Halstead v. Shepard

GIBBONS, J. A demurrer was filed to the bill in the present case for multifariousness, and that constitutes the first ques — 569 — tion presented for our decision. It is not improper to premise that, in determining whether the demurrer is sustainable or not, we can look alone to the bill, and not to the answers of the several defendants, or the proofs in the cause. It is unquestionably true that it is not competent for a party to join improperly in one bill distinct a,nd independent matters, and thereby confound them ; “ as for example, the uniting in one bill of several matters perfectly distinct and unconnected against one defendant, or the demand of several matters of a distinct and independent nature against several defendants in the same bill.” — Story’s Equity PI. § 271. But on the other hand, “ a bill is not to be treated as multifarious, because it joins two good causes of complaint growing out of the same transaction, where all the defendants are interested in the same claim of right, and where the relief asked for in relation to each is of the same general character. Neither will a bill be deemed multifarious where it states a right to an account from A and B, against whom it has one remedy which it seeks to enforce, and also claims a lien against A, for what is due, and seeks that separate remedy against him; for the plaintiff may well, in such a bill, entitle himself to each. Indeed, the objection of multifariousness, and the circumstances under which it will be allowed to prevail or not, is, in many cases, as we shall hereafter see, a matter of discretion, and no general rule can be laid down on the subject.” — Id. § 284. The counsel for the plaintiff in error, amongst other authorities to this point, has cited the cases of Meachem v. Williams, 9 Ala. 482, and Felder et al. v. Davis et al., 17 Ala. 418. In this latter case, Chief Justice Dargan, in commenting upon the authorities, and making a kind of summary of them, says : <c Without examining in detail all the cases referred to by counsel, we deem it sufficient to say, that they show either that the defendants claimed the title asserted by the complainant, or that they claimed to derive from the same source, either mediately or immediately, from which the complainant derived his ; the same fact or circumstance was alleged which rendered the title of the defendants invalid, which fact or circumstance, being the common ground of defence to all, became the connecting link that bound them all together.— Where the defence of all the defendants centers in the point in issue, they may all be joined in one suit, notwithstanding they — 570 — may separately possess distinct parcels of the property sought to be recovered.” The facts of the case in which the above language was employed, were as follows : One B. Davis conveyed to one James Davis certain negroes, in trust for his daughter, Elizabeth Felder, the wife of B. B. Felder. The negroes went into the possession and control of the wife of Felder and of the trustee, Davis. Afterwards the trustee, becoming embarrassed, left the country, and the slaves went into the possession and control of the husband, B. B. Felder, who sold them as his own property to different individuals, and at different times, without the slightest regard to the fact that they were trust property, or that the legal title was in the trustee who had left the country. A bill filed by the wife and children, the cestuis que trust under the trust deed, against all the parties jointly having the several negroes, the trust property, and praying that the said negroes be delivered up to them, or to another trustee to be appointed, was held multifarious. This case we consider the most direct authority produced by the plaintiff in error in support of the demurrer. It is useless to deny that there is a striking analogy between the facts of that case and the case at bar. We think, however, that a clear distinction may be perceived between the facts of the two cases. The defendants in that case did not claim, or pretend to claim, the title under which the plaintiffs sought to recover the property. Every act of sale on the part of Felder, the husband, was a distinct trespass, without any pretence that he was acting in obedience to or passing the title under which the complainants sought to recover the property. One of the tests by which to show that the bill is not multifarious is, that the several defendants claim the same title as that set up by the complainant in his bill. In the bill before us, it is shown that the defendants claim that portion of the notes which is claimed by the complainant, by the same title as the complainant himself. Halstead, the partner of the complainant, is represented to have conveyed away these notes, not by a title different from his, but by the same title ; and the allegation is, that he did so without authority from the complainant, and in fraud of his rights. This distinction between the facts of this case and those of the case cited, we consider sufficiently marked to take it from its controlling influence as an authority. — 571 — There are in the present case, in our opinion, a number of circumstances in the facts presented by the bill, to free it from the objection of multifariousness. In the first place, the complainant and the defendants, Ashley, McCreary and Strickland, claim the one half of the notes, as above remarked, by a common title; secondly, the defence of the defendants is, in one aspect of the case, a common defence, viz., the authority of the said Halstead to sell and dispose of the half of the notes owned by the complainant, and this is said to be another test by which a bill is determined not to be liable to the objection of multifariousness ; thirdly, in the account to be taken before the master, to ascertain the extent of the interest of the said Halstead in’the notes, as that is shown by the bill to be in some measure dependent upon the state of the accounts between the parties, the defendants stand upon one common ground, and their defence is in this aspect also identical. Besides, the bill is filed for a discovery, as well as for an account and relief. It does not show on its face distinct and separate transactions, in so plain and distinct a manner as that this court can say that the interests of the several defendants, represented as claiming the notes, are separate and distinct from each other. On the contrary, we think the legitimate inference to be drawn from the language of the bill is, that the three defendants above named are all holding a joint interest in the papers, or acting with a common intent with Halstead to defeat the complainant in the recovery of any portion of either of the notes. The bill does not pretend to disclose which note was passed to either of the defendants, or the extent of the interest which they set up in the papers, and calls upon them to disclose the facts to the court. A bill so framed, with facts such as are alleged in the bill before us, we do not consider obnoxious to the objection of multifariousness, and the court below committed no error in overruling the demurrer. Upon the merits of the case, on the final hearing, we have but little difficulty in affirming the decree of the Chancellor. So far as respects the case made by McCreary and Strickland, there can be no doubt. Their answers to the bill, concurring with the answer of Halstead, show that they respectively acquired the interest which they claim in the note or judgment in consideration of certain individual debts of Halstead owing to them be — 572 — ing given up to said Halstead in payment. No principle is better settled in our law, than that one partner cannot dispose of the property or assets of the partnership in payment of his own individual debts. Such transfers of property could not prevent the recovery of it by suit in the name of the partnership ; and in a court of equity, the most the purchaser could insist upon would be, the extent of the interest of the partner of whom he had made the purchase. As these defendants acquired their interest in the note which they claim by a transfer from Halstead, whilst the face of the paper gave them notice of the original proprietary interest of the complainant, and taking it upon the faith of Halstead alone, as to his authority to pass the whole title, and in payment of individual debts of Halstead, they must be considered as holding it subject to the interest of the complainant. In a court of equity, Halstead could pass so much of the interest in the paper as he actually owned, and no more. But tho claim set up by Ashley stands upon somewhat different grounds. He claims to have paid cash for the note which he holds, and denies, as his counsel insists, that he had any notice of the rights of the complainant. Waiving the consideration of the question arising out of the rate of discount at which he acquired the paper, it satisfactorily'uppears that he purchased the note after its maturity, and while in the hands of the attorney for suit. He states in his answer, that, il at the time he so purchased said note of said Halstead, he was informed and believed that said complainant had received his full share and portion of the partnership effects, and that upon a fair accounting between said Halstead & Shepard, said Halstead would owe Shepard nothing ; and he also charges that he then believed, and now believes, that the said Halstead, as one of the firm, had full right, power and authority to assign, transfer and deliver said note to him.” Here is a virtual admission on the part of Ashley, that he was aware of the interest of the complainant in the note, but dealt with Halstead upon his representation as to the state of the accounts between him and the complainant. But the testimony of the witness, Fleming, proves, beyond all doubt, that, even according to the representations of Halstead, made in — 573 — Ashley’s presence before he made the purchase of the note, he knew that the complainant had an ■ interest in the paper, and that he was then controlling it for himself. He must be held, therefore, to have purchased the note after its maturity, and with notice that the complainant had a claim to it, predicated upon the partnership accounts between himself and Halstead. He cannot complain of this, because he says he purchased the note upon this precise hypothesis, that upon a fair accounting of the partners together, the said, complainant would have no interest in the note, as he had received from the partnership all that he was entitled to. If the faith which he placed in the representations of Halstead, at the time he made the purchase of the note, has proved to be misplaced, he has no one to blame but himself, as he was advised on a former occasion of a contrary state of facts by Halstead himself. But it is insisted on the part of Ashley, that Halstead had the power, from his position as partner under the circumstances, the partnership being yet undissolved, to sell the notes, and pass the entire title to the purchaser, whether the purchaser had notice or not of the actual interest of the complainant. In this we cannot agree with the counsel. In ordinary partnerships, particularly those of a mercantile character, it is undoubtedly true, that, while the partnership is subsisting, one partner, acting within the scope of the ordinary business of the firm, has the right to sell and dispose of the property of the firm to the extent of the entire stock; so he would have the same right to dispose of the property for the purpose of paying the debts of the firm. But, whilst this is true, on the ether hand one partner has no right to dispose of the partnership property, except within the scope of the partnership business. “ There is an implied obligation among partners to use the property for the benefit of those whose property it is.’’ — Collyer on Part. § 179. If, therefore, one partner undertakes to dispose of the partnership effects to the injury and wrong of the other partners, equity will interpose to give them relief; and if the purchasers of such effects take them with notice of such fraudulent intent on the part of the partner making the sale, they will be considered as parties to the fraud, and liable in equity with the fraudulent partner to refund to the remaining partners. The bill, it is true, shows that the partnership had never been formally dissolved ; — 574 — yet it appears by the bill that it had ceased the business in which it was engaged in its formation, and had, as a firm, no active business whatever, except to wind up its affairs. The stock in trade of the partnership had been sold out by the consent of both partners; its business brought to a close, and the effects of the firm reduced to the shape of the two notes described in the bill. It is not shown that it was necessary to sell this note to Ashley for the purpose of paying partnership debts, nor does it appear that the firm was in debt at all. The bill, answer and proof upon this subject, we think, establish the fact that it was the intention of Halstead, in disposing of the paper in the way he did to Ashley, to deprive the complainant wrongfully, if not fraudulently, of his rights therein; and further, that Ashley, if not cognizant of the intention of Halstead in thus disposing of the note, took it with notice of the interest and rights of the complainant, and is therefore in equity liable, the said Halstead being insolvent, to respond to the said complainant to the extent of his interest in the note. The only remaining question presented by the record for our revision is, the assignment of error that the master, in taking the account, used the answer of Halstead as evidence against the other defendants. In thus using the answer of Halstead by the master there was no error of which the defendants, Ashley, McCreary and Strickland, can complain. That the answer of Halstead, on the subject of the accounts between him and the^complainant, his co-partner, under the general rule, is incompetent evidence as against the other defendants, there can be no doubt; and if it appeared that the defendants had received any iniury from this error, or if there was any room for the presumption that they could have received any injury, we should undoubtedly be compelled to reverse the case. But such is not the fact. The answer of Halstead is adopted by the master as the basis of his report, so far as respects the state of the accounts between him and the complainant. By this answer it appears, that the complainant is indebted to him in the sum of $139 99, that is, ho is entitled to that much more in the notes than the complainant. Now suppose the answer of Halstead is excluded as evidence before the master, and he is compelled to make up his report from tho other evidence in the cause; how then would it have stood 1 Each of the answers of the several — 575 — defendants admits the existence of the partnership, and that the papers in question were partnership papers. The partnership, then, being admitted, the presumption of law arising upon that admission is, that it is an equal partnership, and consequently the interest of the partners is equal in the property. This must necessarily have been the report of the master, in the absence of the answer of Halstead. Inasmuch, therefore, as the error committed by the master operates in favor of the defendants, instead of against them, we eould not, as above remarked, reverse the cause for that reason. Our conclusion is, that we find no error in the record of which the plaintiffs in error can complain, and the decree of the Chancellor is consequently in all things affirmed.