Wagenhurst v. Wineland

Mr. Chief Justice Alvey delivered the opinion of the Cotu’t: As we have already stated, there was no testimony taken. The complainant, after interposing the general replication to the answers of the defendants, thus joining issue thereon, upon his own motion, set the case down for hearing on bill and answers filed. All the averments, therefore, in the answers, responsive to the allegations in the bill, are to be taken as true; as by setting the case down for hearing on bill and answer, the defendants are not offered an opportunity of proving their responsive averments, and the complainant is not entitled to rely upon the unsupported allegations of his bill to make out his case. Conceding then, as has been done by the complainant, that the partnership between Moore and Wagenhurst for the construction of the sewers under the contracts Nos. 2361 and 2390; had been dissolved, and that prior assignments of the money retained under those contracts had been made to Reyburn and Little by Moore and Wagenhurst, the — 92 — onus of proof in making ont a clear and unmistakable case of a subsequent bona fide purchaser for value, without notice, is upon the complainant — his claim to relief being founded upon that contention. Has he made out the case to entitle him to relief, as the facts are presented for consideration? We think, clearly not. Upon the hearing below the court passed a decree dismissing the bill; but, upon petition and reconsideration,, that decree was vacated, and a decree was passed instead thereof, giving full relief to the complainant. It is from this latter decree that this appeal is taken. The partnership, as we have stated, is admitted by the pleading to have been dissolved on the 11th of September, 1897. This dissolution, however, did not exonerate the partners from the obligation imposed upon them, by the contracts and bonds made for the faithful performance of the work to be done under the contracts. The partners were not only obligated to construct the sewers, with respect to-which the contracts were made, but bound to keep them in good repair for a term of five years from the date of their completion. Act of Congress of June 11, 1878. In addition to the bonds given, as required by the statute, for the faithful performance of the work, a retention from the payments made, under the contract, of 10 per cent of the amount, is required to be made as an additional security, and to constitute a guarantee fund to keep the work in repair for five years; and which fund is required to be invested in interest-bearing bonds, etc., and the interest that may accrue on such fund so invested is required to be paid to the contractors. This guarantee fund for repair cannot be withdrawn or impaired by the dissolution of partnership of the contractors, nor can the security afforded by it be affected by assignment of the contractors. The dissolution of partnership may be effectual as between the partners themselves, and those who deal with them after such dissolution, but it can have no effect upon the status of the fund while it remains in or subject to the control of the treasurer of the United States, and liable to the purposes — 93 — for which it was retained. Until the fund fully serves the purposes of its retention and deposit, the ultimate remainder of it, payable on the contract, is of an uncertain character; and while such fund, so retained, may and does, in a special sense, constitute a partnership asset, and may, as such, be assigned, yet such fund will be subject to all the purposes and liabilities, under the statute, for which it was retained and set apart, notwithstanding the assignment. All as-' signees dealing in respect to the fund are bound to take notice of the contract under which it is created, and the object and purpose of its creation. And though the ultimate amount of the fund payable at the expiration of the time for which it is retained, be uncertain and contingent, yet that fact does not deprive it of assignable quality. A court of equity gives effect to assignments of all kinds of future and contingent interests and possibilities in personal as well as in real property, if made for valuable consideration, and not in contravention of any settled public policy upon the subject, and where the assignor is in a condition to transfer the property or chose in action, or to cause it to be transferred, to the assignee. Wright v. Wright, 1 Ves. 411. As we have already stated, the pleadings, both bill and answers, disclose the facts, that the partnership between Moore and Wagenhurst had been dissolved, and all the right and interest of both partners in the funds retained for repairs under the contracts, had been assigned to Reyburn and Little, upon foil and adequate consideration, long before the assignment was made by Moore, in the name of Moore & Co., to Wineland, the complainant. And the first-question is, Was Moore, at the time of making that assignment to Wineland, in a condition to make a valid transfer or assignment of the retained repair funds in the control of the treasurer of the United States? There is no allegation or pretense in this case that the complainant, Wineland, was not fully aware of the fact at the-time of the assignment to him from Moore, that the partnership between the latter and Wagenhurst had been — 94 — dissolved; nor is there any claim or pretense that there was or had been any special delegation of authority to Moore by Wagenhurst to make such assignment, or to do any other act after the dissolution, in the name of the former partnership. Indeed, in the bill it is alleged that the partnership had been dissolved, and the claim made is that, upon general principles of partnership law, Moore had authority as settling partner, to make the assignment to the complainant in the firm name of Moore & Co. It is certainly a well-settled principle in the law of partnership, that in whatever manner the partnership is actually ended, there are certain effects and consequences of its determinatiou, which necessarily result from it as between the partners themselves, and will equally affect their transactions with third persons, where the latter have notice of the dissolution. As between the partners themselves the dissolution of the partnership puts an end to the joint powers and authorities of all the partners any farther to employ the property or funds, or credit of the partnership in the business or trade thereof, subject to certain well-recognized exceptions rendered necessary to the lawful settlement of the affairs of the late firm. None of the partners can create any new contracts or obligations binding upon the partnership; none of them can buy, or sell, or pledge goods on account thereof ; none of them can indorse, or transfer the partnership securities to third persons, or in any other way malee their acts the acts of the partnership. In short, none of them can do any act, or make any disposition of the partnership property or funds, in any manner inconsistent with the primary duty, now incumbent upon all of them, of winding up the whole concern of the partnership. Sto. on Part., Sec. 322, and the cases and authorities there cited; National Bank v. Norton, 1 Hill (N. Y.) Rep. 572; Ex parte Williams, 11 Ves. 5; Peacock v. Peacock, 16 Ves. 49, 57; Wilson v. Greenwood, 1 Swanst. 471; Crawshay v. Maule, 1 Swanst. 495; Pearpoint v. Graham, 4 Wash. C. C. Rep. 232; 3 Kent Com. (6th ed.), p. 63, and cases cited; Pars, on Part. (2d ed.), pp. 402-404. Mr. Parsons, in his work on Partnership, — 95 — page 404, says, that he considers the true rule to be “ that no contract can be made by one partner after dissolution by which the others will be bound, unless such contract is necessary for settling up the business of the concern in the most judicious manner.” It is a well-settled principle, that every person dealing with members of a dissolved partnership, is presumed to know the special rules of the law of partnership, and such person cannot ground a right or defense upon his ignorance of them. Pars, on Part., p. 233. It is very clear, that Moore had no greater authority over the affairs of the dissolved partnership than his copartner Wagenhurst had. And both the partners having disposed of all their rights and interests in the retained repair fund, it would seem to be clear that Moore had no further power or authority to make the subsequent assignment to the complainant, Wine-land, and that the latter could take no right or title by that assignment, to defeat the just rights and claims of the prior assignees, claiming by virtue of assignments of both the partners. The rights of both partners were extinguished in the funds attempted to be assigned, and were no longer subjects of assignment, under pretense of settling partnership affairs. But it is insisted on behalf of the complainant, Wine-land, and his case is founded exclusively upon the contention, that, claiming under the assignment to him of December 21, 1898, which was immediately recorded, and prior notice thereof given to the treasurer, Roberts, he thereby became entitled to a superior right and equity to that acquired by either Reyburn or Little, though he was a subsequent assignee, because of the fact, as he alleges, he is an innocent purchaser for value, without notice of the prior assignments. This contention assumes that Moore had authority to make the assignment to the complainant, in the partnership name, notwithstanding the dissolution of the partnership; — a proposition strongly controverted by the defendants, and whose position would appear to be strongly supported by the authorities to which we have referred. — 96 — Conceding, however, for the sake of the argument, that the assumption of power in Moore to make the assignment •could be maintained, the question then arises, is the complainant in a position, upon the case presented by him, to insist upon and be entitled to receive the protection afforded to an innocent, bona fide, purchaser for value, without notice? The doctrine of innocent purchase for value without notice, applies not only to bills for relief, but also to bills for discovery. But to entitle the purchaser to the benefit of such protection, he must have made the purchase bona fde and without notice, and for a valuable consideration, and he must -also have paid the purchase money in full. He must have purchased the title in fact, and not be a mere purchaser without a semblance of title. These essential facts must not rest simply in mere allegation, but they must be established to the entire satisfaction of the court. Therefore, when a plaintiff comes into a court of equity seeking relief grounded upon either a legal or an equitable title, against a bona fide purchaser of an equitable title of prior date to that asserted by the plaintiff, if the latter be entitled to relief in such case, he must obtain it upon the strength of his own case, and his own evidence; and he is not entitled to extract from the conscience of the innocent defendant, any proof to support it. 2 Sto. Eq. Juris., Secs. 1502, 1503; Senhouse v. Earl, 2 Ves. 450. A party setting up and relying upon the application of the principle of innocent purchaser for value without notice, whether as ground for relief or as matter of defense, in order to prevent fraud and collusion, and that the adverse party may have a fair opportunity to meet and repel'the claim, if it be unfounded in fact, must state in his pleading the deed or assignment under which he makes claim, the •date, and the parties thereto; that the vendor or assignor was. entitled, and rightfully conveyed or assigned; the consideration must be stated, with a distinct averment that it was bona fide and truly paid independently of the recital in the deed or assignment. Notice must be denied previous to and down to the time of paying the money and the delivery — 97 — ■of the deed or assignment; and the circumstances of the transaction must be fully and fairly stated. Boone v. Chiles, 10 Pet. 117, 210, 211. In this case, the allegation made in regard to the complainant being a bona fide purchaser for value without notice, is wholly insufficient, and wanting in the essentials that constitute a bona fide purchaser for value without notice; and the general allegation of the bill that the complainant is such an innocent purchaser for value without notice, is flatly denied by the defendants in their answers. In the answer of Reyburn he utterly denies that Moore was possessed of any authority to make the assignment to Wineland; and he avers that he is justly and equitably entitled to the fund retained under contract No. 2361, and will be entitled to receive the same when it becomes payable by the treasurer, — certainly, as he avers, “ against subsequent parties who, long after the said contract was completed, and contrary to the spirit of the law as to government claims, attempt, as a matter of speculation, to secure for some unknown or doubtful consideration, a transfer of the same to themselves.” And in the answer of defendant Little, after denying all pretense of authority on the part of Moore to assign or transfer the fund retained under contract No. 2390, avers that “ the whole affair, as affecting this defendant, is fraudulent from begining to end.” In both answers, the facts and circumstances are stated from which the defendants have drawn their conclusions, as to the want of good faith in procuring the assignment to the complainant. As we have before stated, the assignment to the complainant recites on its face the nominal consideration of $10; and in the bill it is simply alleged that, on the 21st day of December, 1898, an assignment in writing was made, under seal, by R. M. Moore as settling partner, to the complainant, of the whole and entire fund retained under the contract, “ predicated of a valuable and adequate consideration.” Rut of what this consideration consisted; when, and how it was paid, whether in full at the time of the assignment, or — 98 — afterwards, or under what circumstances as showing the bona fides of the transaction, there are no allegations whatever. This is clearly insufficient, upon all the authorities. Wood v. Mann, 1 Sum. Rep. 506, 510; Flagg v. Mann, 2 Sum. Rep. 486, 550. The complainant having failed to make out his case, founded as it is, upon the alleged authority of Moore to make the assignment to him, and upon his being an alleged subsequent bona fide assignee for value, without notice of prior assignments for value, the decree of the court below must be reversed, and the cause be remanded to the court below that the bill may be dismissed; and it is so ordered. Decree reversed and cause remanded. A motion by the appellee to modify the decree was overruled.