Sigourney v. Munn

| Conn. | Jun 15, 1829

Hosmer, Ch. J.

On the former hearing, it was determined, that the real estate in question was advanced by Sigourney as part of the company’s stock, or purchased for the accommodation of the partnership business; and that these facts made it partnership fund.

The plaintiff has alleged in his bill, that there was a balance due to him, as partner, on the adjustment of the partnership concerns ; and in proof of this, he has relied on a valuation of the goods and estate of the partnership, by the estimate of witnesses. This was adjudged to be inadmissible, and no evidence of their value. On the contrary, it was held, that in every case, where equity interferes to wind up the concerns of a partnership, it directs the value of the stock to be ascertained in the way in which it can best be done, that is, by a conversion of it into money. On this ground the case was remanded ; and it comes again before the Court, with the addition of further facts intended to overcome the adjudged difficulty in the case.

The parties have been heard, not only on the open points in the case, but on those which were closed by the former determination. On full consideration of the subject, I am of opinion, that there exists no reason to question the former decision. It appears to be the most equitable mode of winding up a partnership concern ; and is so considered in chancery. Unless a settlement and division are agreed on, it contravenes every principle of natural justice, to hold, that one partner shall compel the other to accept what, according to valuation, his interest is supposed to be worth. Gow on Part. 316. 17 Ves. 309. A fair valuation is opinion merely; and a separate estimate procured by one of the partners, not unusually, will be attended by false judgment and partiality, which cannot be successfully counteracted. I am fully aware, that a private sale of the goods and effects of a partnership, on its dissolution, is sometimes detrimental, and perhaps impossible. Resort, then, must be had to a speedy sale by auction. Where there is a fair competition, the goods and effects may be sold at their value ; but if they are not, the best test of value is adopted, and the concerns of the partnership (which is some advantage) are speedily closed. In all events, this is a preferable standard of value to an estimate obtained, by the procurement of one of the partners. The case of Marquand & al. v. The New-York Manufacturing Company, 15 Johns. Rep. 525. has been cited as establishing a contrary doctrine. But the question now agitated never arose in that case. The parties mutually agreed to an inventory and valuation of the partnership stock, and the controversy was, whether its original cost, or the estimate of witnesses, should be the criterion of value.

The only question, as between the partners, is, whether on the facts disclosed in the last report of the committee, the valuation of witnesses, by way of exception from the general rule, ought to be the test in this case.

The abandonment of the partnership concerns by Munn, and his refusal to divide the partnership stock, and to answer the repeated solicitations of the plaintiff, amicably to adjust their joint concerns, is the first class of facts demanding attention.

To this the answer is direct and obvious. The plaintiff was left, by Munn, to his own counsel, and with the law for his guide, was authorized to sell the partnership goods, at private sale or at auction ; and this is the only consequence resulting. But in whatever manner their value is to be estimated, is a point not borne upon, by the facts reported.

It is found, that merchants customarily wind up their concerns, by a division of the joint stock ; or by the purchase of it, by one of the partners; but what this has to do with the question before the court, it is difficult to discern. Undoubtedly, they may enter into any voluntary agreement relative to their concerns, not prohibited by law. But suppose they will not. Then, as in this case, they are to deal with the partnership property according to the prescriptions of law ; and this is the only result.

It appears from the report of the committee, that there is no usage here to sell the stock on hand at public auction ; and that when it has been done, it has eventuated in a considerable sacrifice or loss. These facts have no bearing on the point of discussion. If they proved any thing, it would be merely this, that one partner, at the winding up of the partnership concerns, cannot sell the stock at auction. But they have no relevancy to the question, whether the partnership effects may be valued, by the estimate of witnesses. The rule of equity is not founded on usage, but in the intrinsic propriety and necessity of the thing. Besides, that there has been no usage to sell at auction is a mere negative followed by no legal consequence, and has probably arisen from the good sense and harmony of partners, on the dissolution of their connexion.

It is of no importance that an auction sale is frequently attended with loss. This is not peculiar to us, but pervades all states and countries, probably, in nearly the same degree. A voluntary adjustment of their concerns, by partners, is the better course, and precludes the necessity of any other. But if they do not, and will not agree, some mode of winding up their concerns must be adopted; and perhaps there can be none not attended with loss and disadvantage. A private sale, or sale at auction, becomes indispensable ; and the consequences must be submitted to.

Too much has already been said on a subject that has no bearing on this case. There has been no sale at auction. Sigourney, abandoned by his partner, has done what he had a right to do. He has sold the partnership effects at private sale, with the exception of a few goods, remaining on hand ; and in this branch of his proceeding no question has arisen. He, however, has omitted to keep an account of sales ; and whether under the circumstances attending this case, this omission will let in proof of a valuation of the goods and effects of the partnership, by the estimate of witnesses, is the real point of enquiry.

On general principles, it is clear, that an agent, (and such is a partner) is bound to render a written account, comprising the items of the goods sold, with the sums at which they were disposed of, and to substantiate it, by his oath. Coop. Eq. Plead. 277, 8. Gow on Part. 121. Stat. 33. What, then, creates an exception in this case ?

The committee find, that to render the goods more saleable, the plaintiff replenished the stock, by the purchase of new and more vendible articles, and so intermixed the old goods with his new purchases, that it became impractible for him to keep a separate account of the old stock, owing to the number and condition of the articles. I cannot but think, that they have unintentionally employed a word in their report, which does not convey their meaning, and which no possible state of facts could warrant. The intermingling of the goods might create a difficulty in keeping an account of sales, but not an impracticability.

But if a strict impracticability of distinguishing the goods, existed, (a supposition put for the sake of the argument only,) whence did it arise ? From the voluntary act of the plaintiff. If the goods were in this condition, he produced it. By what authority was it done ? By no authority. It was neither authorized by Munn, nor by any principle of law. The impracticability resulted from an unjustifiable act. And is an established rule of law to bend to the volition and culpable act of Mr. Sigourney 1 And may he take advantage of his own wrong ?

There is nothing in the case distinguishing it from what it was at the former hearing. If at the election of one of the partners, the voluntary intermingling of goods dispenses with a strict accountability in the usual manner, it is easy to see, that a rule of law is converted into the volition of the party. And of what value is a rule, (falsely so called) over which the person in interest may exercise a dispensing power, at his election 1

Let the subject be placed in a different light. The plaintiff was an agent of the partners, and, as such, was bound to keep and render an account of sales. With open eyes on the consequences, pre-determmed and foreseen by him, he voluntarily placed himself in a condition, in which he could not fulfil this duty. What, then, is the reasonable result ? He must submit to the known rule of law, and can derive no advantage from his unauthorized act.

It has been asked with emphasis, are not the concerns of the partnership ever to be settled ? I feel myself under no obligation to answer this general question ; nor is it at all involved in this case. The plaintiff has exhibited a bill; and every fact indispensable to its support, he must substantiate, by legal evidence. If through carelessness, improvidence or choice, he has placed such proof beyond his power, he cannot, in this manner, impair any obligation essential to the just rights of his partner.

The conduct of Mr. Sigourney, it has been said, was, intentionally, honourable and just. In this particular, it has not been questioned ; and I admit it to be unquestionable. I think, however, it has been heedless, ill-judged, and without a deliberate attention to the obligation resting upon him. His fair intentions cannot deprive Munn of his legal rights ; nor make that to be law in his case, which ought not to be law in the case of another.

An enquiry has been raised, whether from the recorded deeds, Holbrook, the mortgagee of Munn, had constructive notice, that the property conveyed to him was partnership fund. The determination of this point is not necessary ; but as the Court has come to a result upon it, it is proper that it should be known. The decision, and the reasons on which it is founded, I will state very briefly.

Whatever is sufficient to put a person on enquiry, is considered in equity as conveying notice ; as the law imputes to a person the knowledge of a fact, of which the exercise of common prudence and ordinary diligence must have apprised him. Peters & al. v. Goodrich, 3 Conn. Rep. 146. Newl. on Contr. 510.

None of the recorded deeds directly show, that the real estate mortgaged to Holbrook, was partnership fund. Notwithstanding this, if on the face of either deed there was such an indication of this fact as to place the mortgagee under a reasonable obligation to make enquiry on this subject, he must be deemed to have had constructive notice.

The instrument to which I shall first advert, is a deed of release, in the usual form, from Charles Sigourney to himself and Charles Munn. The consideration expressed in this instrument, is “ one dollar, received of Charles Sigourney and Charles Munn, merchants in trade under the firm of Charles Sigourney & Co.;" and the land is released to them, “ to be held in such proportion as is agreed on between them.”

This writing has a number of striking singularities, calculated to awaken attention. It is a deed from Sigourney to himself and Munn, described as merchants in company ; and as to himself, it conveys no title. It is no far-fetched presumption from the face of this instrument, that it was intended to invest the company with a fund for their partnership purposes. The nominal consideration of one dollar only, strengthens this inference, resulting as it does from the name and description of the company ; a fact both useless and improbable on any other supposition. The presumption is still further enforced, by the nature of the deed, which is a release, and the conveyance of the land to a partner, to be held in proportions that had been agreed on between them. The majority of the Court is of the opinion, that Holbrook, who must be presumed to have read this writing, could not fail to observe its peculiarities ; to have his attention awakened and stimulated by them; and to see the path, that would conduct him to a full knowledge of the rights of the plaintiff. Of consequence, the Court is of opinion, that he had constructive notice, that the land was partnership fund.

The deed of release from Lloyd to Charles Sigourney and Charles Munn, for the consideration of 5942 dollars, 3 cents, received of them, being merchants in company under the firm of Charles Sigourney Co., has one peculiarity only, and that is, the description of the partnership, by the name of the firm. In all other respects, it has the ordinary appearance of a sale to individuals. The unnecessary and somewhat unusual description of Sigourney and Munn as partners, unaided by any other consideration, had not so high a tendency to put Holbrook on enquiry, or to stimulate him to investigation, as to place him under an obligation to look beyond the deed. Confining himself to the instrument, which neither indicated, that the land was bought with partnership fund, nor appropriated to partnership purposes, he had no reason to believe, that the land belonged to Sigourney and Munn otherwise than as tenants in common.

The deed of release from Pratt to Charles Sigourney and Charles Munn, and that from Dimock, are attended with no peculiarity, and contain no expression pointing to the partnership.

An effort was made in argument to connect the three latter deeds with the one from Charles Sigourney to himself and partner, but without any foundation. The three last deeds comprise separate and distinct pieces of land from the one first referred to ; conveyed by different persons, at different times ; and instead of disclosing a connected transaction, arising under the same agreement, they are disjoined by every consideration applicable to such a subject. They are not distinguished from any ordinary transaction with individuals acting in their individual capacity, and present no motive for en-quiry beyond the deeds themselves.

In conclusion ; for the deficiency of proof, in this case, of the indebtedness of Munn to Sigourney, the Court advise, that the bill be dismissed.

Bissell, J. was of the same opinion. Peters, J. dissented, so far as regarded the relief sought against Munn. Daggett and Williams, Js., having been of counsel in the cause, gave no opinion.

Bill to be dismissed.