Winslow v. Young

Strout, J. In the autumn of 1889, Theodore Gerrish, acting as the agent for R. F. Pettigrew, of Sioux Falls, proposed to form a syndicate to purchase a tract of land on Phillips Avenue, in Sioux Falls, at the price of $140,000. He presented his scheme to certain gentlemen in Maine who are parties to this bill. He represented that fabulous profits were to be realized from the transaction; that one-half of the purchase price could remain on mortgage at eight per cent interest for one and two years, and that probably sales of the land would be sufficient to extinguish the mortgage debt before its maturity. Under these representations the parties defendant, except Fuller, agreed with Theodore Gerrish to take interests in the purchase. The extent of these interests were in most cases measured by specific sums of money, and not in fractions. But in the case of Clark, his written contract with Gerrish was for five fifty-sixths of the purchase. The contract with all other Eastern takers was vei’bal. — 156 — A part of those taking interests paid in full for their several shares — others paid in part — but all the purchases were treated as of November 1, 1889. If payments were made later, interest was added from that date at eight per cent. Theodore Gerrish suggested, perhaps with the knowledge and assent of some of the parties, certainly not all, that Chapman should act as cashier or treasurer. Some of the parties made payments to him ; but the majority arranged with Gerrish personally, and he directed Chapman what interest to allow to each. So it was at Gerrish’s suggestion without express assent of any other party, except Clark, that the title was taken by Winslow, S. C. Dyer and Tate as trustees. Pettigrew made his deed of the property to them on November 22, 1889, recorded June 9, 1890. The deed does not contain the names of the cestuis que trust, nor any declaration of what the trust was; nor• was there ever any agreement among the parties defining or limiting the trust, and the rights, duties and powers of the trustees. They held the legal title under a dry trust, with no active duties in l’egard to it. No objection appears to have been made subsequently by any of the parties to the conveyance to the trustees, nor is any made now. In his answer, Young says he was solicited by Theodore Gerrish to buy one undivided twenty-eighth part of the real estate, and that he. so agreed with Gerrish. John J. Gerrish, Preble and Webb say the same as to their interests. Clark, as shown by his written agreement with Gerrish, understood that he was buying five fifty-sixths of the tract. They all say, and it is not denied, that it was a condition of their undertaking that the whole $140,000 should be taken and subscribed before the agreements to take interests should be binding. It is admitted by the plaintiffs that that amount was never raised. Although the moneys received by Chapman and Theodore Gerrish were applied to the purchase of the property, it does not appear that the parties defendant knew that $140,000 had not been secured till long afterwards. When the title was to be obtained from Pettigrew, it was found that the land was under mortgage to Artemas Gale, to secure the — 157 — payment of two notes, one for $25,000 and the other for $20,000. The title was conveyed to Winslow, Dyer and Tate, as trustees, subject to that mortgage, which the grantees assumed and agreed to pay. No authority had been given to them to assume that mortgage in behalf of the other parties interested, nor do the other parties appear to have had knowledge of its assumption till long after; and it was never assented to by them. No meeting of the several takers of interests was ever held till December 30, 1890, nor any general understanding or arrangement made as to management or sale of the property. Such application of the money in hands of Chapman and Theodore Gerrish was had, that the twenty-five thousand dollar mortgage note was paid therefrom in September, 1891. In May, 1892, the Chapman Banking Company bought the Gale mortgage, on which the twenty thousand dollar note remained due, and had it assigned to Charles J. Chapman, who subsequently commenced proceedings to foreclose. Pending these proceedings, the trustees Winslow and Dyer having discovered what was before unknown to them or any of the Eastern parties, except Theodore Gerrish, that of the $140,000 given as the price of the land, $50,000, was to go to Theodore Gerrish, Tate, Pettigrew and Mil-liken, as bonus and commissions, the various subscribers declined to make further payments under their several agreements; and Winslow and Dyer, as trustees, instituted legal proceedings in South Dakota to eliminate Tate, Pettigrew and Milliken from interest in the property, and to close the trust and sell the property. They obtained a decree for sale, and under it sold the property in 1896, for $12,000; but it is admitted that this sale brought no money, and that it was in fact bid in for the trustees, who have or can have a deed of it without payment of anything. Before this, Tate had conveyed his interest in the property to Winslow and Dyer, the two other trustees; but the other owners of interests in the land had no knowledge and gave no consent to the release of Tate as trustee. In May, 1896, these plaintiffs paid $27,676, the amount due upon the Gale mortgage which with other payments by them, or — 158 — by Winslow and Dyer, trustees, made an outlay of $34,777.78 in excess of moneys received, including tbe $12,000 for which the property was bid in, as a cash asset. Plaintiffs do not claim that they had any express authority from their co-purchasers to make these advancements upon their account, except such as was given in the meeting of December 30, 1890, the only meeting when a quorum was present, or any action taken. At that meeting a part of the subscribers were present, not all. The evidence, which rests in recollection only, shows about one-half of the members present. At that meeting it was voted that the trustees “be authorized to call upon the proprietors for further payments,” and that they “be authorized to raise any amount of money required to take up said mortgage which may not be paid by the part owners or proprietors, and to reimburse themselves from the first sales of land for all outlays, interest and expenses.” Also, that the trustees be authorized to employ agents at Sioux Falls, to sell all or any part of the land at such prices as they consider for the interest of all. Chapman kept some sort of record or memoranda, not produced, of the holdings of the various parties in the Phillips Avenue syndicate, as it was called; but nearly all of his entries appear to have been made at the suggestion or dictation of Theodore Gerrish. Folsom is entered as taking $10,000, at Gerrish’s suggestion, but Folsom never consulted with any of his associates, nor was consulted by them in regard to it. He attended no meeting, answered no letters, and never showed any interest in the scheme. So J. J. Gerrish, having agreed to take an interest of $4500, and having paid $2250 on it, a little later Theodore Gerrish directed Chapman to transfer that share to the defendant Fuller, apparently as collateral for Theodore Gerrish’s debt to Fuller. Various other peculiar transfers were made in the memoranda of Chapman, some of which are not very satisfactorily explained. The grade of Phillips Avenue having been changed, to the damage of these lots, as the trustees believed, they desired to commence proceedings to recover compensation; and to that end asked the parties to sign a written agreement to unite to enforce the claim, and to pay pro rata to Chapman the expense of its prosecution, and — 159 — authorizing Winslow and S. C. Dyer, two of the trustees, to proceed. This was in November, 1894. The paper was signed by Winslow, S. C. Dyer, Chapman, Lowney and Young; but eight other parties in interest declined to be responsible for any part of the expenses, but did authorize the trustees to prosecute, holding them exempt from expense; and in the case of Mrs. Webb, where it was necessary that she should take letters of administration in South Dakota, Winslow and S. C. Dyer gave her a written guaranty to pay the expense of obtaining such letters, and to hold her harmless from costs or damages arising from prosecution of the claim. The business was done very loosely. So little of it is in writing and so much rests upon uncertain recollection that it is very difficult to ascertain the precise facts, but we have extracted from the mass of evidence all that appears to be necessary to determine the legal and equitable rights of the parties. The bill is brought to recover from the defendants, in the proportion of their holdings, the amount of advances by plaintiffs in excess of their receipts. It is ably argued that the true relation of all the parties was that of partners in a business to be conducted by the trustees. It is not claimed, nor is it shown, that the parties agreed upon or understood that they were forming a partnership in the ordinary manner by mutual consent; but it is claimed that the business or venture undertaken, and the means to accomplish it, and the method of raising funds therefor were such as to make it in law a partnership; and that -the trustees, as holding the legal title and managing the property, were the agents of all the parties, and that what they did for the common interest of the concern was binding upon all. It may be conceded that, under some circumstances, associated parties may be regarded in law as partners, when the parties themselves do not understand that a partnership exists. But before the law will imply such relation, contrary to the intention of the parties, it must appear not only that funds were contributed to a common object, but that the enterprise or business contemplated and intended to be carried on, is of such a character and purpose that — 160 — it cannot result in a successful issue if the proprietors are treated as tenants in common and not co-partners. As in Farnum v. Patch, 60 N. H. 294, where various persons took shares as stockholders for the purpose of starting and operating a grocery store, and were held to be partners. So it may be that a partnership can be created by parol, the business of which is to deal in real estate without violating the statute of frauds. The authorities do not agree upon this. The affirmative is held in Williams v. Gillies, 75 N. Y. 197, and a contrary view is held in Smith v. Burnham,, 3 Sumner, 435. Assuming that such partnership may legally be created by parol, we are to examine the acts of these parties and apply the rules of law to them and determine therefrom whether their rights and liabilities aré to be governed by the law applicable to partnership. It is undoubtedly true that the purchase was speculative, and that the proprietors expected, their profits to arise from sales of the land. They did not contemplate building upon it or making other improvements, but simply to hold it for sale at advanced prices, which it was supposed would be obtained in a short time. There was therefore no necessity for a partnership to accomplish this end. Ownership as tenants in common was equally effective. The elements which justify a court in finding a partnership to result from the character of the business to be done are wanting. One element of a partnership is a community of interest in the subject matter of it. But that, alone is insufficient. Part owners of a ship are always treated as tenants in common and not as partners, though they have a community of interest in the ship, and share its profits and bear its losses in the proportion of ownership of each. Another element is that each partner, from the relation itself, becomes the agent of all the others, having the jus disponendi of its property, and authority to bind the firm by contracts, within the scope of the business, and upon dissolution of the partnership by death of one of its members, the survivors become entitled to retain and dispose of the partnership effects for a settlement of its — 161 — affairs. Dwinel v. Stone, 30 Maine, 386; Knowlton v. Reed, 38 Maine, 250; Berthold v. Goldsmith, 24 How. 541. In the present case, while there was community of interest, there was no element of agency in the individual parties. This objection might be met and overcome if, by agreement of all the proprietors, the title had been taken by the trustees under an active and defined trust to manage and dispose of the property. But this was not the case. The title was taken by Winslow, S. C. Dyer and Tate, as trustees, without the knowledge of most of the parties; and although later when it came to their knowledge no objection was made,— and all parties may therefore be regarded as acquiescing in that action, — there never was any declaration of trust by the trustees; nor did the proprietors ever confer upon the trustees any authority to manage or dispose of the property. They held the legal title to the land upon a resulting, dry trust in favor of each individual owner, which the statute of uses would execute in his favor for his aliquot share of the estate, in common and undivided. We do not overlook the meeting on December 30, 1890, at which some, but not all, of the proprietors were present, and voted to authorize the trustees to raise money to discharge the mortgage, and reimburse themselves from sales of land, and to sell part or all of the land. There is no evidence that the proprietors not present at that meeting ever assented to its doings, or had knowledge of them; consequently the authority there attempted to be given bound only those voting, and did not affect the others. It was therefore impracticable for the trustees to act under that vote. They could not sell and convey any specific portion of the land, but only the undivided interest of those voting or assenting to the vote. The resulting trust could not be enlarged to an active, managing trust by the action of a part only of the cestuis que trust. So that, for all practical purposes, this action of a few became inoperative upon the trust estate, or the powers and duties of the trustees. While they continued to hold the legal title, they were not authorized to make a price upon the whole or' any part of the land or sell it, except upon the request of all the proprietors and — 162 — on the terms they might suggest; nor had they the right to refuse to sell (except their own share) upon the terms dictated by all the others. They never became the agents of the proprietors to manage and dispose of the property. When Winslow, Dyer and Tate took the title, a trust in the land resulted in favor of all who had paid towards its purchase, and we are satisfied from the evidence that all the parties so understood it. That Winslow and Dyer so understood it, is apparent from their statement in letter to Folsom on October 28,, 1895, in which they say, “ Owing to the fact that no declaration of trust was filed with the deed, the trustees were not authorized to act in any way for the owners.” Even if the payments of the several parties were regarded as payments to a common fund to purchase the property jointly, when the trustees took title without any trust declared by them or by the parties in interest and none was subsequently declared by agreement of all, the trust in Winslow and his associates resulted to the contributors in their several proportions, as an integral interest in the land and attached to it, and the individual owner could have ‘compelled a conveyance of his individual share from the trustees if his share was fully paid — if not so paid, then upon payment of the amount due. Perry on Trusts, §§ 520, 521, 133 ; Buck v. Swazey, 85 Maine, 41. Upon all the facts it is apparent that a partnership was not intended by the parties, nor can one result as matter of law. Ferguson v. Gooch, 94 Va. 6. But plaintiffs claim contribution upon 'another ground: that regarding the rights of the cestuis que trust as those of equitable tenants in common, the plaintiffs have advanced a large sum' to protect the property, and for the benefit of all; and therefore the loss should be borne pro rata by all. To the maintenance of this claim there are formidable obstacles. While the proprietors intended that one-half of the purchase money could remain on mortgage, nothing in the case indicates that they contemplated a mortgage creating a personal liability, but rather that the land alone should be responsible. It is true the matter — 163 — was not discussed — -the parties saw only prospective profits, and possible loss was not thought of. The trustees when they took title found it incumbered with the $45,000 mortgage. If they had taken title subject to the mortgage — in other words — taken title to the equity, it would have been practically in accord with the understanding of the parties. Instead, they reluctantly assumed and agreed to pay the mortgage, thus rendering themselves personally liable. They had no precedent authority from the other-owners to do this; and the,;faet that it was done was not known to them for some years afterward and was never ratified by them. It was not known at the meeting December 30, 1890, when action was taken by part of the owners, really looking to payment of the $25,000 note then due rather than the $20,000 note which did not fall due till a year later. The plaintiffs understood this, for when in May, 1896, they paid the last mortgage note which the trustees had personally assumed without authority, they did not consult the other owners or seek any direction from them in the matter. This appears in Mr. Chapman’s testimony. It is true, he. had endeavored with but little success to collect unpaid subscriptions, and in October, 1895, made an effort to get a meeting of the parties to take the matter into consideration, but less than a quorum attended and nothing was done. At the December meeting, 1890, those who acted only authorized the trustees to raise money, not paid by the owners to take up the mortgage u and to reimburse themselves from the first sales of land for all outlays, interest and expenses,” thus carefully avoiding the assumption of personal liability. As to these parties, the plaintiffs must be regarded as acting under the limitations and conditions of the vote, and cannot claim personal liability; and as to all the others, they have no authority whatever. So far as any general equity for contribution ex equo et bono may be considered, it must be remarked that by the schedules in the bill a credit of $12,000 is given for proceeds of sale of the entire property under date of May 1, 1896, and on the same day plaintiffs charge payment of $27,676 to discharge the mortgage. — 164 — As the trustees had personally assumed the mortgage of their own volition, without authority from the other owners, they were obliged to pay it. But when they ask contribution towards that payment, the other parties may well say they did not desire redemption at a cost of more than double the amount realized on sale of the property. No benefit resulted to them, and no equity in favor of plaintiffs arose from the transaction. Having paid the mortgage under their personal liability and made other voluntary advances, plaintiffs are entitled to hold the land bid in for them to the extent of their reimbursement, and will be accountable over to the other owners only for the excess. If the land is insufficient for this purpose, they have no claim for the deficiency upon the other owners. They voluntarily and unnecessarily assumed the mortgage on their individual responsibility, and made other advances without any authority from many of the owners, and authority from a few, limited to reimbursement from sales of the land, and they can only rely upon the land for reimbursement. One tenant in common, without authority from his co-tenant cannot create a personal liability against him by making improvements on the common property, or payments in regard to it, as to which the co-tenant was not under a legal liability. When the improvements add permanent value to the property, the tenant making them, if in receipt of the rents, may be permitted to hold them for his reimbursement; but his right to contribution extends no further. Williams v. Coombs, 88 Maine, 183; Preston v. Wright, 81 Maine, 306; Alien v. Carleton, 81 Maine, 358; Calvert v. Aldrich, 99 Mass. 74; Converse v. Ferre, 11 Mass. 326. These trustees have no greater right. Bill dismissed with one bill of costs.