Case ID: va_18/html/0136-01.html
Source: Caselaw Access Project
Author: {"author": "JUDGE ROANE", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

Forde v. Herron.
    Argued Friday, March 25th, 1814.
    1. Partnership — Realty—Liability for Individual Debts, —Though real property, purchased with the effects, and used for the purposes, of a mercantile firm or copartnery, may, in equity, be liable to discharge the balance due from the company to any partner, in preference to the private and individual debts of any other partner : it is nevertheless competent to the members of such co-partnery to acquire such property jointly, as individuals, or to lose the lien aforesaid, (generally existing upon the social property,) by acts tending to mislead or deceive creditors or purchasers, in this particular; as where the deed neither describes the parties purchasing as merchants and partners, nor states the purchase to have been made by them for the use of the firm, but merely purports a conveyance to them as individuals.
    2. Sale — Setting Aside — Inadequacy of Price. — A sale ought not to be set aside on the ground of smallness of price, if that was occasioned by the acts of the complainant.
    George Chandler conveyed to the appellant Eorde and one Patrick Fury a lot in Norfolk, on the 4th of June 1798. Fury conveyed his moiety to James Hunter, on the 24th of April 1800, in trust, to secure a debt due to William Plume. Hunter, the trustee, sold. for the satisfaction of Plume’s debt; and Walter Herron the appellee became the purchaser. Hunter conveyed to him Fury’s moiety, by deed bearing date on *the 18th of January 1802. All these deeds were duly proved and recorded.
    .Herron filed his bill in the Superior Court of Chancery for the Williamsburg District, against Forde, for a partition.
    The defendant Forde by his answer insisted, that he had a lien in equity on Fury’s moiety ; that he and Fury were partners in trade; that the lot was bought with the partnership funds, and considered as partnership stock ; that Fury was his debtor on the partnership concern ; and that Plume and Herron had notice of his equity at the time of their respective purchases.
    The parties being at issue, a number of depositions were taken by the defendant to prove that the lot was in part paid for by the partnership funds ; and that Fury was in debt to the firm : but there was no evidence of any specific agreement, that it should be held as partnership stock. There was the testimony of one witness to prove that Plume, before his purchase, had notice that the land was partnership property ; but it was contended that his deposition ought not have been received, as he refused to answer an important interrogatory, and appeared unworthy of credit. Notice to Herron was proved. It was proved that, after the sale to Herron, Forde declared his willingness to pay Plume’s debt.
    The deposition of William Plume was also taken, in which he denied his having had any notice of Forde’s claim, before he took the deed of trust from Fury ; acknowledged he knew that Patrick Fury and John Forde, who composed the firm of John Forde & Co., had bought the property; but averred that he did not know whether they bought it on account of the partnership of John Forde & Co., or not; on the contrary, “Patrick Fury told the deponent that they had bought the lot, not on account of the partnership, but as a permanent settlement, on which each of them meant to make an improvement for himself.”
    It appeared that, on the 19th of June 1801, Forde and Fury referred all the accounts relating to the mercantile transactions of John Forde & Co. to arbitrators, who awarded that Fury owed to Forde the sum of 2481. 17s. 6^d.; that the *lot in question was the only undivided property belonging to the said co-partnership ; that the said lot should be sold, and that the money arising from the sale be appropriated to the payment of the said debt, and of the creditors of the said John Forde & Co. ; in conformity with which award, the court of Norfolk borough, on the 27th of August 1801, decreed a sale of the lot, which, thereupon, being offered for sale at auction, was purchased by John Forde himself, he being the highest bidder. It was, also, in evidence, that the sale by Hunter as trustee for Plume, was forbidden by an agent of Forde ; and that the only persons present at it were the trustee, Plume the creditor, his son-in-law Herron the purchaser, and Charles H. Simmons, Forde’s agent.
    The partition was decreed; chancellor Tyler being of opinion, “that the plaintiff (Herron) was a fair purchaser for valuable consideration under the deed of trust, the validity of which is not impugned by any evidence in the cause ; that the acts of the defendant or Patrick Fury, tending to defeat the effect of the said deed, were fraudulent as to all persons claiming under the same ; and that the right of the said Fury to create the lien on the moiety of the lot, in the said deed of trust mentioned, was completely recognized by the defendant himself, by his offering to discharge the debt, if the lien should be released to him.
    A final decree was rendered, confirming a partition made by commissioners ; and Forde appealed to this court.
    Hay, for the appellant.
    The decree is erroneous ; first, because the lot in question was partnership stock of Forde and Fury, merchants and partners, having been bought and paid for with the partnership effects. It appears from the mercantile books that such was the case, and that the improvements were paid for in like manner. This being partnership property, it was liable to the claim of each partner, and could not be applied to satisfy a creditor of either separately, until the partnership claim was satisfied. Even admit that Forde’s lien upon Fury’s share was only an equitable title; that is sufficient; for it appears that Plume, as well *as Herron, had notice of his claim. Mr. Plume’s own deposition shews that he has sufficient notice to put him on his guard with respect to the title. He should ha ye enquired of Forde as to the effect and operation of the deed to Forde and Fury, which he had seen; that is, whether the land conveyed by it was partnership property.
    2. The sale under the deed of trust ought not to be sanctioned in a Court of Equity. Only one bidder was present ; and he bid only enough to satisfy Plume’s claim. He got, for six hundred dollars, property worth eleven hundred and twenty-five. If it had been worth five, or even ten thousand dollars, the result would have been the same.
    Wickham contra.
    Mr. Plume is not before the court. Fury also is not a party. The whole dispute on Forde’s part is concerning the unsettled account between Forde and Fury : yet Fury is not before the court.
    The bill was filed by the appellee for a partition. He shewed a complete legal title to one moiety of the lot, and the defendant to the other moiety. A decree directing the partition was, therefore, a matter of course.  If Forde the defendant had any latent equity involving the rights of a third person, he should have filed a cross bill, and made that person a party. The lot was certainly not partnership stock to every purpose ; so as to be considered personal property, and to go to Fury’s executors, instead of his heirs.  At the utmost, Forde had only a lien on Fury’s share. A decree against Fury himself would only have been, that he pay the balance due from him to Forde, on a day appointed by the court; and, in default of such payment, that his share of the lot be sold to satisfy that debt. Such a decree could not be made without a cross bill against him. If the sale to Herron was bad, Fury alone had the right to complain ; which he has not done.
    But it is clear, that Plume is a purchaser without notice. On the face of their deed, Forde and Fury were tenants in common : but it does not appear that the property was applied to partnership purposes. There is not a tittle of evidence *to that effect. All the authorities cited apply to cases, only, of property purchased for the use of the company ; such as ground for a store, &c. No adjudged case can be found, shewing the mere circumstance (that the money of the partnership was laid out in the purchase,) to be sufficient to make the land partnership property.
    Plume was not bound to enquire of Forde, whether Fury’s statement to him was true. The deposition of the single witness, who swears that he had notice, ought not to be regarded as evidence in the cause. His re-4usal to answer a legal and pertinent question was a violation of his oath, “to tell the truth, the whole truth, and nothing but the truth.” He speaks, too, about conveyancing ; and yet acknowledges that he cannot Write.
    It follows, therefore, as Plume was a purchaser without notice, that Herron, who claims under him, is protected, though he bought with notice. 
    
    The award was made by agreement in pais, and rule of court thereupon, in conformity with the act of assembly ; but all this was after the deed to Plume had been recorded, and, evidently, the result of a combination to defeat his righ't.
    Hay in reply.
    Where real property is bought jointly, by partners, with the partnership funds, it is not necessary to prove an express agreement to apply it to partnership purposes. The construction of the law is, that it is, of course, partnership property.  Where the law itself makes the transfer, (as by execution against the debtor partner,) the purchaser takes it cum onere, whether he has notice or not.
    Judge Cabell suggested that, in such cases, the purchaser always has notice.
    Hay. But Plume in this case certainly had notice. The story told by the witness is plain, rational, and consistent; *without any appearance of fabrication. The question he refused to answer was of no manner of moment to the cause ; and his refusal to answer may have proceeded from his not knowing that he was bound to do so, ©r from his vexation at being fatigued with too many interrogatories. If his character was bad, why was not some testimony taken -to prove it so ? It seems something like trick, that, without insisting upon his answering the question, they caught at the circumstance, as calculated to injure the credibility of his testimony — put it down, and shut up the deposition.
    But, from Plume’s own deposition, it appears that he had such notice as is binding in equity ; for whatever is sufficient to put a purchaser upon enquiry is good notice ; that is, where a man has sufficient information to lead him to a fact, he shall be deemed conusant of it. 
    
    There is no proof of a combination between Horde and Hury to defraud Plume. The decree in favor of Horde against Hury does not appear to have been by consent of parties. It was founded on an award by arbitrators.
    The defendant in this suit could not have made Hury a party by a cross bill; because he was not a party to the original bill,  And, even admitting a third person might be made a party, could not Fury have pleaded the account, award, and decree, in the former suit against" him, in bar to his being brought into court again as defendant to the cross bill?
    But why should Hury have been made a party to this suit, when no decree was wanting against him? — Horde alone is interested in the present controversy ; and the sale to Herron ought to be set aside, as operating to his injury.
    Saturday, December 17th, 1814,
    
      
      Partnership — Realty—Title in One Partner — Rights of Purchaser without Notice. — if the legal title to real estate is vested in one partner, a tona Me purchaser from him of the property, having no notice either express or constructive, of its being partnership property, will be entitled to hold it free from any partnership claim. But, if the purchaser has such notice, he is clearly bound by the trust, and takes the property eum onere, like every other purchaser of a trust deed. Hoxie v. Carr, 12 Fed. Cas. 749, 750, citing the principal case. To the same effect, the principal case was cited in Jones v. Neale, 2 Pat. & H. 354. And in Pierce v. Trigg, 10 Leigh 425, the principal case is cited as deciding that if partners take their deed to real estate in such form as not to disclose the connection of the title with the partnership, a purchaser without notice will be protected against the partners or their creditors. The circumstance that a conveyance of real property is in the name of partners as tenants in common may afford some presumption, in the absence of a countervailing presumption, that the conveyance is not designed to be on the partnership account, but, per se, it is very slight and never decisive. Hoxie v. Carr, 12 Fed. Cas. 751, citing principal case. See further, monographic note on "Partnership” appended to Scott v. Trent, 1 Wash. 77.
    
    
      
      Sale — Setting Aside — Inadequacy of Price. A court of equity will not set aside a sale made by a trustee, on the ground of inadequacy of price occasioned by the acts of the complainant at the sale. Jones v. Neale, 2 Pat. & H. 855, citing the principal case as its authority. To the same effect, the principal caséis cited in Graeme v. Cullen, 23 Gratt. 286.
    
    
      
       Lyster v. Dolland, 1 Vesey, jr. 434; — Smith v. Smith, 5 Vesey, jr. 189.
    
    
      
       Parker v. Gerrard, Ambl. 236.
    
    
      
       Watson on partnership, p. 60 ; Thornton v. Dixon, 3 Bro. Ch. Cases, 199.
    
    
      
       See Lacey, &c. v. Wilson, ante.
    
    
      
       See Edgar v. Donally, 2 Munf. 391; and the cases there cited.
    
    
      
       Sugden 498, citing Smith v. Low, 1 Atk. 489; Ferrars v. Cherry, 2 Vern. 384; 2 Fonbl. ch. 6, sect. 3, note m.
    
    
      
       Hinde’s pr. in ch. 53, Mitf. 75, Cooper 85.
    
   JUDGE ROANE

delivered the following opinion of the court.

The court is of opinion that, although real property, purchased with the effects, and used for the purposes, of a mercantile firm or co-partnery, may, in equity, be liable to discharge the balance due from the company to any partner, in preference to the private and individual debt of any *other partner, it is nevertheless competent to the members of such co-partnery to acquire such property jointly, as individuals, or tó lose the lien aforesaid, (generally existing upon the social property,) by acts tending to mislead or deceive creditors, or purchasers, in this particularand it appearing to the court, in this case, that while, on the one hand, William Plume, under whom the appellee claims, had no certain indicium, as at the date of Fury’s deed to him, whereby he could have discerned that the lot in question was purchased by, or used for the purposes of the co-partnery of Horde and Hury in the proceedings mentioned, he was led to conclude the contrary from the terms of the deed, under which John Horde and Patrick Fury claimed the same from George Chandler ; — that deed neither describing the parties purchasing as merchants and partners, nor stating that the said lot was purchased by them for the use of the firm, but merely purporting the conveyance to have been to them as individuals; — the court is of opinion, that the present is not a case in which the doctrine aforesaid can properly apply; but that the equity of the appellant, under the foregoing principle, has been lost, in favour of the said Plume, a fair creditor of Hury, by his negligence and omission aforesaid. The claim of the appellant could, therefore, only be sustained, in any event, as to the surplus remaining after satisfying the debt of the said Plume : — but no such surplus exists in the actual case before us ; nor, consequently, can the question relative thereto arise in this case, unless the sale, under which the appellee purchased the moiety of t’he lot in question, should be vacated by the decree of the court. With respect to that sale, the court is of opinion, that, if it is now competent to it to set aside the same, when it has not been impeached, or put in issue, by the answer of the appellant, or the proceeding^ in this cause, it would not be proper to do it when, in addition to the omission aforesaid, that omission may perhaps be accounted for, by a consciousness on the part of the appellant that the smallness of the price produced by the sale to the appellee was caused by his own acts; — by having, in *the first place, purchased .the lot himself, ata sale made under a decree of the Hastings court of Norfolk, and then forbidden others to bid for or purchase the same. Under these circumstances, therefore, the sale to the appellee will be sustained against the claims of the appellant; — and, on these grounds, the decree of the court of chancery is affirmed.