Case ID: serg-rawl_15/html/0118-01.html
Source: Caselaw Access Project
Author: {"author": "Gibson, J.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

[Philadelphia,
    January 8, 1827.]
    KUHN against NIXON and another.
    MOTION FOR NEW TRIAE.
    Equitable principles are to be applied by a jury, under the direction of the court, in the same manner as legal ones; and the remedy, on motion for a new trial, is the same.
    What circumstances will give to a separate debt of some of the partners the character of a partnership debt.
    This cause was tried before the Chief Justice at Nisi Prius in February last, and a verdict was rendered in favour of the defend- ■ ants. The plaintiff now moved for a new trial.
    
      It was an action for money had and received, and was brought by Hartman Kuhn against Henry Nixon and Richard Willing,, to recover of them, as assignees of James and John Gibson, a rateable proportion of a debt which he asserted the defendants were liable to him for, and on the trial the circumstances appeared to be as follows.
    On the 1st of July, 1813, articles of co-partnership were agreed upon between Thomas Conaroe, Richard Conaroe, James Gibson, and John Gibson, for five years, to carry on the lumber business in the name of T. Conaroe and Co. on premises situate on the river Delaware above Philadelphia, and owned by J. and J. Gibson: the capital ten thousand dollars, to be equally advanced by the parties, who were equally to share in the profit and loss: Richard Conaroe to devote his time to the lumber yard, and receive five hundred dollars a year for it, and each partner to give advice and assistance free of charge. Thomas Conaroe assigned his lease of the wharf, &c. on the premises, and J. and J. Gibson leased the wharf, meadow, &c. to the concern, at a rent to be fixed. The partnership went into operation, and in the fall of 1817, having about a million feet of unsawed timber on hand, John Gibson suggested to the other partners the purchase of a steam saw-mill owned, by F, Markoe, which he was willing to sell, and stated that if,he would take ten thousand dollars in lumber, it would be advisable to purchase it; to this they all agreed. The proposition being made to Markoe, he assented. A few days after, he said he had rather take a less price in money on a credit, and it was finally agreed to purchase the mill for eight thousand dollars on credit. Accordingly, on the 29th of November, 1817, Markoe declared he considered the Messrs. Gibspns sufficient for the purchase money, and conveyed the mill to James and John Gibson in fee, and took their bond and warrant, and a mortgage for the payment of the eight thousand dollars, on or before the 29th of November, 1820, with interest half yearly at the expiration of one year from the date. The property was held by Markoe, subject to a ground rent of six hundred dollars and upwards per annum. Markoe assigned the bond, warrant, and mortgage to the plaintiff, Kuhn, on the 8th of December, 1817, and the plaintiff entered up judgment on the bond in February, 1821.
    On the 26th of Jlpril, 1S19, an agreement to dissolve the partnership was signed by all the partners; the settlement of the affairs of the concern to be made by James and John Gibson; on the same day, T. and R. Conaroe assigned to J. and J. Gibson, reciting that they were indebted to them for money advanced, and conveyed to them, “their executors, administrators, and assigns, all the partnership stock, debts, goods, and chattels, and effects, and all the partnership estate whatsoever,” to hold to the said J. and J. G. their executors,'administrators, and assigns for their own use, &c. On the 28th of Jlpril, 1S19, J. and J. Gibson assigned to the defendants in trust that they should, out of the proceeds of the assigned property, in the first place, pay'“all the debts due and owing by the late firm of T. and R. Conaroe and Co.”
    To prove that the saw-mill was in fact a partnership purchase, and the debt a partnership debt, the plaintiff relied upon evidence which he gave at the trial, that the mill was repaired and worked by the firm: that in an advertisement in May., 1818, by the firm, that the mill was ready to work and soliciting business, it was said to belong to the firm: the firm paid all expenses and received the profits without paying any rent to J. and J. Gibson: in ISIS the firm erected a wood house, and made alterations in the mill, and sawed lumber: they paid half a year’s ground rent on the mill in that year, and interest on the mortgage to Markoe, from which and other circumstances they contended that it was the understanding of all the partners that the saw-mill was partnership próperty. They also gave in evidence conversations on the part of Nixon, one of the defendants, soon after the assignment, in which he gave directions concerning the management of the saw-mill, on behalf of the assignees; and the acts and entries of John Gibson, as agent of the assignees, in relation to the property, especially his paying interest on the mortgage. On the other hand, the defendants alleged that the saw-mill did not pass to the firm under the assignment, and adduced evidence to prove that the cost of the mill was never entered in the partnership books; that the mill was never worked after the assignment; that John Gibson’s acts, as agent of the assignees, were never recognized by them: that Nixon acted without authority: that the creditors of the partnership, who were note-holders, released, upon a belief founded on papers and documents shown them by J. and J. Gibson, that the partnership effects were to be for the sole benefit of the'note-holders; and that the assignees refused to receive from J. and J. Gibson a conveyance of the sawmill, when tendered to them some short time after the assignment.
    The Chief Justice instructed the jury fully as to the facts, and then gave his opinion on the points of law, as follows.
    1. Did the interest of T, and R. Conaroe in the mill estate pass by their deed to Messrs. Gibson? My opinion is, that it did pass.
    2. Did the mill, estate pass by the deed from Messrs. Gibson to the defendant? My opinion is, that it did not pass.
    3. Were the defendants estopped, by the payment of interest on the bond and mortgage, made to the plaintiff by John Gibson, their agent, from denying that this was a debt owing to the late firm of T. and R. Conaroe and Co. In my opinion, they were not estopped.
    4. Supposing this to be a partnership debt, was the plaintiff precluded from a right to prosecute this action, by the judgment which he entered on the bond of Messrs. Gibson, in February, 1821? My opinion is, the plaintiff was not precluded from this action, by the entry of the judgment.
    
      5. Suppose the release to have been executed by the creditors to Messrs, Gibson, in consequence of an error into which they had been led by misrepresentations of Messrs. Gibson, concealing from them that this was a partnership debt, would that affect the plaintiff’s right of recovery.
    Opinion. The plaintiff’s right of recovery, if otherwise good,, eould not be affected by the supposed misrepresentations, although the releases to Messrs. Gibson would thereby be rendered void.
    The Chief Justice then informed the jury, that their verdict should depend on a point which it was not for Him to decide, viz. whether the, debt dud on the purchase of the mill, was a debt due from the late firm of T. and É. Conaroe and Co. As to that, he would lay down one or two principles of law. If the purchase was made by the firm, it might be considered as a debt due from the firm, though Messrs. Gibson had taken the deed to themselves, and given their own bond and mortgage to Markoe. So it might be considered as a debt due from the finm, if it appeared, by entries in the books of the firm, or other unequivocal conduct of the partners, that it was acknowledged, by them as a debt'due from the firm. To judge merely from the writings, viz. the conveyance to Messrs. Gibson by Markoe, and their bond and mortgage, to him, it would not be a partnership debt. But the jury were to take into consideration the parol evidence given ón the facts he had mentioned, and decide on the whole whether it was a partnership debt or not. If it was, their verdict should be for the plaintiff; but, if not, for the defendants. . The jury gave a verdict for the defendants.
    The plaintiff filed the following reasons for granting a new trial:—
    1. Because the evidence produced in this cause was sufficient, in law, to prove that the debt due for the purchase of a steam sawmill (and for which the plaintiff brought this action) was a co-partnership debt of T. and R. Conaroe and Co. and also to prove the plaintiff’s right to recover the same from the defendants.
    2. Because the said evidence was sufficient, in law, to prove that the said mill was, the co-partnership property of the said T. and R. Conaroe and Co., and was vested in the said defendants, in trust to pay the said co-partnership debt.
    3. Because the court did not state what was the law and equity of the case arising out of the evidence, and change the jury,to find accordingly; but left the jury to collect the law and equity from the evidence.
    4. Because the Court did not charge, that the debt for which the’action was brought, was a debt of T. and R. Conaroe and Co. within the true meaning of the deed of assignment of James and John Gibson to the defendants, and that therefore the plaintiff had a right to recover.
    
      5. Because the verdict is against law and evidence, in this, that the debt contracted for the saw-mill was a debt of T. and R. Concave, and therefore the plaintiff had a right to recover.
    The Chief Justice reported the case, and said that the cause turned ,upon the fact.whether the plaintiff’s debt was due from Conaroe and Co., which he left to the jury,—that the fact was perplexed, and he should not have been dissatisfied, had the jury found one way or the other.
    
      Condy, for the plaintiff.
    It is time for the court to take a more decided stand in charging juries in equity cases. Courts of chancery act, almost altogether, without a jury. The court ought to order a new trial, in all cases, where 'the jury have drawn an inference in matter of fact different from what a discreet judge would have done. This is the principle which .I wish now to be established. The advertisement of Conaroe and Co., that they-had purchased the steam miff, amounted to a written declaration of trust, on the part of Gibson, that they held the property for the partnership. He then made two points.
    1. Did the mill property pass by the assignment to the defendants ?
    2. Was the purchase money a partnership debt?
    Condy-made particular remarks on the evidence, in order to show that all the parties considered the mill, &c., as their property, and that Mr. Nixon, after the assignment to the defendants, considered the property as being vested in the assignees. He then referred to the authorities, to establish the principles for which he contended, Gow on Partnership, (2d Ed.) 47, 48, 254, 291, 308, 309, 310, 311, 312. 10 Johns. 505. 3 Ves. & B. 38, 40. 2 Merrivale, 37. 1 Vern. 390. Effects, in a devise, are synonymous with worldly substance, and include real estate. Cowp. 304 307.
    •The steam engine, which was the chief value of the property, was personal property. It would have been wrong in Messrs. Gibson, when they made their assignment, not to take care that the partnership debts should be paid from the partnership proper,, ty. They ought not to have paid their private debts out of the partnership property.
    
      Binney, for the plaintiff.
    The opposite argument would destroy the present system of equity in Pennsylvania, and transfer all power from the jury to the court. The constitution gives the jury the power possessed by them before. The court decides the principles of equity by which the jury are to be governed; A new trial will not be granted, because it is a verdict against evidence, if the judge is not dissatisfied. 2 Binn. 108. 3 Binn. 317. 2 Serg. & Rawle, 134.
    1. The steam mill property did not pass to the defendant.
    2. As to its being a partnership debt, it was a fact (or the jury.
    9. The jury were right, that it was not a partnership debt.
    
      
      Binney went through the evidence, and commented on it.
    The plaintiff has no equity against the defendants: he is assignee of a bond and mortgage given by Messrs. Gibson,—to them only he looked,—he never had the least communication with the Conaroes, nor in any manner trusted to them. The mill property was worth nothing, and therefore contributed nothing to the partnership stock.
    1. The mill did not pass to the defendants: the deed has no words of inheritance. It speaks of personal property only,—it refers to a settlement between the partners, which does not mention it as part of their stock. As to third persons, at least, it was real property. M‘Dermot v. Lawrence, 7 Serg. & Rawle, 438. It was never the intention of the defendants to receive this property.
    2. The Chief Justice was right in submitting to the jury the fact, whether this was a partnership debt. To look to the writings, it was not a partnership debt. The evidence on which the plaintiff relied, was parol, and was necessarily left to the jury.
    3. The jury decided right. The original contract was- solely between Markoe and Messrs. Gibson. The seller conveyed to Messrs. Gibson, and received from them their bond and mortgage; and trusted to them only. It is dangerous to adopt certain equity principles, used in England, who settle these matters on a commission of bankruptcy, when we have no means of adopting their whole system.
    
      Chauncey, for the defendants.
    The plaintiff relies on three points.
    1. The verdict is against evidence.
    2. The court did not charge the law and equity of the case.
    
      3. The court did not charge that it was a partnership debt.
    The judge who tried the cause was not dissatisfied. This ought to be decisive; but the verdict was right. This debt was originally contracted on the credit of Messrs. Gibson only. If the separate liability of one partner is originally relied on, the partnership is not liable. Gow, 169, 170,266. The firm is not bound, where the contract is made expressly on the credit of one partner. 3 Chit. Com. Law, 338, 339, 232. 4 Esp. N. P. Rep. 89. Evans v. Drummond, 3 Price’s Ex. Rep 542. Eden’s Bankrupt Laws, 158. 15 East, 7. 3 Barn. & Ald. 89. A dormant partner is not liable, where the other partners purchase land, and take a deed to themselves. Fritz v. Waugh, 14 Mass. 424. Clement v. Brush, 3 Johns. Cas. 180. 2 Marsh. Rep. (Kent,) 285. If Markoe agreed to accept the bond and mortgage of Messrs. Gibson, he had no right to have recourse to T.. and R. Conaroe, though he knew the property was purchased for the use of the partnership. In 2 Johns. 213, one of five partners gave bond to the United States for goods imported by the-partnership,—the other partners held not liable. In this case, the Suit was brought by the surety of the obligor, who had paid, the bond to the United States. This mill property never came beneficially to the firm, nor could they have compelled Messrs. Gibson to have conveyed to them, having paid nothing for it and it never having been entered, as part of the stock of the firm, on their books. I deny, that the steam engine attached to the mill was personal estate: it could not be separated from the mill, which was part of the freehold.
    
      Hopkinson, in reply.
    The verdict is contrary to law and justice. The Chief Justice did not say that he was satisfied, but that he was not dissatisfied. The cause was so perplexed, that had the jury found one way or the other, he should not have blamed them. Causes are better discussed on a second trial. The jury, in this case, have been perplexed by a mixture of law with the fact. There is reason to doubt whether justice has been done. The courts of Pennsylvania have in many instances led the way, which the English courts have followed. For example, setting aside a verdict where vindictive damages have been excessive. Lyon v. Bank of Pennsylvania. Again, in libels, the defendant was suffered to give evidence, in mitigation of damages, that he was not the original author of the scandal. Kennedy v. Gregory, and Morris v. Duane. The question is, whether the plaintiff' is entitled to come on the fund in the defendants’ hands, according to the deed of assignment; that is, was this a debt for which Conaroe and Co. were' responsible? It is immaterial whether the steam mill was conveyed to the defendants or not, except by way of argument, to show that it was a partnership debt: so it might be a partnership debt, though the property was in Messrs. Gibson only. He contended, that the mill did pass to the defendants, and, if so, there was a misdirection in law, for which there should be a new trial. Real estate purchased for the use of a firm, and used in the business of the firm, is part of the stock in trade. If any payment has been made on account of the mill purchase, it has been from partnership funds. A partnership creditor may come on the partnership stock, though he has taken separate secur rity by specialty, from one of the partners. If one partner borrows money on his own credit, and it can be traced to the partnership fund, it becomes a partnership debt. On these principles, the mill estate was partnership stock. In cases like this, a fee may pass without the word heirs. The deed to the defendants conveys all the partnership effects, which comprehends real estate. But, after all, the decisive question is, was this a partnership debt? He then argued, from the evidence, that it was a partnership debt. II was wanted for partnership purposes, and originally agreed to be paid for by the lumber of the partnership. It was after-wards so far altered, that the payment was to be of a less sum in money, but there was no other alteration, and the mill has been used for partnership purposes only. No rent was charged by Messrs. Gibson against the firm. John Gibson paid interest on this mortgage, as agent of the defendants, before any contest arose, which shows his sense of it. When the defendants made their first dividend, the principal of this debt was not due; but the interest had been paid by 'the agent of the defendants.. The mill has contributed largely to the partnership fund, by sawing their logs^ the boards made from which logs were sold., and the money brought into the partnership stock. The question was put too broadly to the jury, to decide whether it was a partnership debt, as matter of fact.
    
   The opinion of the court, (Huston, J. being absent,) was delivered by

Gibson, J.

The principles which must guide, in motions for new trials, are the same whether the suit be an action strictly at the common law, or substantially a bill in equity. The rules of equity are as well defined and of as easy application by a jury, under the direction of the court,-as-are the rules of the common law. With us, equity and law are convertible terms; and no good reason has been shown for distinguishing between them in the exercise of judicial discretion. On the contrary, the course indicated would lead to the destruction of trial by jury altogether.

Whatever may be our opinion of the points on which the plaintiff mainly relies, there is an insuperable impediment in the way of his recovery. No construction, however liberal, can make him a creditor of the partnership; consequently, his debt is not within either the letter or the spirit of any of the trusts declared in the deed of assignment. On this head, cases in bankruptcy must be viewed with extreme distrust, and adopted, if at. all, with great caution and many grains of allowance.. The English courts have carried their construction of the contract of partnership toa length that would often have produced shocking injustice, had not that been prevented by forced constructions on the other side. Nothing can be more unjust in the abstract, than the right of the partnership creditors to a monopoly of the partnership funds; yet this was produced by holding the interest of each partner to be limited to what remains after the joint debts are paid; arid hence a lien was created in favour of the joint creditors, for no equity peculiar to themselves, but to prevent the separate creditors from coming in to the prejudice of the other partners. To counteract this natural injustice, when both classes came before the chancellor under a commission of bankruptcy, he was compelled to give the separate creditors of the partners the same monopoly of their separate estates; and the interest of the separate creditors was further promoted by throwing on the joint fund all who could by any construction be declared joint creditors: as, therefore, the joint fund is usually the largest, and as those who were admitted to participate in it would make no objection, it is not extraordinary that we should have many cases in which creditors were let in on the joint fund, who had not trusted to it. Under the statutes of bankruptcy, this was all very well; but here, where we are under no necessity to take a course which would lead into difficulties or to re - sort tp by-ways to extricate ourselves from them, it would show little foresight to follow the English decisions. We ought rather to suffer ourselves to follow the dictates of reason, and common sense, according to which it is impossible to say, that the credit in. this instance was not given exclusively to the partnership. Mr. Markoe had undoubtedly been in treaty with the firm: but the matter was finally arranged by a conveyance to James and John Gibson, and a bond and mortgage from them ás a security for the purchase money. There undoubtedly are cases where a partnership debt will not merge in the bond of one of the partners; but when it does not, it should clearly appear that the credit was originally given to the firm, and that the security afforded by the bond was intended to be cumulative; in the absence of proof of which, the bond must necessarily be considered as the principal, and the only debt. Here, however, the proof accords with the legal presumption; for it distinctly appears, tb-d when Mr. Markoe conveyed the property to the Messrs. Gibson, and took their bond and mortgage for the price, he declared this was done because he thought them sufficient for the debt; thus intimating, that he relied on this security exclusively. After this, it is unnecessary to inquire into the view with, which the property was purchased, or whether it has been applied to the purposes of the partnership. It is sufficient that the credit was given to the Messrs. Gibson; for Mr. Markoe, having thought proper to trust them originally, could never afterwards resort to the firm.

But if the law were otherwise, still the written contract showed any thing but a purchase by the firm; and if a joint liability existed in fact, it could be made only by extrinsic circumstances. Of these the plaintiff has had all the benefit to which he was entitled; but he complains of the direction, that the steam-mill did not pass by the deed of trust. In conveyances of this sort, I admit that words of inheritance are not. indispensible where the purposes of the trust cannot be answered with less than a fee; but by the provisions of the assignment, (particularly the reference to the schedule and books of the partnership,) it is made plain that the parties had in vievv nothing but an assignment of the personal effects, and this construction is fortified by a variety of circumstances too minute to be recapitulated. The other parts of the case were left to-the jury under a direction quite as favourable to the plaintiff as he had a right to expect. The Chief Justice charged, that if the purchase were made by'thejirm, the debt might be considered as still due from the firm, although the Messrs. Gibson had taken the deed to themselves, and given their own bond and mortgage for the price; and, as to this, the plaintiff, of all the parlies concerned, had least reason to complain. As to the supposed mistake of the jury in point of fact, it is sufficient that the judge who tried the cause is not dissatisfied with the verdict, and, on a review of. the evidence, I am inclined to coincide in'opinion with the .jury. On every ground, therefore, the defendants are entitled to judgment.

Rule to show cause discharged.