Case ID: ohio-st_36/html/0068-01.html
Source: Caselaw Access Project
Author: {"author": "\"White, J.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

Buckingham v. Buckingham.
    1. M. engaged in the management of the business of H. Beyond tbe first year there was no agreement as to tbe time tbe service was to continue, nor as to tbe compensation to be paid ; but it was tbe expectation of tbe parties that they would come to an agreement as to such compensation. After many years of service and before tbe contemplated agreement was consummated, M. became a bankrupt: Held, that on the adjudication of bis bankruptcy the right to demand the value of the services already rendered passed to tbe assignee, who, by operation of law, succeeded to all tbe rights of tha bankrupt in respect to such demand.
    2. Before a bankrupt can maintain an action on a claim, which, under tbe adjudication in bankruptcy passed to tbe assignee, on the ground that tbe assignee elected not to take such claim, it devolves upon the bankrupt to show that tbe assignee was informed of the nature of tbe claim and that he elected not to take it.
    3. In an action brought by a bankrupt upon a cause of action which passed to his assignee, it is immaterial whether the right of the assignee to sue on the causo of action is barred or not.
    
      4. The objection, that the cause of action for which the plaintiff sues was assigned before the commencement of the action, does not relate to the capacity of the plaintiff to sue, but to the fact that the right of action sought to be enforced is not in the plaintiff. To warrant a recovery the petition must show a cause of action in the plaintiff.
    Error to the District Court of Hamilton County.
    The action in the common pleas was instituted by Mark Buckingham, to enforce the specific performance of a contract to convey real estate.
    It appears from the petition, “ That in September, eighteen hundred and sixty-seven (1861), the said plaintiff applied in the district court of the United States for the southern district of Ohio for the benefit of an act entitled “ An act to establish a uniform system of bankruptcy throughout the United States,” approved March 2, 1861, and under the proceedings had upon said application surrendered all his property and effects, pursuant to the requirements of said law, and having conformed to all the requirements thereof, was, on the tenth day of April, eighteen hundred and sixty-eight (1868), forever discharged from all debts and claims which by said act were provable against his estate, and which existed on the sixth day of September, eighteen hundred and sixty-seven (1861), as will more fully and at large appear by the records and proceedings of said district court, reference being had thereto.”
    The petition also states, that on April 15, 1869, the defendant, Horatio Buckingham (in consideration of certain services theretofore rendered by the plaintiff for and at the request of the defendant), promised and agreed that he would, when he should be so requested by the plaintiff, convey to him, in fee simple, certain real estate situated in Hamilton and Clermont counties, Ohio, and in said petition particularly described, being five separate tracts, containing about 241 acres of land, with a distillery, a mill, a dwelling-house, and warehouse on the same. And also, the defendant would convey to plaintiff, or pay him an amount of money equal to one-half the value of certain lands in the counties of Cook and Hamilton, in the State of Illinois, and certain other lands in Hamilton county, Ohio, in said petition described, subject to the payment of about $7,470 by said plaintiff toward the extinguishment of certain claims against part of said property.
    It is also alleged in the petition, that said plaintiff, as part of said agreement, was to pay and indemnify the defend ant against liability on two notes made by defendant to the order of the said plaintiff, for $6,825 each, and dated December, 1853, and at the date of filing said? petition held by the assignee in bankruptcy of the said Mark Buckingham.
    The petition avers that the plaintiff has requested the defendant to make said conveyances, but he refused so to do, and it prays that he be adjudged and compelled to convey, &c.
    
    To this petition an answer was filed, and a decree was taken in the common pleas, dismissing said action. The case was taken to the district court by appeal. On the trial of the case in the district court, the plaintiff having wholly failed to prove the agreement to convey set forth in his petition, filed (by leave of court) an amendment thereto, stating that on said April 16, 1869, ;£ the said defendant, in consideration that the said plaintiff had done and performed the services and benefits thereinbefore set forth and described, at the instance and request of the defendant, and in the manner as thereinbefore set forth, undertook and faithfully promised the plaintiff that he, the defendant, would, upon the request of the plaintiff, pay to the said plaintiff such an amount of money as the said services and benefits might be reasonably worth.” And that said services were of great value, and were reasonably worth an amount of money equivalent to one-half the profits realized from said services; and that the defendant then and there promised to pay to him one-half of the said profits, but has failed, though often requested so to do.
    The amended petition avers that the plaintiff’s half of the said profits amounts to $35,000.
    The district court found, from the evidence, that neither of the agreements alleged in the petition and the amendment thereto have been made on April 15, 1869, was in fact made.
    
      Tbe claim of tlie plaintiff, therefore, rests on the original understanding and agreement between the parties in 1853, when he entered into the employment of the defendant.
    The plaintiff’s statement of what that was is set forth in his testimony as follows:
    “ The agreement was that I was to take possession of this personal property, and do with it as if it was my own. I was to use his name. I was to use his name as if it was my own. I did go ahead with the use of his name, and conducted the business as if it was my own. We made a sort of nominal agreement, about $600 per year, for my services for the first year, and the use of the house, but it was to have nothing to do with the justice between us. The agreement was to do all justice by me. That was the agreement; I continued to do business; the distillery was burned in the spring of 1858 ; the store'was continued till about the spring of 1861; the flour-mill was run up to 1869 ; the grist-mill has a capacity of one hundred and fifty barrels per day; we kept it running pretty busily up till the distillery was burned; it was run afterward, but not doing so much.” (There were about sixty-four acres of the mill property which was farm land.)
    “ These operations were carried on in the name of IT. Buckingham. There were a regular set of books of account kept by Charles. I made some entiles; I had supervision of the books; they were open to IToratio. TI. Stroman was the first bookkeeper; after him A. M. Robinson ; then James (Test till he died ; after his death, in 1866, there was not much done after 1866. I carrried'on the business, except in the last three or four years; IToratio saw to renting the mill, &c.”
    On cross-examination, he says: “After the spring of 1865, I did not do much, as there was not much to be done. I have done certain things for IToratio after 1865 ; I did not do any regular business for Horatio since 1865 ; I did what was necessary.”
    IToratio Buckingham says that Mark asked him $600 per year .for his services, and he gave him it. He had, in addition, the use of the dwelling-house and about five acres of land, and his fire-wood, corn, &c. He says: “We never had any other bargain.” This was all tbe testimony there was before the court in reference to the agreement between the parties as to the terms of the employment.
    The defendant introduced testimony showing that on September 6, 1867, Mark Buckingham filed, his petition in bankruptcy in the district court of the United States for the southern district of Ohio; was duly adjudged bankrupt; and on October 18, 1867, E. P. Cranch, the register in bankruptcy, executed and delivered a deed of assignment, pursuant to the statute, to T. Jeff. Phelps, the assignee in bankruptcy of said Mark Buckingham, which deed was read in evidence.
    The schedules did not contain any reference to the claim sued on herein, nor was it mentioned or disclosed in the examination of the bankrupt.
    The district court, on the trial of the case, found, among’ others, the following facts from the evidence:
    “ That the defendant, in December, 1853, engaged the plaintiff to undertake the management of all of said business (to wit, the management of a store, a distillery,' a grist-mill, and saw-mill); that the plaintiff carried on for the defendant all said business, and also other business operations in Cincinnati and on the Scioto-river, and conducted for' him sundry purchases of land in Ohio and Illinois; that the plaintiff devoted the whole of his time to said employment, which was finally terminated in the spring of 1869 ; -that for the first year of said employment the plaintiff has been fully paid and satisfied; that during the rest of the said employment the plaintiff resided in the said dwelling and curtilage belonging to the defendant, and has drawn from the said business means for the support of himself and family, and the education of his children ; that the plaintiff all the while expected and the defendant all the while intended to make, at some subsequent time, an agreement for the complete compensation of the plaintiff; that in the spring of 1869, the plaintiff and defendant conferred and made memoranda, with a view toward making such agreement, bnt determined to postpone to a later day the making of an agreement; that the jfiaintiff has since called on the defendant to enter into an agreement for the complete compensation for the services rendered, but that the defendant has refused and still refuses to make any agreement, but claims the plaintiff has been fully compensated.
    “ And the court further find that the plaintiff is entitled to reasonable compensation, and find that a sum equal to one-half of the net profits of the business carried on by the plaintiff for the defendant, including investments in land, would be reasonable compensation. And the court orders a reference of the case to a master, to ascertain the amount of the profits,” &c.
    The court directed that the master, in ascertaining the amount of the profits, should include in said business the investments in land made by the plaintiff on behalf of the defendant ; and it also ordered that in stating said account credit should be given to the plaintiff for any money received by him as salary as postmaster or otherwise, in his own right, which he may have put into said business, and he should be chai'ged with a fair rent for the house and curtilage occupied by him, and with money paid to him or on his account by the defendant, as well as with what he drew himself from the business.
    Exceptions were taken to the findings and decree of the court, and to the overruling of a motion for new trial made by defendant, and a bill of exceptions embodying all the testimony was signed, sealed, and allowed, and made part of the record. • Ancl this proceeding in error is prosecuted to. reverse said judgment or decree of the district court, because of errors aj>parent on the record.
    The first error complained of is, that the court found and decreed that the plaintiff was entitled to recover for services rendered by him prior to the date of the commencement of his proceedings in bankruptcy, on September 6, 1867.
    The second error relates to the rule or measure of damages decreed and fixed by the court, to wit, that a sum equal to one-half the net profits of the business carried on by the plaintiff should be taken as the amount of damage to which the plaintiff is entitled.
    
      
      George Hoadley and Oqppoele da Qald/well, for plaintiff in error:
    • 1. As to wbat property passed to tbe assignee in bankruptcy, see Hilliard on Bankruptcy, 107, 108, 146; Comegys v. Vosse, 1 Pet. 193; Milnor v. Metz, 16 Id. 221. Tbe effect of tbe proceedings in bankruptcy was to divest tbe plaintiff of all bis property and rights, including tbe claim sued for, on September 6, 1867. Those rights passed to and vested in tbe assignee, in trust for tbe creditors. Tbe assignee took tbe legal title to all tbe assets, and tbe creditors became tbe equitable owners of tbe same. Tbe assignee alone could sue for tbe recovery of tbe assets, except perhaps where be willfully and fraudulently neglected bis duty, in which case tbe creditors might in equity prosecute a suit by making tbe assignee a party and setting forth bis neglect and refusal. But tbe bankrupt could not maintain such an action in bis own name. His legal capacity to sue for rights which accrued before tbe bankruptcy was gone. It was therefore sufficient, in this’ case, in order to defeat the plaintiff’s action, for tbe defendant to show that tbe plaintiff bad filed bis petition in bankruptcy, and that tbe register bad executed a deed to bis assignee. This was a bar to the action, at least to so much as sought a recovery for services rendered prior to September 6, 1867. On this point we refer to tbe decision of Lord Campbell in tbe case of Sprye v. Porter, 38 Eng. L. & Eq. 67. See same case reported 7 Ellis & Blackburn, Q. B. 57.
    2. Tbe true rule for determining tbe compensation in the present case, it appears to us, is for tbe court to ascertain wbat skill and experience tbe plaintiff bad when be entered the employment of tbe defendant, and what be did while in said service. These being shown, tbe next step would be to prove wbat such services were reasonably worth. Quantum meruit or gua/itum valebif is tbe question. “A quanimm meruit is not wbat tbe defendant gained, but wbat tbe plaintiff deserved.” Edington v. Pickle, 1 Sneed (Tenn.) 122.
    
      Matthews, Ramsey da Matthews, and Da/oid M. Pfyma/n, for defendant in error:
    
      Tbe defendant did not demur, nor did he, by bis answer, seek to take any advantage of tbe plaintiff’s bankruptcy ; and, under this- section of tbe Code, be must be deemed to have waived this objection. Does tbe mere fact that it appears on tbe face of tbe pleadings, or in tbe evidence at tbe trial, that tbe plaintiff bas been adjudged a bankrupt, have tbe force of a }3lea or answer 1 We think not.
    Tbe objection that the plaintiff bas not the legal capacity to sue unless it appeal's on tbe face of the complaint or petition,. so that it can be raised by demurrer, is new matter. Being in the nature of a dilatory defense, like that of a defect of parties, tbe facts wbicb constitute it must be stated with certainty; a mere general averment would raise no issue. Pomeroy on Remedies, 733, and cases cited; Burnside v. Mathews, 54 N. Y. 78.
    An answer in an action for tbe recovery of personal property, wbicb avers that the plaintiff bas been adjudicated a bankrupt, and prays that tbe suit abate, but does not aver appointment of an assignee, is bad on demurrer. It is Hot tbe adjudication in bankruptcy, but tbe appointment of an assignee, wbicb divests tbe bankrupt’s title; and pleas in abatement must be drawn with great precision and accuracy. Sutherland v. Davis, 42 Ind. 26.
    If tbe plaintiff’s legal capacity to sue was gone, certainly tbe right of tbe defendant to show such want of legal capacity was also gone, by bis failure to take advantage of tbe defect' by answer or demurrer.
    “A court cannot take judicial notice of proceedings in bankruptcy in another court, and it is its duty to proceed as between tbe parties before it until, by some proper pleadings in tbe case, it is informed of tbe changed relations of any of such parties to tbe subject-matter of tbe suit.” Eyster v. Gaff, 91 U. S. 524; Smith v. Gordon, 6 Law Reporter, 313 ; Copeland v. Stephens, 1 Barn. & Ald. 573 ; Webb v. Down, 1 Bos. & Pull. 44.
    If the assignee elects to claim property, be must elect in a reasonable time. Rugely v. Robinson, 19 Ala. 404, 416, 417.
    
      As to the title an assignee in bankruptcy takes, see Rhoades v. Blackiston, 106 Mass. 336.
   "White, J.

If the first ground of error is well taken, the second need not bo considered.

The first ground is, that the court erred in finding and decreeing that the plaintiff below, Mark Buckingham, was entitled to recover for services rendered by him prior to the commencement of his proceedings in bankruptcy, on September 6, 1867.

Whether this ground of error is well taken or not depends upon the effect of section 11 of the bankrupt act of March 2, 1867, upon the cause of action sued on. According to the provisions of this section, the deed' executed by the register vested in the assignee, among other things, “ all rights in equity ” and “dioses in action” of the bankrupt, and “ all debts due him or any person for his use, and all liens and securities therefor; all his rights of action for property or estate, real or personal, and for any cause of action which the bankrupt had against any person arising from contract,” &c. The section declares that all such rights shall, in virtue of the adjudication of bankruptcy, and the appointment of the assignee, be at once vested in such assignee.

That the plaintiff below had, at the time of his bankruptcy, a right of action for his services rendered up- to that time, we entertain no doubt, from the finding of the court and from his own testimony.

The finding is that he engaged in the management of the business of the plaintiff in error (the defendant below), in December, 1853; but that his employment did not finally terminate until the spring of 1869. The testimony, however, shows that his services substantially ended in 1865. The employment was for no specific time. Either party was at liberty to terminate it at any time, and to require a settlement for the services performed. The fact that it was the expectation of the parties that they would come to an agreement as to the compensation, did not require the plaintiff to continue in the service until such agreement should be consummated; nor did it affect his right to be compensated for services rendered.

On the adjudication in bankruptcy, the right to demand the value of the services already rendered passed to the assignee, who succeeded, by operation of law, to all the rights of the bankrupt in respect to such demand.

It is claimed on behalf of the defendant in error, that although all property and rights of property are, by operation of law, transferred to and vested in the assignee, yet that he is not bound, in all cases, to take possession of every part. That if any part of the property would be rather a burden than a benefit to the estate, the assignee may elect not to take such' property, and in the case of his making srrch election, that the right remains in the bankrupt.

We deem it unnecessary to refer to the various cases cited in support of this proposition. It is sufficient to say that the proposition is not applicable to the case before us. Before the bankrupt can support his title upon the ground that the assignee has elected not to take the property or the right in question, it devolves upon him to show that such election has been exercised by the assignee.

No such proof has been made in the present case. The schedules in the bankruptcy proceeding contained no reference to the claim sued on, nor was it mentioned or disclosed in the examination. - of the bankrupt; nor does it appear that the assignee was otherwise informed, or had notice of the nature or •extent of the claim.

It does appear that he was called as a witness by the defendant below on the trial; but the extent of his examination was merely to show when he was elected assignee, and to require the production of the deed executed to him by the register in bankruptcy.

It is also said, on behalf of the defendant in error, that an action brought by the assignee on the cause of action in question would be barred under section 2 of the bankrupt act. Whether this would be so -or not we cannot determine in this case. The assignee is not before us; and whether his right to maintain the action would be barred, under the principles decided in Baily v. Glover (21 Wall. 342), can only properly be determined in such action.

But whether an action by the assignee would be barred or. not is immaterial as respects the rights of the bankrupt. The rights of the bankrupt remain the same whether the right of the assignee is barred or not.

It is also claimed that the objection, that the plaintiff below cannot recover for services rendered prior to his bankruptcy, is not available to the plaintiff in error. The proposition is, that the objection relates to the legal capacity of the plaintiff to sue; and that as the objection was not taken by demurrer or by answer, the objection was waived.

But this contention of counsel is founded upon a misconception of the nature of the objection. The objection does not relate to the capacity of the plaintiff to sue, but to the fact, that it appears from the petition that the right of action which is sought to be enforced does not exist in the plaintiff, but in another, on whose behalf the plaintiff is not authorized to sue. To warrant a recovery on the petition, it must show a cause of action in the plcumtiff. If the petition fails to show such a cause of action, the objection is not waived by a failure to demur, or to make the objection by answer. A fact stated in the p'etition, which shows that the plaintiff has no right to recover, need not be again pleaded by the defendant, to make it effective.

The finding and judgment of the court, that the plaintiff below was entitled to recover for services rendered prior to the adjudication in bankruptcy, is set aside, the judgment reversed, and the cause remanded.