Buford v. Neely, 17 N.C. 481, 2 Dev. Eq. 481 (1833)

Dec. 1833 · Supreme Court of North Carolina

17 N.C. 481, 2 Dev. Eq. 481

William Buford v. Thomas Neely, adm’r. of Willis Pilkington, Ragland Roberts, et al.

An assignment by one of two copartners, of his interest in the copartnership, is a dissolution of it, because the other is not bound to receive the assignee as a partner. But where the assignment was a mere security, and it was agreed by all parties that the assignor should act in the partnership business as agent of the assignee, it does not produce this effect. .And upon a bill by the assignor for an account of the partnership, the assignor and the other partner are proper parties.

The plaintiff alleged that in September, 1815, one Hicks and Pilkington, the intestate, entered into copart-nership, and did business at Lynchburg in Virginia ; that Hicks advanced 8000 dollars, and Pilkington 2-000 dollars, which constituted the capital. That the profits were to be divided in the proportion of three fifths to Hicks, and the residue to Pilkington, who was to be the managing partner. That thepiaintifl) in March, 1816, with the consent of Pilkington, bought the interest of Hicks in the partnership. That the partnership business was transacted in Lynchburg, until December, 1816, when, by consent of all parties, the goods &c. were removed to Stokes county, in this State, where a profitable business was carried on until the year 1819. That in March IB 19, the plaintiff assigned his interest in the copartnership to Abraham & John Shelton, (defendants,) upon trust, to secure Abraham & John Bufort, (also defendants,) as his sureties in sundry debts, which were specified in the assignment. That Pilkington knew of this assignment and consented thereto, and had uniformly, after its date, until the sale hereafter mentioned, treated the plaintiff as a partner, by returning him statements of the partnership dealings, &c. That the debts secured by this deed had been paid by the plaintiff, and the deed, as a security, abondoned by the assignees and their cestuique trusts. The plaintiff then charged that Pilkington, intending to defraud him, had combined with *he defendant Roberts, who was a young man without capital, and a clerk of the copartnership, and in September, 1818, bad advertised the stock of goods for sale, and had, at a pretended sale, exposed them in large lots, and in conjunction with Roberts, had brought them in at a nominal price, and commenced a new firm under the title of Pilkington & Roberts. The plaintiff averred that this new copartnership was'conductcd with the effects of the old one, and lie prayed an account of the profits of both; admitting that Pilkington liad paid, or was bound to pay, a part of the money due Hipks for the purchase of his interest, and submitting that he should have credit therefor, or be protected therefrom, in the final adjustment of the accounts.

The two Skeltons and the two Buforts in their answers disclaimed any interest under the assignment, and admitted that if any thing was due upon a settlement of the copartnership accounts, it belonged to the plaintiff.

The defendant Pilkington, in his answer admitted most of the allegations of the bill. He insisted that if he was liable to account at all, it was to the Skeltons under the assignment, and not to the plaintiff — that his recognition of the plaintiff, as a partner, proceeded from the fact that he was constituted the agent of the assignees, and their cestui que trusts, in managing the copartnership business. He insisted that the copartnership expired on the first of September, 1818, and that not knowing where tire plaintiff then resided, he did not give him notice of an intended sale, which he averred was advertised at several ¡daces, and conducted fairly, being upon a credit of six months. But he admitted that the goods were sold in lots, and that he and Roberts had purchased nearly all of them, and that these purchases formed a part of tire stock of the new copartnership of Pilkington & Roberts. He denied that profits had been made by the co-partnership of which the plaintiff was a member, and insisted that the business had resulted in a heavy loss, which had absorbed the capital. He admitted, that subject to the claim of the assignees in trust, the plaintiff' was entitled, and stated that prior to the assignment being executed, the name of Abraham, Bu/ort had, with his consent been inserted in the copartnership articles, instead of that of the plaintiff, for fear of embarrassment from the creditors of'the latter.

The defendant Roberts joined in this answer, to which a replication was filed.

Pilkington filed a cross bill, in which he insisted upon the matters set forth in his answer, praying that he might be allowed compensation for attending to the business of the copartnership, and be protected from loss by reason of his suretyship for the plaintiff to Hicks, and for a decree against the plaintiff for his,the latter’s, share of the loss which had taken place.

To this bill the defendant answered, and set forth an extract from the articles of copartnership, whereby Pil-kington agreed to attend to the copartnership business without compensation. He denied the losses, and submitted to an account, and that Pilkington should be pro- * tected from loss as prayed by him.

Pilkington died during the pendency of the suit, and the defendant Neely was made a party to the original bill, by sd. fa. and appeared and prosecuted the cross bill.

In the court below, a reference which was to be without prejudice to the parties, was directed. The master reported a balance due the plaintiff, and exceptions were taken to the report by both parties. Many of them involved simple questions of fact. Those upon which questions of law arose, were the fourth of the defendant Neely, because the master had rejected a claim for compensation to his intestate,for managing the copartnership business.

The case was argued both upon the right of the plaintiff to an account, and upon the exceptions to the report, by Badger and Devereax for the plaintiff, and by Nash and Winston for the defendants, Neely and Roberts.

Daniei, Judge.

After stating the material facts, proceeded as follows :

The plaintiff having assigned his interest in the firm by an absolute deed, in the year 1816, to Abraham Bu-fort, it is now contended by Roberts and Pilkington’s administrator, two of the defendants, that the partnership was dissolved at that time by that act, anil no account of the partnership transactions could be decreed after that period. It is true that a bona Jkle assignment by one partner of his share, is a dissolution of the partnership, at the election of either. The remaining partners may not have confidence in.the assignee,* nor may the assignee choose to be concerned in trade. (Griswold v. Waddington, 15 John 82. Marquand v. Manufacturing Company, 17 John 535.) But in this case, it.was expressly agreed by the parties, that the partnership should continue. It was agreed by the deed of 1816, that Abraham Bufort should appear as the partner, and that William Bufort should act as his agent. By the deed executed in 1817 by the plaintiff to the two Sheltons in trust to secure Abraham and John Bufort for their liabilities for the plaintiff, the same property is conveyed as as that contained in the deed of 1816, and it is recited in the last deed, that the first was considered ineffectual for the purposes intended. Abraham Bufort, by agreeing that the same property should be conveyed to tho Sheltons, admitted that he bad no title under tho first deed; or, at most, it was considered as a mortgage. It is contended that if IHlkington and Roberts arc bound to account, they should do so only-to Abraham Bufort, or the Sheltons, who now are the' owners of the share which formerly belonged to the plaintiff.

On this point the defendant’s covinsel has cited several authorities. When examined, they prove nothing more, where there is no collusion, than this ; a creditor shall not be permitted in equity to file a bill for relief against the executor and a debtor of the testator, or against au as-signee in bankruptcy, and a debtor to the bankrupt, or against a trustee and a debtor of the assignor, where all the assignor’s effects and debts are transferred for the benefit of all his creditors. Where there is no fraud, the creditor’s remedy is against him who has the legal title. If this was not the rule, every debtor to such estates might bo harrassed with a bill in equity. The plaintiff does uot claim as a creditor, nor is he seeking a surplus under a resulting trust, arising from the deed to the Sheltons. Ever since the date of that deed, AbrahamBu-fort lias not pretended- to be considered as a partner in the concern, but William has always claimed to be and iiag been so acknowledged by Pilkington himself. It is a general rule, that where a bill,is brought for relief, all persons materially interested in the subject of the suit, should be parties, either as plaintiffs or defendants, in order to prevent a multiplicity of suits, and that there may be a complete decree between ail parties having material interests. (2 Mad. C. 179. If the assignees in this case, had brought a bill for an account and relief, the assignor must have been made a party to show his interest if he had any, for how would the defendant be protected against the assignor, if it should turn out that the assignment was not valid. (Cathcart v. Lewis, 1 Ves. Jun. 463. Ray v. Fenwick, 8 Bro.Ch. 35.) In this case all the parties have been brought before the court, and those persons, who the defendant says have the absolute interest which formerly belonged to the plaintiff, disclaim any interest, and expressly state that it all belongs to the plaintiff. The defendant Pilkington admits in his answer, that the plaintiff had an ultimate interest, after Abraham and John Bufort should be satisfied. The defendant Pilkington, also admits sufficiently in his answer, for us to see that he always treated the plaintiff as a partner; he made monthly returns to him of the sales» kept up a correspondence with him upon the subject of (he concern, and agreed to come to a settlement with him. And we think there is nothing to prevent the defendants now accounting with him.

The principal debtor is not a no-bUl'to’settleVeo-partnershipwhere asSgned'his 'interest in it to in-temmfy the

^ sa^ that although Abraham and John Bufort and the Sheltons now disclaim any interest, yet the court ahould not let the plaintiff have the fund,unless it should appear that all the creditors of William Bufort, mention-et^ i'1 the deed of trust of 1817, have been satisfied. The answer is that the deed of trust was to secure Abraham Bufort for their liabilities to those creditors mentioned in the deed of trust. The trustees and Abraham and John Bufort, admitting that they are satisfied, is presumptive evidence that all those creditors have been paid : it does not appear that they have not been paid. And if it' should appear that they have not, I am not prepared to say, that would prevent the relief he is seeking.

joint efe(;ts in partner,and a purchase by him,does not divest the property of the other, tcTanac* count of the pro, fits thereof, A sale of th

We are of the opinion that the defendant Filkington’s adm’r. is liable to account to the plaintiff, William Bufort, as a partner ot all the firms mentioned m the bul, and tliat Eoberts’ and Filkington’s administrators are lia- . . . , _ . , _ , . , „ ,, ble to account to William, Bufort lor Ins part ot the capital and the profits that were made on the same, after the time, when by the original articles, the partnership expired. We consider the-sale of the stock of goods made by Pilkington, and purchased by him and Roberts, a fraudulent transaction. William Bufort was not divested by the sale of his interest in the stock in trade, and as the defendants Pilkington and Eoberts traded upon that stock and capital, if any profits were made,three fifths of the same belonged to William Bufort.

A report having been made in these cases, subject to the opinion of the court, whether Pilkington and Eoberts were bound to account, and the court being of opinion that they are; exceptions have been filed by both parties to the said report, and the exceptions now come to to be decided. His Honor here considered several of the exceptions which involved questions of fact.

The defendant’s exceptions will now-be considered. The 1st, 2d and 3d exceptions are overruled. His Hon- or here stated the reasons shortly.

The 4th exception is overruled. Pilkington was bound by articles of copartnership to attend personally to the businessj he did not stipulate for. compensation. He is not entitled to receive remuneration for doing that which he agreed to perform, and which it was his duty as partner to transact. It has been held that a surviving partner, when there is not an express stipulation to that effect, is not entitled to charge in account a sum of money as a compensation to himself for his management of the trade, and for his time and labour; he cannot in the absence of a positive agreement, claim an allowance for carrying on the trade. (Burden v. Burden, 1 Ves. & Bea. 170. Gow. 380. 381.) The Sill exception is overruled, as to all but the sum of g>60, with interest from the 1st day of October 1824, which is allowed for Filkington’s services and expences in attending to the suit, brought by Hicks against him as the surety of the plaintiff.

Per Curiam. — Decree accordingly.