Hanff v. Howard, 56 N.C. 440, 3 Jones Eq. 440 (1857)

Dec. 1857 · Supreme Court of North Carolina

56 N.C. 440, 3 Jones Eq. 440

JOHN N. HANFF against THOMAS S. HOWARD and others.

Where real property was bought for the purpose of being used by a company formed for the purpose of carrying on a mechanical trade, and was so used, and had been so used, by several companies before this, and was necessary to the carrying on of such business, and was mentioned in the several deeds to the several partners as a part of the effects of the partnership, it was Held that thgre was a trust of such real property, by operation of law, for the partnership as tenants in common, though it had not been declared in writing.

A trust by operation of law, is not within the scope of the statute of frauds. (Hargrave v. King, 5 Ire. Eq. 430; Gloninger v. Summit, 2 Jones’ Eq. 613, cited and approved.)

Cause removed from the Court of Equily of Craven county.

This was a bill filed for the sale of a lot of land, to which the plaintiff claimed to be a tenant in common with the defendants, alleging that an actual partition could not be made without great injury and loss to the several claimants.

On the-clay of December, 1841, Malachi B. Robinson executed a deed to Vm. P. Robinson and Joseph J. Robinson, reciting that, by articles between Malachi Robinson and John Noe, dec’cl., they had entered into copartnership in the ship-carpenter’s business, under the name and style of Noe & Robinson, and held the following property as effects of the firm, “ a certain lot of ground lying in the town of Newbern, with the railways and other improvements thereon, and various implements and articles for tlie better success and promotion of the business of their said copartnership, all of which was "held by them as copartners;” that the said copartnership had been dissolved by the death of Noe, and the said M. B. Eobinson, as surviving partner, conveyed the whole of the said property to "William P. Eobinson and Joseph J. Eobinson. On the same day, for a valuable consideration, they sold and conveyed back to the defendant Malachi B. Eobinson, one undivided half of the lot and its appurtenances. The recital in the deed sets forth that the said Malachi, William and Joseph, had associated themselves together under the name and style of Eobinson & Brothers, for the purpose of carrying on the ship-carpenter’s business. Eor the consideration of three thousand dollars they conveyed to the said Malachi, each one half of his interest, to wit, one fourth of the land, “ with the wharf buildings, railway, falls and fixtures, incidental and appertaining to said railway, together with one half of all their right, title, claim and interest in and to the timber, tools, saws, iron-canoe, horse, cart and harness, bellows and anvil, and other articles bought by them at the sale of the effects of the late firm of Noe & Eobinson.” This deed also sots forth the proportions in which each of the partners was to be interested in the profits and liabilities of the firm. On the 6th of April, 1843, Malachi B. Eobinson, with the consent of the other partners, sold his interest (one half) in the land, fixtures, tools, &c., to Thomas S. Howard, who thenceforward became a partner in the same business with the said William P. and Joseph J. Eobinson. This sale having been made on a credit, the said Malachi took a mortgage on the share so conveyed to Howard, which was still unsatisfied at the commencement of this suit. Joseph J. Eobinson, with the consent of his associates, Howard and Wm. P. Eobinson, on the 3rd of February, 1845, sold and conveyed his share of the lot, railway fixtures, tools, &o., to James Pittman, who thenceforward became a partner with Howard and Wm. P. Eobinson, and the business was carried on, on the premises with the railway &c., in the name and style of Eobinson, Pittman & Co. During the time of this latter copartnership, a bouse was built on the said lot as a residence for Pittman and his family, which was paid for out of the common funds of the company, which he occupied until his death, which occurred in the year -, and was still occupied by his widow at the beginning of this suit. Another house on the premises, which Howard occupied as a residence, was extensively repaired, also at the expense of the company. The firm, last formed, was carried on for several years with the same means, but it became embarrassed in its affairs, and at the time of filing this bill, there were outstanding debts against it to a considerable amount beyond its moans. On the 10th of February, 1849, James Pittman made a mortgage deed to Alexander Miller, to secure the payment of certain debts therein specified, clue by Pittman to one Mitchell and others, for which Miller was his surety. This deed purports to convey the lot, “marine railway, buildings, improvements, and every part of the gear, tools, and appurtenances thereunto belonging.” Miller filed a bill in the court of equity against the heirs and personal representatives of Pittman, and obtained a decree of foreclosure, under which the interest of the said Pittman in the land in question, was sold at public auction and purchased by the plaintiff. The suit is brought to have the share thus purchased realised by a sale, and for partition of the money. It was insisted by the defendants that the said lot, with the buildings and fixtures, was brought into the business capital of the firm, and, as such, was not liable to the private debts of the partners, cither by way of mortgage or by execution, but was, in the first instance, liable to the debts of the copartnership; that the only interest which the mortgagee obtained by the deed of 1849, was to have the surplus coming to Pittman, after the debts of the firm were paid. The plaintiff, on the other hand, contended that the land rvas conveyed to Pittman individually, and as the association was formed by parol agreement, the land never vested in the company ; that the statute of frauds prevented the land from so vesting.

The causo was set down for hearing on the bill, answer and exhibits, and sent to this Court.

J. II. Bryan, for the plaintiff.

Donnell and J. W. Bryan, for the defendants.

Pjsaesoít, J.

If a partner executes a mortgage of the whole or any portion of the partnership effects, as a security to an individual creditor, the mortgagee takes, subject to the equity of the other members of the,firm, to have the effects first applied to the discharge of the partnership debts, and acquires only the interest of the mortgagor ; i. c., his share of the surplus, if any, after the liabilities and debts of the firm are paid and the business is wound up. This is a well-settled principle and is applied not only to mortgages, but to sales under execution in favor of a private creditor of one member of the firm.

This doctrine was properly conceded in the argument, but it was insisted, for the plaintiff, that the land, together with the marine rail-road, buildings and other fixtures, did not constitute a part of the partnership effects; for that it was not embraced in the original copartnership; and in the second place, if it was, as the agreement was notin writing, it is void in respect to the land by the statute of frauds. IVe are satisfied, that although the legal title to the land remained in the respective members of the firm as tenants in common, yet the use of it did constitute a part of the partnership effects. ¥o are led to this conclusion by many circumstances and considerations: The deed of "William and Joseph Robinson to Malachi Robinson, December, 1841,recited: “Whereas, Malachi, William and Joseph Robinson, have agreed to associate themselves together as copartners, under the name of Robinson and Brothers, for the purpose of carrying on the ship-carpentcr’s business, and have farther agreed to become interested in the property hereinafter mentioned, in the proportion of one half by Malachi, and one half by William and Joseph, for the purpose of carrying on the said business.” The deed, then, conveys to Malachi all right and interest in one half of the land, marine railway, buildings and other fixtures, and timber on hand, tools, saws, bellows and anvil, and other articles, bought at the sale of the effects of the late firm of Noe and Robinson. A deed of the same date, executed by Malachi Robinson to William and Joseph Robinson, recites, that by articles of agreement between Malachi Robinson and John Noe, deceased, they had entered into copartnership in the ship-carpenter’s business, under the name of Noe and Robinson, and held the following property, as effects of the firm, setting out the land, railway, &c., the same as the other deed. In April, 1843, Malachi Robinson, by deed, conveys to Thomas Howard, all his undivided half or right, title and claim in the land and railway, &c., tools, &c., describing the same property, and the business was then carried oil by Howard and William and Joseph Robinson, as copartners, using and treating the land, tools, &c., as effects of the firm. In February, 1845, Joseph Robinson, by deed, conveys to James Pittman, all his undivided one-fourth part or right, title and claim in the land, railway &c., tools &c., describing the same property, and. the business was then carried on by Howard and William Robinson and James Pittman, as copartners, using and treating the land, tools &c., as effects of the firm.

So, this land has been used for many years as partnership property ; first by the firm of Noe & Robinson ; then by Robinson and Brothers; then by Howard and the two Robin-sons, and then by Howard, Robinson & Pittman ; and although these several firms were unconnected, and one was followed in succession by another, still the same land, tools &c., constituted the effects of the respective firms, and the land was identified and became justas much a part of the effects of the firm as the “bellows and anvil,” or other implements. The land was necessary for the purposes of the firm ; in tact, the business could not be carried on without it. The land was not only used and treated by Howard, Robinson and Pittman, as a part of the effects of the firm in the usual way, but a house was built on it for Pittman to live in ; Howard’s bouse, on it, was repaired at a large expense, and a shed and other buildings were erected, all of which was done and paid for by the firm. The deed of mortgage by Pittman to Miller, February, 1849, conveys all of Pittman’s “ undivided one fourth share, i/nterest, estate and claim in the land, together with the marine railway, buildings, improvements, and every part of the gear, tools and appurtenances thereunto belonging.” So that the deed, under which the plaintiff claims, connects the land and tools, and treats them alike as effects of the firm.

The question is, does the statute of frauds make void this copartnership agreement in respect to the land? "We find it settled by authority, that it does not; and we fully concur in the reasoning on which that conclusion is based ; Dale v. Hamilton, 5 Hare’s Rep. 369, and the cases there cited, where the subject is fully discussed. Adams’ Eq. 36; “If land is acquired as the substratum of a partnership, or is brought into and used by the partnership, for partnership purposes, there will be a trust by operation of law, for the partnership as tenants in common, although a trust may not have been declared in writing, and the ownership may not be apparently in all the members of the firm, or if in all, may apparently be in them as joint-tenants.” Hargrave v. King, 5 Ire. Eq. 430; Cloninger v. Summit, 2 Jones’ Eq. 513, are cases where the agreement, in respect to land, was held not to be within the operation of the statute, upon the same principle of enforcing the execution of a trust.

In our case, the legal ownership Avas in Howard, Robinson and Pittman, as tenants in common, but a trust was implied by operation of law, because it was a partnership transaction. The land was necessary for the purposes of the association, and was brought in and used for partnership purposes, and a trust, by operation of law', is not within the operation of the statute.

PeR Cubiam, Bill dismissed.