Kelly v. Biddle

Knowlton, J. The decree in this case is in accordance with the master’s report, to which no exceptions are taken. The appeal of the defendant Biddle is founded on the denial of his motion to dismiss the bill on the ground that it appears from the pleadings and the master’s report that it is “a bill seeking to enforce an illegal contract or joint undertaking, inasmuch as it seeks to enforce the distribution of the alleged profits arising out of the execution of an unlawful undertaking, namely, the entering into partnership of corporations with individuals.” The findings show that the plaintiffs, who were creditors of the insolvent company, and the defendants Biddle and Nelson, 149 made an agreement to purchase the stock in trade of the insolvent, and to employ one Worthen who had been general manager of the insolvent, to manage the business of finishing it up and disposing of it, and in order to raise money to pay for the stock, agreed that each of the three parties should contribute SI,000 in money and give a note for the balance, to be indorsed by the parties. Each of these accordingly contributed this sum, and afterwards the Charles Wing Company, a corporation which was also a creditor, contributed the same sum. A few days later notes were made for use in the business, which were indorsed by all these parties, including the Charles Wing Company. Their undertaking has been completed, and this suit is brought to recover the plaintiffs’ share of the balance in the hands of Biddle. The appellant contends that the arrangement was so affected with illegality by reason of the participation in it of the Charles Wing Company that a court of equity will enforce no rights which are founded on it. He relies on the case of Whittenton Mills v. Upton, 10 Gray, 582, in which it was held that a corporation cannot legally enter into a partnership. It is doubtless true that corporations, under our laws, are not authorized to become members of an ordinary partnership; but in this case there is no ground for a contention that the final arrangement was objectionable otherwise than as being ultra vires on the part of the Charles Wing Company, and we are not prepared to hold that this objection is well founded. There is no doubt that the corporation, as a creditor of the insolvent, might make any reasonable and proper arrangement not in violation of law to make its loss as small as possible. The common objections to a partnership with a corporation were not involved in this arrangement. Although there was a community of interest in the proceeds, including the profits of the undertaking, it was agreed that the business should be conducted by a general manager hired for the purpose. This business was only temporary, and the money was contributed and the labor employed in order to close out and turn into money as advantageously as possible a stock in trade. We are of opinion that there was no such illegality in the transaction as to prevent the court from giving the plaintiffs their share of the money in the hands of the defendant after the execution of the contract. There are numerous cases 150 which treat the pecuniary results of partnerships between corporations and individuals as subject to the protection of the courts. See Allen v. Woonsocket Co. 11 R. I. 288; Butler v. American Toy Co. 46 Conn. 136 ; Catskill Bank v. Gray, 14 Barb. 471; Conkling v. Washington University, 2 Md. Ch. 497; New York Sharon Canal Co. v. Fulton Bank, 7 Wend. 412. If we assume in favor of the defendant, without deciding, that the Charles Wing Company was acting without authority of law, the defendant is not in a position to avail himself of the defence of ultra vires in reference to the fruits of the joint enterprise. Under the doctrine stated in Nims v. Mount Hermon Boys’ School, 160 Mass. 177, there is no good reason why the court should refuse to give the plaintiffs a remedy. Decree affirmed.