Price v. Hicks

RANDALL, C. J., delivered the opinion of the Court. It is objected on the part of the respondent that the court will not go behind the report of the referee in this case, because no proper exceptions were taken thereto. While it is true that as a general rule where no exceptions are taken to the report of a master, no exceptions will be allovred in’ the Supreme Court, the rule can hardly be made to apply here. This was a reference under the provisions of the Code, — 577 — not for the purposes of a trial by the referee, but for the information of the court, to take and state an account of the partnership transactions, and of the partnership property, and what has become of it, what were the debts and credits of the copartnership, what real and personal property was purchased by either of the copartners with copartnership funds, and “ to take testimony and report the same in writing upon all the' facts and issues in the case.” The referee presents the testimony taken before him, states an .account therefrom and recommends judgment for the complainant for a certain sum as stated to be due. There were two reports made by the referee. The defendants excepted to the first report, and it was recommitted for the purpose of making it more clear, but it does not seem that the second report avoids the effect of the exceptions. But are exceptions necessary ? “ Where a master by his report states all the facts correctly, but is mistaken as to the legal consequences of these facts, it is not necessary for the party dissatisfied with the master’s finding to except to the report, as the question decided by the master may be opened upon further directions without exceptions.” (Daniel’s Ch. Pi. and Pr., 1,492.) The court entered judgment “ confirming” the report of the referee and awarding the amount, as recommended, against the appellants, whereupon the appellants excepted to the rulings and judgment of the court. The only mode of reviewing the rulings of the referee or his report is by an appeal from the judgment entered thereon, whether the findings be on a question of law-or fact. (Code, sec. 218 ;) and this is only where the issues are referred for trial, and it seems ’unnecessary to confirm” a report of a referee appointed solely to take testimony and report upon matters for the information of the court, as in this case, for he was not called upon to exercise any judicial judgment as to the law or the facts. Under the pleadings in this case, the first issue tobe tried is whether there was a copartnership between the complain — 578 — ant and Henry B. Fitts as to the several transactions occurring between them in the years 1863 and 1866. From the-evidence it ' cannot be doubted that such partnership did exist in 1863, and again in 1866, and whatever question might have been raised as to the rights ot the parties on account of the status of the complainant in 1863, yet the subsequent negotiations resulting in a renewal of the copartnership after he became free recognized his rights as though he-was free in 1863, and he is entitled to the benefit of that recognition. It does not appear that there was a continuingcopartnership from 1863 to 1866, because the complainant expressly states that he refused to continue it after 1863, and he gives no account of his own earnings, and demands none of the earnings of Fitts during the interval. The testimony relates only to the joint operations in 1863 and in 1866. What then are the lights of the parties growing out of the-partnership and the voluntary investment of partnership funds in real estate, whether for the purposes of the joint business, or otherwise, as an investment of surplus capital outside of the regular business for which the copartnership existed ? During the year 1863, while Hicks and Fitts were conducting their business of blacksmithing, they purchased and paid for, out of their earnings, certain real estate, the title to which was taken in the name of the wife of Fitts, (one of the defendants,) “ but with the full understanding and agreement between them that the purchase should enure to the benefit of the copartners equally.” This is the statement in the bill. In his testimony complainant says he was not aware until some time after the purchase that the title was taken in the name of Mrs. Fitts, and had supposed the title had been taken in the name of both the partners, and on expressing dissatisfaction with the condition of the title, became satisfied upon being assured that the title should be- “ made out properly,” or his share of the purchase money paid to him. The investment was made in the house and — 579 — lot in Tallahassee at the suggestion of Mrs. Eitts, who wanted “ a house to live in.” In Goodwin vs. Richardson, (11 Mass., 467,) the court holds that where two parties buy land with partnership funds, and there is nothing done in the way of agreement between them how it is to be held, it is not in the law considered as partnership property, that is, it is not subject te the law governing partnerships generally. So in New York, Cole vs. Coles, (15 Johns., 159,) which was an action of as sumpsit by the administratrix of a deceased partner against the survivor, for money had and received upon a sale of real estate belonging to the partnership sold jointly in the partner’s life time, the proceeds whereof were converted to the use of the defendant, the court says : “ There may be special covenants and agreements entered into between partners relative to the use and enjoyment of real estate owned by them jointly, and the land would be considered as held subject to such covenants, but nothing of that kind appears in the present case ; and in the absence of all such special cove ■ nants, the real estate owned by the parties must be considered and treated as such, without reference to the partnership.” This is the rule of the English law. In equity. “ whenever real estate has been purchased by the partners with partnership funds for the use and eoiwenienee of the partnership, and there is no ' express agreement that the property shall be the individual property of the partners, each standing as a debtor to the joint fund for the cost, it remains as part of the joint stock or fund.” In Loubat vs. Nourse, 5 Fla., 351, Justice Thompson delivering the opinion of the court, says: “ The facts of this case bring it within the equitable rule before laid down. The wharf lot was purchased, and the wharf erected thereon, out of the joint or partnership funds; it was held and owned as joint property, for the use and convenience of the partnership, the partnership alone having the reception of the rents and profits therefrom; and therefore the application of it to partnership — 580 — purposes, such, as the satisfaction of creditors against the dowei’ of the widows of the partners and the claims of the heirs at law, is clear beyond a doubt.” This court in Robertson vs. Baker, 11 Fla., 192, 225, says: w The contract or agreement of the parties, and even the intention, when clearly manifested, is recognized as the true and only test by which the character of partnership property is to be determined, and this, we think, will be found, upon a critical examination of the reported cases, to be the established doctrine of the English courts.” * * “ In Massachusetts, the doctrine of conversion is carried beyond that of the English courts, and it is there held that £ when real estate is purchased by partners with partnership funds, for partnership use and convenience, although it is conveyed to them in such manner as to mako them tenants in common, yet in the absence of an express agreement,' or of circumstances showing an intent that such estate shall be held for their separate use, it will be considered and treated in equity as vesting in them in their partnership capacity, clothed with aii implied trust that they should hold it until the purposes for which it was so purchased shall be accomplished, and that it shall be applied, if necessary, to the payment of the partnership debts.’ ” The court in Robertson vs. Baker adopted the rule as just quoted from Dyer vs. Clark, 5 Metcalf, 562, as the better law, and it is therefore considered the law of this State. a These two cases refer exclusively to lands purchased and held for the use and convenience of the partnership in carrying on its business or trade. Where land has been bought by partners and paid for out of partnership funds, but not for the use and convenience of the copartnership business, or for the purposes of the copartnership, the English rule yet prevails, and the individual partners are tenants in common of the estate as real and not as personal; and this distinction is observed in the cases cited from 5th and 11th Florida Reports. — 581 — It seems to us from the present state of the pleadings and the evidence in this ease, that the lots i5 and 16 in Tallahassee were purchased by Hicks and Fitts with their joint funds as an investment outside of any connection with the carrying on of the partnership business, and that their interests became several,' as tenants in common of real estate, without reference to the existence of the copartnership. In this light, the house and lots 15 and 16, having been conveyed to Mrs. Fitts for the purposes and with the intent and objects stated in the testimony, (if that be sufficient to overcome the sworn answer of Mrs. Price, which it is unnecessary now to determine,) the effect is that she holds the title as a trustee for the use of the complainant as to one moiety, and for the use of the estate of her late husband as to the other moiety, unless as to that the conveyance to herself may have invested her with a good ,title, except as to the existing creditors of the copartners or of her husband. The decree in this case adjudges that the complainant recover against the defendants, Price and wife, as administrator and administi’atrix of the estate of Henry P. Fitts, deceased, the sum of three thousand one hundred and eighty-five dollars and forty-two cents, this sum being the aggregate of the items in the report of the referee, which includes the complainant’s share of the purchase money of the Tallahassee lots and the “ Lascli land,” a mule, wagon, and other personal property which were in the possession of one or both of the partners at the time of the death of Fitts, and which personal property belonged to the complainant as surviving partner. Most assuredly as to these items, the cost or value of the real estate held by Mrs. Fitts as trustee, and of the personal property belonging to the survivor, there can be no claim in favor of the complainant against the estate of the deceased partner. If he is rightfully the beneficiary of the resulting — 582 — trust in the lands conveyed to Mrs. Fitts, whether individually or as surviving partner, he may have his remedy, but not as for an indebtedness against the estate of Fitts, for the-property has not gone into that estate. The mule and the wagon, and such other of the personal property as belonged to the partnership at the death of Fitts, were not of his estate, and if they have been disposed of by a wrong doer, the remedy must be against some other than the representatives-of the estate as such. A large item of the indebtedness mentioned in the report of the referee is for interest on the money invested in the real and personal property. It cannot be that Fitts’ estate is chargeable with interest upon money invested in the lands or other property in trust for the benefit of the complainant himself, and which property remained in the possession of the several partners at the time of the dissolution by the death of Fitts ; for the investment was not made fraudulently, but voluntarily by Flicks himself, and the title in the lands so taken for his use in the name of any ■ third person is his title, as effectually as though it were vested in his own name. Nor can the fact that the trustee was the wife of Fitts give any greater color of claim against his estate than if the trustee had been any other third person. Nothing said here is in contravention of the principle contended for by the respondent, as to the investment or disposition of trust funds, or of money or property held by one in a fiduciary capacity, or of a wrongful conversion of partnership funds by one of the partners without the consent of the other partner. The title to the lands was undoubtedly taken in the name of another than Flicks, because of his then legal incapacity to hold in his own name; and the transaction was managed by a very intelligent and honorable member of the bar, (Judge Hogue,) selected by Hicks himself for the purpose. As to the “ Lasch land ” of which mention is made, there is nothing charged in the bill which seems to relate to it. — 583 — or to any other land than that described as lots 15 and 16; in Tallahassee, and there is no charge that any partnership funds were invested in any other. Mrs. Fitts (Price) states in her answer that the Lasch land was bought with her own money, and in this manner this land is first brought into the ease. Complainant swears that it was bought with the partnership funds, but he does not recollect its cost. Anthony Hicks says Fitts told him it cost,$l per acre, and that between 50 and 60 acres was planted in corn, potatoes and ground peas. Latham says there was only 40 acres oi it, mostly cleared. Two or three other witnesses say that Hitts told them that Hicks owned one-half interest in it, and that they were cropping the land together. Here, then, is one witness, complainant, who says the .land was bought with partnership funds ; several who heard Fitts say it was owned by the partners and they were working it as partnership property. Hero, also, is a crop gathered of 600 bushels of corn and other crops, estimated by the referee to be worth $672, one-half of which, with nearly $200 interest thereon, is charged against the estate of Fitts, without any deduction or credit for any portion of this fodder, which, for aught that appears, may have been fed out to the partnership stock. If Fitts used this produce for his own private benefit, his .estate is doubtless liable for the value of one-half of it, and while the complainant was a witness in the case it would have been more satisfactory for the purpose of sustaining the decree if he had shown that no portion of this-crop was used in feeding and keeping the partnership cattle.. The only testimony on the subject is that of one witness who* says that Fitts told him “ he had used ” the crop ; and, it seems somewhat peculiar that the complainant makes no-mention whatever of this land or the crops in his bill of complaint. Iij under the circumstances, the testimony is sufficient to overcome the answer of Mrs. Price as to the purchase of this land, and to show that it was owned anilused for partnership purposes, it was then a part of the as584 sets of the firm, held in trust for the survivor, for the purpose of a final liquidation of all the partnership affairs ; but the land, or the value of it, is not the proper basis of a charge against the estate of the deceased partner, whether it be deemed assets of the firm or lands,held by the several owners as tenants in common. The referee charges it against the estate, because, he says, Mrs. Price, holding the title, sold it, (at a time subsequent to the commencement of this suit,) and “ if the same was deeded to an innocent purchaser for a valuable consideration, and without notice, it is no longer subject to the claim of the complainant,” and that “ having disposed of a portion of the property in her own wrong is responsible” as administratrix, and therefore charges it against the estate. We think the court erred in taking the same view of the matter. in regard to the value of the personal property which was taken and used or converted by Fitts in his life time, the proper rule in charging the estate would be to ascertain its actual value in lawful money at the time it was taken or used, and add interest at the then lawful rate to the date of decree. As to the personal property of the firm which remained at the time of the decease of Fitts, its cost or value cannot be charged to the estate. We come now to the account, as stated by the referee, of the partnership of 1866. Complainant states in his bill that no part of the earnings of this business was received by him, but that Fitts received the whole of it. In his testimony he says nothing on the subject, and there is no proof showing what amount of money was realized during 1866 by either of the partners. As the books are not before this Court, we must take the statements of the report “ that the earnings of the partnership in 1866 amounted to the eurn of.................................... $2,449.38 Expenses of shop,........................... 15,35 Net earnings,.......................... $2,434.03 — 585 — Complainant’s share, one-lialf,................ 1,217.01 Advanced to complainant,................... 359.00 Balance due him.......................$858.01” Interest is computed on this sum from 1st July, 1866, at eight per cent,.................. 497.64 Total included in the judgment,.......... $1,355.65 There are some peculiarities in this statement. First, that although some of the witnesses swore that they worked for the firm, there is nothing put down in the account as paid for their labor, and the whole amount of shop expenses for six months is fixed at $15.35. This is not very satisfactory ; but in addition to this, the report does not show how much money was received by Eitts, and we are at a loss to know how much to charge him with. The earnmgs are stated to be so much, as “ obtained from the books.” The complainant is said to have received $359, but Eitts is not shown to have received any given sum. It would be unjust to charge the estate with the whole amount of the earnings, as shown by the books, because the earnings may be represented in accounts iiot collected. Indeed it appears by Hicks’ testimony that Mrs. Eitts “ collected some of the accounts ” from the books after Eitts’ death, and this was a portion of the “ net earnings.” Neither the testimony nor the report of the referee show anything against the estate in favor of the complainant for money collected by the deceased partner on account of the earnings of 1866. It is said the books appear to have been mutilated, but although’ this may enhance the difficulty of ascertaining the proper result, it does not warrant the charge against the estate of an amount of indebtedness for money received, in the absence of evidence that money was received. If there are accounts not collected, the surviving partner should collect them, if they are collectable, out of the debtors, and not out of the estate of his late partner. — 586 — The referee in his report intimates that a “ portion of the property ” has been alienated by Mrs. Price “ in her own wrong.” Whether the property thus disposed of was real or personal is not stated, and there is no evidence upon which this is reported save the allegation in the bill that Mrs. Price had disposed of one mule. jlhe referee’s statement that she had “ deeded ” the property, would imply that .she had conveyed some real estate, but there is no evidence ■of this, and there is no legal or equitable reason for charging >one portion of the property with money invested in another with the consent of the complainant himself and even by his own act: The estate is no more liable for the value of the. property which may have been held by Mrs. Price in trust for Hicks, than it would be if the trustee had been an eutirc stranger. One of the grounds of error assigned is that the court considered the testimony of Hicks the complainant as to communications between himself and his deceased partner. The testimony is given in the form of depositions. Whether upon the hearing any objection was urged against receiving this testimony does not appear, except as it may be included in one of the exceptions to the report, that it is “ not sustained by any proper or sufficient evidence.” It is perhaps unnecessary to consider the point as to the effect of receiving such testimony when no objection was interposed at the hearing upon this precise ground. We may remark, however, that the provision of the Code, (sec. 331,) which was in force as to this suit, is a prohibition against a surviving party giving evidence “ in regard to any transaction or communication between” him and the deceased, “ when the examination or any judgment or determination in Such action or proceeding can in any manner affect the interest of such witness, or the interest previously owned or represente^. by him,” unless the opposite party had been examined in his own behalf in relation thereto. In the present state of the case upon the pleadings and — 587 — evidence, it would not be proper to enter a decree here, and-we must therefore reverse the decree of the Circuit Court ■and remand the cause with directions that such further or amended pleadings may be -had in the ease as may be deemed necessary, and as the parties may be advised ; and that such further proceedings may be had as may be conformable to law and the practice of the court and with this opinion.