evidence, and, if so, what was its nature? The lease bears date April 26, 1884, and seems to have been executed about that time. Prior to this time a clear understanding existed between Meaghei’, Reed and Smith as to the enterprise and their relations and interests in it. It was settled that Reed should take and carry the burden of an undivided one-fourth interest. The interest of Smith appears to have been the same. In the letter of April 27th addressed by Meagher to Smith it is stated that Barker was to have one-fourth. It appears that Barker and Meagher went to the property together and began work, and that after this time Hall came to Robinson and signed the lease. At the time the enterprise was set on foot, and prior to the execution of the lease, the four parties named seem to have undertaken to acquire a lease of the property in question, and to develop and work the same for the purpose of extracting the mineral therefrom, and to pay the expenses and share the profits, if any, in accordance with their respective interests therein. That this arrangement constituted a partnership between the parties cannot be doubted. What was- the nature of the partnership? Was it a general partnership, and subject to all the incidents and principles of the law of partnership, or was it a mining partnership, as defined in the text-books and by the authorities?
In England and in America the operation of mines has long been considered a species of trade. The nature of the business, and particularly the necessity for the continuous operation of mines, the practical impossibility of each owner acting independently, and the consequent
In this case the principal if not the sole object of obtaining the lease of the “Felicia Grace” was the extraction of ores from the property. It is claimed by appellants that the partnership alleged in the complaint and found by the court is a general or commercial partnership,
These principles have been recognized again and again by the courts of England and this country. Crawshay v. Maule, 1 Swanst. 495; Fereday v. Wightwick, 1 Russ. & M. 45; Williams v. Attenborough, 1 Turn. & R. 70; Dickinson v. Valpy, 10 Barn. & C. 128; Colly. Partn. §| 801, 808; 1 Bates, Partn. § 163; Charles v. Eshleman, 5 Colo. 107; Manville v. Parks, 7 Colo. 128; Skillman v, Lachman, 23 Cal. 199; Duryea v. Burt, 28 Cal. 569; Kahn v. Smelting Co. 102 U. S. 641; Bissell v. Foss, 114 U. S. 252, 260; Rock. Mines, 574; Lamar v. Hale, 79 Va. 147.
The cases cited not only clearly define the nature of a mining partnership, and distinguish such , a partnership from a general partnership, but they also show that, except in the particulars mentioned, the affairs of a mining parnership are governed by the same principles in equity as a general partnership. In no case does this appear more clearly than in Fereday v. Wightwick, supra: ‘ ‘ A lease was taken of certain mines, the lessees consisting of six persons; at the same time a lease was taken of the surface of the property. The mines and surface were used with a communion of expense and a communion of profit. The first question is whether this is a partnership property liable to be sold and disposed of to pay the partnership debts, and whether, a partner having sold part of his shares, his interest is to be considered subject, in the first place, to repayment of what is due from him to the partnership. This question is concluded by authority, but I am willing to decide it upon principle. Mining concerns are to some purposes trading concerns, but they are not so to all. They are not so in this particular, viz., that they are not, as an ordinary partnership trade, subject to dissolution on the death or bankruptcy of any of the partners, and the shares are
“To apply the rule to this particular case, the property was acquired by these partners for the purpose of the partnership concern. Therefore, though in the nature of real property it is subject to all the debts of the partnership, and subject to the debts of one of the partners incurred in the administration of the property, there can be no doubt that the plaintiffs have a right to make this claim. ” These principles are clearly stated and elaborated in Duryea v. Burt, supra. ■ The relation, then, which existed between the parties before and at the time appellant Meagher obtained the lease of the property in question, was that of mining partners. The lease having been acquired by Meagher as one of the partners, pursuant to and in consummation of the partnership agreement, and the property having been applied to the uses of the partnership for the purpose of conducting the business of mining thereon, the interest in the property, to wit, the leasehold estate, must be deemed to be partnership property.
Third. That the interest in the premises acquired by the lease is an interest in lands, within the meaning of the statute of frauds, cannot be doubted. The question to be now determined is whether the arrangement or agreement between the parties, upon which the appellee predicated his rights in the premises, could be established by parol testimony. Can a copartnership entered into for the prosecution of a specific venture, necessarily re
The proposition actually decided is that contained in the last clause of the paragraph quoted. The counterpart of that proposition is that which is involved in this case, to wit, whether a partnership agreement to acquire a lease of a particular property for the purpose of extracting ores therefrom, made before the lease has been obtained, can be proved by parol, when it appears that it was acquired in the name of one of the partners pursuant to the agreement, and applied to partnership uses under the agreement. It is a well-settled elementary principle that if a partnership be proven to exist by competent evidence it may be shown by parol that a whole or a part of its assets consist of real estate. The real question now presented is whether the fact that the acquisition of a leasehold interest in the property in question was actually contemplated at the time the contract was made changes the rule of evidence so as to require that such contract be proven by an instrument in writing. It is also an elementary principle that a contract to enter into a copartnership in a business which requires the acquisition of an interest in land as a necessary incident to the business may be proven by parol. The question here presented is whether a parol agreement to acquire a leasehold interest in a particular mine, as a necessary incident to the development of the property, and the extraction of ores therefrom, is within the statute of frauds. The further question is also presented whether the fact that by the terms of the agreement the interest in the mine
Whether a partnership to trade in lands can be proven by parol has frequently been considered by the courts. The question has been discussed with great ingenuity, learning and ability by many able jurists, but, even when the authorities are in harmony, the reasons and principles upon which the decisions have been predicated are by no means the same. In many cases the law of trusts, with its doubts and uncertainties, has been invoked, and the issue determined by applying principles, the application of which was by no means certain. It has been assumed that for all purposes an interest in lands must be held by a title, either legal or equitable, within the meaning of the law. This is undoubtedly true; but to define this title it is not necessary to resort to the law of trusts. If the land is partnership property, the title is vested in the partnership, and is defined, governed and controlled by well-settled principles of partnership law; and this is true whether the title is vested in one of the partners, or in all.
A careful analysis of the more recent authorities clearly discloses a marked tendency to limit the issue to two independent propositions: First, is there a partnership? This may be proven by competent evidence. Second, of what does the partnership property consist? If of real estate, its treatmept and disposition are regu
In 1 Lindley on Partnership, 88, the author says: “ With respect to that part of the fourth section of the statute of frauds which relates to lands, it is held (1) that a partnership constituted without writing is as valid as one constituted by writing; and (2) that, if a partnership is proved to exist, then it may be shown by parol evidence that its property consists of land.” The opposite view is adopted by Judge Story in his work on Partnership. At section 83 he says: “But although there is no positive incompetency at the common law of creating a partnership in the buying and selling of lands on joint account, and for the benefit of the parties by way of commercial speculation and commercial adventure, yet such a contract must, from the nature of the case and the positive rules of law and the statute of frauds, be reduced to writing; and then the stipulations of the parties will constitute the sole rule to ascertain their intent and to enforce their respective rights.”
Do the authorities sustain the principles of the author last cited? The leading case in support of this proposition is Smith v. Burnham, 3 Sumn. 435. In this case, after commenting upon the provisions of the statute of frauds, it is said: “How, taking these clauses together, or separately, the same conclusion would seem to follow as to the parol agreement in the present case. If the agreement could be treated as a sale by the defendant to the plaintiff of any interest in the lands to be purchased, it would be within the statute. If it could be treated as the case of an estate created in lands, it would be a mere estate at will, which would defeat the whole intention of
In the above case it will be seen that a contract of partnership entered into for the purpose of trading in lands is regarded as a contract in respect to an interest
This view of the question is adopted in a number of authorities, the mos't important of which is Bird v. Morrison, 12 Wis. 138. The court at page 155 say: “These cases, therefore, go no further than to establish three propositions: (1) Where real estate is bought with part-' nership funds for partnership purposes, there is a resulting trust in favor of the partnership, though the title be taken in the name of one. (2) Where the title is held by all the partners jointly, so as to be entirely consistent with the character of partnership property, the fact of partnership may be shown by parol, and that the property was held for partnership purposes, and from these facts the law will imply its partnership character, and such trusts as resulted therefrom. (3) A partnership in any branch of trade or business may be shown by parol as an existing fact, and then whatever real estate is held for the purpose of such business is regarded as an incident thereto, and the law will imply a trust in favor of the partnership, where the legal title is not in all.” And, as an illustration of the application of the principle contained in the third paragraph quoted, he says, page 159: “ If the bill had alleged that the partnership extended to the carrying on of a hotel business, that would have been a partnership, and might, so far as the hotel lots were concerned, have laid the foundation for applying the doctrine of implied trust to the real estate used for the hotel, as being incident to the business. But it only alleges
A like principle is laid down in Essex v. Essex, 20 Beav. 442. Attention is now particularly called to the language of the court in Chester v. Dickerson, 54 N. Y. 1: “ On the other hand it is claimed that such an agreement is not affected by the statute of frauds, for the reason that the real estate is treated and administered in equity as personal property for all the purposes of the partnership. A court of equity having full jurisdiction of all cases between partners touching the partnership property, it is claimed that it will inquire into, take an account of, and administer upon all the partnership property, whether it be real or personal, and in such cases will not allow one partner to commit a fraud or a breach of trust upon his copartner by taking advantage of the statute of frauds.” Citing cases. “I am inclined to think this doctrine to be founded upon the best reason and the most authority. * * * But suppose two persons by parol agreement enter into a partnership^ to speculate in lands, how do they come in conflict with the statute of frauds? No estate or interest in land has been granted, assigned or declared. When the agreement is made no lands are owned by the firm, and neither party attempts to convey or assign any to the othei*. The contract is a valid one, and in pursuance of this agreement they go on and buy, improve and sell lands. While they are doing this, do they not act as partners, and bear partnership relations to each other? Within the meaning of the statute in such cases, neither conveys or assigns any land to the other, and hence there is no conflict in the statute. The statute is not so broad as to prevent proof by parol of an interest in lands. It is simply aimed at
In this case the partnership was entered into for the purchase of coal lands, and the development of the same, with a view to profit. This doctrine is adopted by the supreme court of Iowa in many well-considered cases.
A like doctrine'has been adopted by the supreme court of California. In Coward v. Clanton, 21 Pac. Rep. 359, in the course of the opinion, Works, J., says: “The defendant contends in this court that, conceding that the contract was one of partnership, as it was in parol, it was within the statute of frauds, and cannot for that
It has already been said that upon the facts proven the nature of the partnership was that of a mining partnership. But whether it was a mining or a general partnership is immaterial in the discussion of the question now presented. That question is suggested in the consideration of the authority of Meagher to dispose of interests in the lease. For the purposes of this case it is not necessary to determine to what extent the real estate belonging to the copartnership is converted into personal property, nor when, in equity, it ceases to be regarded as personal property, and becomes real estate. It is sufficient to say that the real estate of a mining partnership is, in equity, treated in precisely the same manner as the real estate of a general or commercial partnership. Duryea v. Burt, 28 Cal. 569, supra; Settembre v. Putnam, 30 Cal. 490.
Finally, it is contended that appellee abandoned his interest, and that Meagher had a right to treat the same as forfeited. This proposition is entirely untenable. There is no evidence to warrant it. The claim is predicated upon the. fact that Reed failed to answer the letter addressed to him by Meagher on or about the 7th of June, and that for a period of less than six weeks he gave no attention to the enterprise. This is not sufficient to justify the conclusion that he had abandoned, or intended to abandon and forfeit, his interest. If in the month of July, 1884, instead of uncovering a valuable deposit of mineral, the parties had discovered that the property was absolutely barren, and had instituted an action against appellee for the contribution of his share of the expense, could he then have been heard to say, in defense of such an action, that he had abandoned the enterprise in the month of June, and that he was there
Many other questions are suggested by the argument of counsel in this case, but it is not deemed necessary to consider them. Many findings of the court have been discussed by counsel for appellants with great ability, for the purpose of showing that they are not sustained by the evidence. It may be that some of them are unwarranted, but if the conclusions already reached are correct they are sufficient to sustain the decree. The judgment should be affirmed.
Affirmed.
Richmond and Reed, CO., concur.
The principal purpose of the partnership, as stated in the exhaustive opinion of Commissioner Pattison, was to carry on the business of extracting and marketing ores during the period specified. This purpose has been accomplished, and it only remains to settle the partnership affairs, and distribute the partnership-assets. These assets include no interest in realty, and, in our judgment, the right to a settlement and distribution does not depend upon the legal status, under the statute of frauds, of such an interest. The judgment of the court below is accordingly affirmed.
Elliott, J., dissenting.