Pierce v. Covert

Cole, J. It seems to us it would, have been much better practice for the defendant George Govert to have answered the amended complaint, showing all the facts in regard to his purchase of the warehouse property as he has set them forth in his affidavits., He states, in the first affidavit filed with the' commissioner, that he was advised by his counsel that it was unnecessary for him to answer, and consequently he did not do so. But we think it would have been more regular and formal for him to have answered, instead of setting up his interest in the real estate by way of affidavit, as he did on the rule to show cause. No objection is taken to the informal way in which his rights or interests in the property are presented to the court; and they will therefore be considered as the record now stands. The main facts of the case are undisputed. The action is for a dissolution of a partnership, and for a settlement and division of the property among those entitled to it. A receiver has been appointed to take charge of the property of the firm and to collect the debts. The firm was originally composed of Griswold Weaver, Henry Pierce and Augustus Covert; was formed in August, 1866, for the purpose of buying and selling live stock, grain and produce at- Clinton, Eock- county, under articles by which each partner agreed to furnish an [258] equal amount of capital stock and was equally interested in the profits and losses. The firm purchased real estate with partnership funds, and. erected a warehouse thereon for the purpose of carrying on their business. The title was conveyed to the partners in their individual names; and they apparently and in fact held it as tenants in common. Weaver died in December, 1872, and his personal representatives, heirs and widow are made parties to this action. It abundantly appears that the firm is perfectly solvent; that it owes no debts; and that there will be assets of considerable amount to be divided among the partners, after paying all debts and the costs and expenses of this action. The defendant George Covert purchased in June, 1873, of Augustus Covert, the undivided third of the warehouse property, and took a conveyance thereof. This interest the circuit court ordered him to convey to the receiver, in order that it might be sold with other partnership property. It is insisted and claimed by the counsel of George Covert, that this order was erroneous; that no good reason was shown for disturbing his title, or for compelling him to convey the interest which he has purchased and paid for, to the receiver. One partner, it is said, may sell and convey his interest in real estate owned and held by him with the other members of the firm as tenants in common, when the firm is. out of debt and has money and personal property on hand, and when the partner selling his interest would owe the other partners nothing on a final settlement of the partnership account. But on the other hand it is claimed that where real estate is purchased with partnership funds for partnership use, it is-treated in all cases in equity as personal property, not only for the purpose of paying the debts of the firm and adjusting the equities of the partners as between themselves, but also for the purpose of distributing the proceeds among those entitled to them. The general rule doubtless is, that so far as the partners [259] and tbe creditors are concerned, real estate belonging to tbe partnership is in equity deemed as mere personalty; and in case of dissolution it is often decreed to be sold as a proper way to ascertain its value, and in order that an equal distribution of tbe partnership effects may be made. But we do not understand tbe rule to be inflexible, that a court of equity always decrees tbe sale of real estate purchased with partnership funds for parnership purposes, on winding up tbe concern. Tbe circumstances of some cases may be such as to render this entirely unnecessary. For example, where, as in this case, tbe partners have taken, tbe title as tenants in common, and their interests in tbe real estate are precisely ascertained; where all tbe debts and obligations due to third persons and as between themselves have been paid and discharged; and where an equal distribution of the assets can be made without a sale of the real estate, —there it is not obvious why the court should order a sale on a dissolution of the partnership. True, it is said in some of the books that it is the right of any partner to insist on a sale of all the propérty on a dissolution; and this is ordinarily the course where it appears that it would be most beneficial for the interests of all the partners to do so. But we see no' valid reason for adopting that course here. The complaint clearly treats the warehouse property as real estate held by the partners as tenants in common, and descending to the heirs of the deceased partner, subject to the wife’s dower. It avers that the firm owed debts to only a small amount, and that there was property of $2,000 and upwards, consisting of money, notes and accounts belonging to the firm. True, there is an allegation that the real estate cannot be'divided without great prejudice and injury to the owners thereof; but there is no pretense that the sale is necessary in order to make an equal distribution of the assets. And after treating the real estate standing in the name of the individual partners as subject to all the rules and incidents which govern such property and descending to heirs, it would [260] seem tliat the case presented no ground for interfering with or disturbing the title. The complaint clearly shows that the partner Pierce, as well as the heirs and representatives of the deceased partner, treat the warehouse property as not governed by the principles applicable to partnership property; so that, whatever might otherwise he the rule, there is surely no necessity for decreeing its sale as such in this action. But it is suggested on the brief of counsel for the plaintiffs, that as the court has taken jurisdiction of the cause for the dissolution of the partnership and winding up its concerns, it should retain the cause for the purpose of making a partition of the real estate. It seems to us that such a practice would be anomalous. To attempt to convert the proceeding into one for the partition of real estate, would only serve to complicate the matter, and delay the final settlement of the partnership account. By the Cov/rt. — The order of the circuit court requiring the defendants George Covert and Jmnette Covert to convey the undivided one-third of the warehouse property to the receiver, is reversed, and the cause is remanded for further proceedings according to law.