Lang's Heirs v. Waring

CHILTON, C. J. 1. A bill between these same parties was dismissed by this court at a previous term (11 Ala. 145), but without prejudice as to any supposed right which the complainant might have acquired in virtue of his purchase from Messrs. Gayle & Phillips. The effect of- such reservation in the decree of dismissal is, to prevent such decree from constituting a bar to another bill brought upon the same title ; but it by no means compromits the court as a judicial determination in favor of such title. In so far as the former decision leaves the questions for discussion open, we must address ourselves to them as though they were-for the first time before us. 2. After much vacillation by the English courts, the doctrine may now perhaps be considered settled, that, unless there is something in the articles of copartnership, or some agreement by the partners to the contrary, real estate purchased with partnership funds, for partnership purposes, is, in a court of equity, converted, and treated as personalty, and therefore goes to the personal representatives, and not to the heir of the deceased partner.—See Bisset on Part. 55-6; Coll. on Part. (3d edit.) 141. While the decisions of the American courts generally concur in affirming that such estate is, in equity, chargeable with the debts of the copartnership, and with any balance which may be due from one copartner to another, there is, much conflict among them, as to whether the surplus, in case of the death of a partner, shall descend to the heir as real estate, or go to the personal representative for distribution. Judge Story, in Hoxie v. Carr, 1 Sum. R. 183, inclined to the opinion, that the disposition of the surplus of such real estate must depend on the presumed intention of the deceased partner, as to whether it should be treated as realty, or impressed with the artificial character of personalty. In his work on Partnership, however, (§ 93,) he leaves the question unsettled, and says that, from the diversity of judicial decision, the doctrine is open to many distressing doubts. In his work on Equity Jurisprudence, he sides with the English doctrine. Chancellor Kent follows the English cases, and holds, that “ the property will be entitled to be distributed as personal — 640 — estate.” — B Kent, (6 edit.) 37. Chancellor Walworth, in Buchan v. Sumner, 2 Barb. Ch. R. 200-1, held, and thought the American cases, many of which he cites, might be considered as establishing, that, as between the personal representatives and the heirs-at-law of a deceased partner, his share of the surplus of the real estate of the partnership, which remains after paying the debts thereof and adjusting all the equitable claims of the different members of the firm as between themselves, is considered and treated as real estate. Without citing the numerous authorities upon this subject, which may be found collated in those above referred to, we think the true rule is, that, although a court of equity considers and treats real property, purchased with the copartnership funds, and held for the purposes of the firm, as constituting part of the stock of the firm, it leaves the legal title undisturbed, except so far as it may be necessary to protect the equitable rights of the respective partners. Such was the opinionof Chancellor Walworth, in the case last cited (2 Barb. Ch. R. 206.) 3. We do not well .see upon what principle the courts have ever held that the heirs of the deceased partner are but naked trustees of the legal title, without any beneficial interest. True, they hold as trustees for the surviving partner for the purpose of adjusting the debts and equities growing out of the partnership relation; but they have an ultimate interest. The purposes of the partnership accomplished, and the liens and equities adjusted, they are the sole beneficiaries of their ancestor’s share. But, if we concede that they cannot take the surplus directly as heirs, and hold that it must pass through the hands of the deceased partner’s personal representative, even then we are not prepared to say, that they are so wholly without any beneficial interest as to deny them the privilege, when sued for a divestiture of title, of showing that the alleged equity is founded in a wrongful conversion of the partnership effects, which a court of equity should not sanction. The court, it seems to us, will not be astute in ferreting out their interest, as to whether it is certain or uncertain, immediate or remote, in order to shut the mouths of .the heirs. They are the only parties sued, and the court ought not to become active in divesting them of their legal title, which, by — 641 — .operation of law, may possibly become united with a perfect equity, in favor of any one whose claim to relief cannot stand before their assault. The former opinion in the case between these parties, (17 Ala. 145-66,) is conclusive upon this point; for, if the survivor has the unqualified right to dispose of the real estate of the firm, and the -heir may not gainsay it, upon what principle could the court look into the consideration of the mortgage deed, and question the power of the survivor to execute notes in the name of the firm as the evidence of the demands secured by the mortgage ? The complainant was a derivative purchaser, exhibiting the mesne conveyances, from the survivor, of the entire land or lot of ground. The survivor made no complaint; and if he had the right to appoint the person to take the legal title, irrespective of the nature and objects of the transfer, who shall interpose? The case just cited furnishes the answer: the heirs did interpose, and with success. 4. It is no answer to their right to defend, that the firm is insolvent, and that the whole of the assets of the firm are required to pay the debts. The surviving partner is not calling for this land, as assets of the firm, to administer it for firm purposes. If the disposition which he has made of it amounts to a proper and legal administration of it for the objects of the firm, of course the court will uphold it; but, on the other hand, if the disposition is unlawful, or such as good faith requires should not have been made, the court will find in the insolvency of the firm, which may have been superin-duced by such mal-administration, an additional reason for withholding its aid. If this estate has never been properly disposed of, and yet remains as assets of the firm, we cannot undertake to say that the firm will be finally insolvent. It is an event dependent, it may be, upon the amount which this property may bring, and which the future alone can develop. Upon the whole, we think the heirs should be allowed to discuss the plaintiff’s right. 5. In Andrews’ Heirs v. Brown’s Adm’rs, 21 Ala. 437, it was held, that as the surviving partner is charged with the payment of' the debts of the firm, he has the right, in equity, to dispose of the real estate owned by it for that purpose; — 642 — and that, although his deed will not convey the legal title to the purchaser, yet it will convoy this equity to him, and through it he may compel the heir to convey the legal title. Whether this proposition, thus broadly asserted, as respects the right of a surviving partner to execute a mortgage upon the real estate of the firm, can be supported as correct law, we will not now inquire. It was certainly not intended' to establish the doctrine that a court of equity, in all cases of disposition by a surviving partner of the real estate of the firm, however unfair, inequitable or unauthorized such disposition might be, would compel the heirs to convey, and thus become the minister of injustice. Such a. doctrine would be monstrous, and could never obtain in a court which administers justice upon the broad principles of equity and good conscience. 6. Without intending to affirm the correctness of Andrews v. Brown, supra, but conceding, for the purposes of this argument, that the surviving partner has the power to make a mortgage, subject to the confirmation of the court of equity, and that if the sale be fair and bona fide, such as the court would have sanctioned and sustained, if it had been made under its own direction, the same would be upheld and the legal title decreed to the purchaser ; yet, if it be for a grossly inadequate consideration, and made under such circumstances as were well calculated to cause it Lo be sold for, an almost nominal sum, the court ought not to lend its aid to perfect such a purchase. Especially should it withhold its action, when invoked by one whose conduct has contributed, in all probability, to bring about the sacrifice. 7. There are several circumstances connected with this transaction, which account for the sacrifice, as they were well calculated to cast a cloud over the title, if not to deter all persons from bidding for the property when it was sold under the mortgage. In the first place, the mortgage was made by McBae alone, and it does not purport to convey in terms the interest of the deceased partner. It was made while Bartlett & Waririg had judgments against McBae, as survivor of the late firm, for a large amount. Then it was made to secure the payment of notes executed by the surviving partner in the name of the late firm, which, as previously decided, (17 Ala., supra,) created no obligation as against the firm. Add to all — 643 — this, that before the sale under the mortgage, which took place the 4th May, 1840, the lot had been sold under the judgments of Bartlett & Waring, whose judgments were older than the mortgage, and purchased by Waring on the 4th March, 1839, who took and held possession when the sale under the mortgage was made, — and it is by no means surprising that the lot, proved to have been worth some eight thousand dollars, should have been sold for two hundred and fifty dollars. It occurs to us, that, if there ever was a case where good faith required the surviving partner to resort to equity to have the estate disencumbered, so that the purchaser might know what interest he was buying, and that the property might not be sacrificed, this was one of that character. This is not an application to chancery to set aside an executed contract for inadequacy of price, — in which case, it is conceded, the inadequacy must be so gross as “ to shock the conscience of the chancellor, and be evidence of fraud,” — but it is an appeal to the equity of the court to sanction an act done by another, which is of no validity without such sanction. It is, in effect, the adoption as its own of the act of the surviving partner, who, without its aid, cannot make a valid disposition of this property; and as it is too clear to admit of any doubt, that injustice has been done, by the sacrifice of the property for an almost nominal sum compared with its true value, we are clearly of opinion the court should not sanction it, nor disturb the legal title by reason of it. Other considerations are relied upon by the complainant to strengthen the moral justness of his claim ; but we know of no rule of law or equity which will enable us, as chancellors, to make the complainant’s previous improvident purchase, or his liberal compromise with the widow and representative of the deceased partner, any ground for a decree on this title. 8. As to the purchase made by the appellee at sheriff’s sale, it is only necessary to say, the maxim is “ caveat emptor,” and that in such cases this maxim applies as well in equity as at law. He then took by that purchase only the share of the surviving partner, and the amount bid must be regarded as the price^of thatAshare. — 644 — Upon the whole, our conclusion is, that the complainant shows by the record no case for the relief he seeks, and that the decree of the chancellor is erroneous. Let the decree be reversed, and the bill be here dismissed.