Whitton v. Smith

1 Free. Ch. 231 | Miss. Chanc. Ct. | 1844

The Chancellor.

The state of facts shown by the pleadings, so far as they are necessary to the consideration of this motion, are these. In 1835 Whitton & Hulbert formed a mercantile partnership. Whitton was to furnish the capital stock; .was to have five per cent, commissions for purchasing. Hulbert was to take charge of, and superintend the business of selling, and to receive a salary of from three to eight hundred dollars per year. The partnership was to continue for six years; neither party was to sell without the consent of the other. The capital stock was to remain the exclusive property of Whitton. Hulbert was to share equally in the profits only, and bear equally the losses. Upon these terms the partnership went into operation in the town of Columbus, Mississippi, and continued until the fail of 1837, when Hulbert, in the absence of Whitton, and without his knowledge, sold the entire concern to the defendant, James H. Smith, for upwards of thirty thousand six hundred dollars, to be paid for in part by lands at four dollars per acre, to be selected from ten thousand acres owned by Smith in the Choctaw District of lands, for the conveyance of which Smith gave his bond to Whitton and Hulbert jointly. That Hulbert afterwards, from excessive dissipation, became deranged, and incapable of business.

In this state of things it is charged that the defendant, Butter-worth, having possession of a number of claims for collection against the firm of Whitton & Hulbert, induced Hulbert to surrender to Smith the title bond made to Whitton & Hulbert, and to get Smith to make a deed for the lands directly and absolutely to Butterworth, for the purpose of securing the payment of the claims held by him, and that thereupon he, Butterworth, would make a declaration of the trusts, upon which he held the lands so conveyed to him; all of which was done, as appears by the exhibits in the case.

Whitton, who was absent residing in one of the northern states, being advised of this state of things, came on to this country, and electing to consider the transactions between Hulbert and Butter-worth as void, procured from Hulbert a power of attorney authorizing him to transfer all lands or other effects held in the partnership name, for the purpose of paying the partnership debts. That Whitton accordingly transferred and conveyed amongst other things all interest in the lands aforesaid to the complainant, A. G. Weir, in trust for certain preferred creditors, who, together with Whitton & Hulbert, have filed this bill to set aside the conveyance to Butterworth, and to subject the lands to the purposes of the deed to Weir, and in the mean time to enjoin Butterworth from selling the lands.

These are the statements of the bill. The material facts are not varied by the answers, except as to the charges of fraud and the incapacity of Hulbert, both of which are positively denied.

The only point in the pleadings which I consider it necessary to examine under this motion, is that which questions the validity of the transactions between Ilulbert, Butterworth and Smith; and in doing this, it is proper to advert first to the sale made by Hulbert to Smith, of the entire partnership stock of Whitton and Hulbert, and to inquire what effect that sale had upon the partnership relation. That a partnership should no longer exist after the business for which it was created has ceased or terminated, is a proposition so natural and reasonable as to be self-evident. Extincto suljecto tollitur adjunctum,, is alike the maxim of the civil law and of common sense. Hence it has been held, that a sale or assignment by one partner, of all his interest in the concern, operates ipso facto a dissolution of the partnership, and this, too, although it may be stipulated in the articles of partnership that it should continue for a specified term of years. There is no such thing as an indissoluble partnership. 19-R. 538.

One of the undisputed canons of the law of partnership is, the right of each partner to sell the whole partnership property, if the sale be free from fraud on the part of the purchaser, and such a sale terminates the partnership relation. The sale, then, made by Hulbert to Smith, of the partnership stock, dissolved the partnership between himself and Whitton. The bond taken from Smith to Whitton and Hulbert for the conveyance of the lands, given in part consideration of the purchase of the goods, created a joint tenancy, in relation to those lands, between Whitton and Hulbert, From this view of the case, it will be readily seen that no subsequent act of Hulbert could affect any interest which Whitton thus acquired in the lands agreed to be conveyed; first, because, by the terms of the partnership, the capital stock being the exclusive property of Whitton, and the land being the representative of that stock, and the partnership being dissolved, Hulbert had no just right to it, nor power nor authority over it, as respects Whitton. If the bond of Smith has passed a legal title to Whitton and Hulbert, Hulbert might, no doubt, have passed his joint interest to a purchaser without notice of Whitton’s equity. But the bond creating a mere equitable title, even if Hulbert had undertaken to sell merely 'his undivided interest, his vendee would have been subjected to Whitton’s prior equity.

I have thus far supposed that Hulbert actually made some assignment or conveyance of the lands; but how do the facts of the case stand? It seems that it was verbally agreed that the bond of Smith- should be given up to him, and that Smith should convey absolutely and directly to the defendant, Butterworth, which appears, to have been done. This arrangement being made without the knowledge or assent of Whitton, was a fraud in law, if not in fact, upon his rights, and consequently could not divest his interest. Did it legally divest the interest of even Hulbert? The bond from'Smith conveyed to Hulbert, jointly with Whitton, an equitable title to the lands, which the bare surrender of the bond to Smith could not divest. The law is well settled upon this subject. Where a deed has been once duly executed and delivered, a subsequent surrender and destruction of it cannot divest the estate of the grantee which passed by that deed. The title to the lands, then, remain as they were at the execution and delivery of the bond for title to Hulbert, viz. the mere formal equitable title to a part in Hulbert, which he would be decreed to hold in trust for Whitton, according to the terms of the article of partnership. Although I am of opinion that no title whatever would pass under any sale which might be made by Butterworth, under the anomalous instrument declaring a trust, nor under his deed, yet, as such a sale might cast a shadow over the title of the complainants, and embarrass them in the assertion of their rights, this fact alone would induce a court of equity to interpose. That constitutes a reason why the injunction should not be dissolved. It must be retained until final hearing.