Source: https://openjurist.org/135/us/621
Timestamp: 2019-04-24 19:51:35+00:00

Document:
"They agree to start a coal depot at Island Eighty-Two in copartnership, and the said Whitehill agrees on his part to give his whole attention to the management at the coal-yard, and the said Riddle, Coleman and Co., on their part, are to furnish coal, capital, or credit to start the yard, and charge no interest for the extra capital, in lieu of the said Whitehill's services at the depot. The said Whitehill is entitled to one-half the profits or losses, and the said Riddle, Coleman and Co. the other half, to be allowed about Vicksburg and New Orleans prices for the coal delivered at the island. It is also agreed that the business shall be carried on under the name and style of J. M. Whitehill and Co., and the partnership is exclusively for the purpose of selling coal by retail, and no other, and to continue for five years, providing the firm of Riddle, Coleman and Co. wish to continue in the coal business; but, if they want to stop the coal business, or wish to draw out of the business at Eighty-Two, the firm of J. M. Whitehill and Co. is to wind up their affairs, and sell the stock to the best advantage for all parties concerned.
"This the 7th day of March, A. D. 1870.
That, in accordance with said agreement, Riddle, Coleman & Co. furnished to said firm of J. M. Whitehill & Co. a comp lete plant and outfit with which to start a coal-yard and depot for the retailing of coal at Island Eighty-Two, consisting in part of a wharfboat, with rooms for office, for residence of Whitehill's family, quartersfor the crew and employes of the firm, box-boats or flats for measuring out and selling coal from boxes, shovels, chains, lines, barrows, anchors, etc., and also coal in barges and coal-boats; insured the same, and also furnished additional plant and stock from time to time as needed for said business; and Whitehill & Co. established a depot and coal fleet at Island Eighty-Two, and carried on the business of a retail dealer in coal for about the space of two years at that point, and, with the knowledge and consent of Riddle, Coleman & Co., started a retail store there, partly for the purpose of supplying their labor, and partly for profit, carried on with the capital of Riddle, Coleman & Co., and for the profit of J. M. Whitehill & Co.; that in the latter part of the year 1871, or early in 1872, to induce the firm of J. M. Whitehill & Co. to change and remove their place of business, depot, and coal fieet from Island Eighty-Two to Arkansas City, the proprietors of the lastmentioned place leased to that firm, free of rent, the landing and coaling privileges at Arkansas City for a term of years, and donated to them certain town lots in said town; and, with the knowledge and approbation of Riddle, Coleman & Co., the firm of J. M. Whitehill & Co. changed during the year 1872 the location of their business from Island Eighty-Two to Arkansas City, and the fleets, barges, boats, and all their outfit were moved by one of the tow-boats of Riddle, Coleman & Co. from Island Eighty-Two to Arkansas City; and from that time until October, 1877, and afterwards, J. M. Whitehill & Co. carried on the business as dealers in coal at Arkansas City, and also kept a general store, and did a general merchandising business, at that place. That, in addition to the landing and coaling privilege and the lots donated to said firm by the proprietors of said town, as an inducement to said i rm to locate their business at that point, the said J. M. Whitehill, for the use of the firm, purchased a large number of other town lots in the town, and paid for the same with the money of the firm, and in like manner acquired and purchased an undivided half interest in the entire river front of the town for a distance of about 3,000 feet, and leased the other half interest in the river front for a period of 25 years from the 1st day of May, 1872, and paid for the same out of the money and with the property of the firm, and expended large sums of the money of the firm in building residence houses, store-houses, warehouses, highwater platform, a large and expensive icehouse, a hotel, and other valuable improvements on the lots and lands so donated to and purchased with the money and property of said firm; and certain lots are enumerated as having been conveyed as an inducement to locate at said town.
The bill further averred that the river front was leased to the firm on the 1st day of May, 1872, for 5 years, and this was subsequently extended for the additional term of 20 years from the 1st day of May, 1877; that on the 21st of July, 1875, an undivided half of the river front was sold and conveyed to the firm; that the deeds to some of the land and town lots were taken in the name of J. M. Whitehill & Co., and the deeds to other parts of the land and town lots were taken in the name of J. M. Whitehill; but complainants charge that all the land and town lots not donated to the firm were purchased with its money and for its benefit, and held as partnership assets of the firm. That the business of the firm of J. M. Whitehill & Co. was very profitable, and large profits were realized therefrom, all of which, and much of the capital furnished by Riddle, Coleman & Co., were used in the purchase and improvement of the lots and river front, and J. M. Whitehill & Co. became largely indebted to said Riddle, Coleman & Co. for plant and stock furnished by them. It was further alleged that Riddle, Coleman & Co. became embarrassed and were forced to suspend business, and on the 15th day of October, 1877, made an assignment to James Lynn, as assignee, under the laws of the state of Pennsylvania, of all their real and personal property, including the indebtedness to them from J. M. Whitehill & Co., and all their interest in the business, profits, and property of said J. M. Whitehill & Co. of every description, to be collected or sold and disposed of for the benefit of their creditors; that T. J. Coleman, a member of the firm of Riddle, Coleman & Co., died in the year 1878; that the surviving members of that firm, to-wit, the complainants in this cause, devoted themselves, with the aid of the assignee, to realize on the assets of the firm, and after several years' attention to that object, and the application of their individual means to the payment of the debts of the firm, they succeeded in settling up and discharging the debts, and, upon a public sale made in virtue of the powers contained in the deed of assignment, with the express assent of their creditors, all the uncollected assets of the firm, including the indebtedness of the defendant J. M. Whitehill, and the firm of J. M. Whitehill & Co., were assigned and conveyed by said assignee to W. S. Packer, as trustee for Electra Packer, and George Riddle, by deed dated the 3d day of January, 1885, a copy of which was attached. Complainants averred that no part of the indebtedness of J. M. Whitehill or J. M. Whitehill & Co., and no part of the assets of said J. M. Whitehill & Co., was ever paid to or collected by the said assignee, and the same, and the right to sue for and collect the same, is now vested in the complainants, who are also the sole surviving partners of said firm of Riddle, Coleman & Co.; that at the time of the assignment, the 15th day of October, 1877, the firm of J. M. Whitehill & Co. was indebted to the firm of Riddle, Coleman & Co. in the sum of $10,000 for plant, stock, boats, barges, flats, ferry-boats, tugs, anchors, etc., and for o al furnished and supplied to J. M. Whitehill & Co. by Riddle, Coleman & Co.; that Riddle, Coleman & Co. were entitled to one-half of the profits realized by said firm, and also entitled to one-half of the assets of the firm of J. M. Whitehill & Co., which amounted in part to over $65,000, given in various items; that defendant, Whitehill, published a dissolution of the firm, and took and retained possession of all its assets, and on the 10th day of March, 1881, sold and delivered to Brown, Jones & Co. a part of the property of the firm of J. M. Whitehill & Co. for the sum of $16,000, and also leased to Brown, Jones & Co. the coal privilege at the landing for a term of 10 years, at the price and sum of $800 per annum, and has collected and received the same for three or four years, and is now in receipt of the same; that there is on said river front a large and valuable icehouse, warehouses, and other large and valuable improvements erected thereon with the money and for the benefit of J. M. Whitehill & Co., from which defendant, Whitehill, has collected rents and received the profits since the date of the assignment of Riddle, Coleman & Co.; that Whitehill has carried on the business of a receiving and forwarding merchant and ferryman, by reason of holding the river front, and derived large profits; that he has received annually large sums of money for the rent of houses and an hotel, built with the money of the firm of J. M. Whitehill & Co., and Riddle, Coleman & Co. are entitled to one half of all these receipts; that defendant Whitehill has sold some of the lots embraced in the conveyances aforesaid, and received the money therefor, and has exchanged some of the lots for other property situated in the town, and, as the title was in some instances taken in his own name, the purchasers or grantees of some of the lots may have taken the same for a valuable consideration without notice of the rights of Riddle, Coleman & Co., but defendant, Whitehill, should be held to account for the proceeds of such lots, to one-half of which complainants are entitled; and that, as complainants charge on information and belief, Whitehill purchased with the money of Whitehill & Co. a plantation, and took the title thereto in the name of his wife and his brother, and ought to be required to account for the same. The bill then prayed that an account be taken of the partnership business of the firm of J. M. Whitehill & Co.; that that firm may be dissolved; that a master may be appointed to state an account of the business and property and the liabilities of the firm, the indebtedness of J. M. Whitehill & Co. to Riddle, Coleman & Co., the interest of Riddle, Coleman & Co. in the assets of the business of J. M. Whitehill & Co., the profits realized by Whitehill from the property and privileges of J. M. Whitehill & Co., etc., and that at the final hearing complainants may have a decree for the amount due from the defendant, and that the lots and real estate purchased with the assets of the firm, remaining undisposed of to bona fide holders without notice, be appropriated to the satisfaction of the decree, and a judgment be rendered against the defendant for any balance due complainants on the business of said partnership; and that a receiver be appointed; and for general relief. The bill was verified by one of the complainants.
On the 14th of April, 1886, the court sustained the demurrer, and ordered the bill to be dismissed for want of equity; and complainants prayed an appeal to this court, which was allowed. On the 7th of October, 1886, one of the days of the same term, the complainant moved to set aside the decree dismissing the bill, and for leave to amend the same by inserting therein that the defendant continued in the possession and control of the assets belonging to the firm of J. M. Whitehill & Co. for the professed purpose of paying the debts of the firm, representing to the assingnee, Lynn, that J. M. Whitehill & Co. were indebted in the sum of $20,000; that he (the defendant) had in 1879 made arrangements to pay said indebtedness by installments of $6,000 per year, and that he was using the assets of the firm for that purpose; that defendant did not make any adverse claim to the assets belonging to J. M. Whitehill & Co. until long after the sale hereinbefore stated, in 1881; and that after paying all the debts of J. M. Whitehill & Co. the defendant is indebted to the firm of Riddle, Coleman & Co., and subject to account, as hereinbefore stated. This motion to set aside the decree and for leave to amend was continued on the 23d day of October, 1886, to the next term, at which term the motion was overruled. The transcript of record was filed in this court on the 2d day of April, 1887.
The sections of the statute of limitations of Arkansas referred to are as follows: 'Sec. 4471. No person or persons, or their heirs, shall have, sue, or maintain any action or suit, either in law or equity, for any lands, tenements, or hereditaments, but within seven years next after his, her, or their right to commence, have, or maintain such suit shall have come, fallen, or accrued; and all suits, either in law or equity, for the recovery of any lands, tenements, or hereditaments, shall be had and sued within seven years next after title or cause of action accrued, and no time after said seven years shall have passed.' 'Sec. 4478. The following actions shall be commenced within three years after the cause of action shall accrue, and not after: First, all actions founded upon any contract or liability, express or implied, not in writing.' 'Sec. 4483. Actions on promissory notes, and other instruments in writing not under seal, shall be commenced within five years after the cause of action shall accrue, and not afterwards.' 'Sec. 4488. All actions not included in the foregoing provisions shall be commenced within five years after the cause of action shall have accrued.' Mansf. Dig. Ark. 1884, p. 886.
D. H. Reynolds, for appellee.
As to this real estate, whether the deeds ran to J. M. Whitehill & Co. or to J. M. Whitehill, the latter held the title in trust; and it was so ruled inM cGuire v. Ramsey, 9 Ark. 519. It is there said that 'where real estate is purchased and paid for with partnership funds, but conveyed to one of the partners alone, a trust results in favor of the other partners,' and that lapse of time 'cannot be allowed in favor of one partner in possession of real estate against the other, for the possession of one is the possession of both.' Lord REDESDALE, in Hovenden v. Lord Annesley, 2 Schoales & L. 633, laid down the rule that, if the trust be constituted by act of the parties, the possession of the trustee is the possession of the cestui que trust, and no length of such possession will bar; but, if a party is to be constituted a trustee by the decree of a court of equity, founded on fraud or the like, his possession is adverse, and the statute of limitations will run from the time that the circumstances of the fraud were discovered. 'As a general rule, doubtless,' said Mr. Justice GRAY, delivering the opinion of the court in Speidel v. Henrici, 120 U. S. 377, 386, 7 Sup. Ct. Rep. 610, 'length of time is no bar to a trust clearly established, and express trusts are not within the statute of limitations, because the possession of the trustee is presumed to be the possession of his cestui que trust. * * * But this rule is, in accordance with the reason on which it is founded, and as has been clearly pointed out by Chancellor Kent and Mr. Justice Story, subject to this qualification, that time begins to run against a trust as soon as it is openly disavowed by the trustee, insisting upon an adverse right and interest which is clearly and unequivocally made known to the cestui que trust, as when, for instance, such transactions take place between the trustee and the cestui que trust as would, in case of tenants in common, amount to an ouster of one of them by the other. * * * In the case of an implied or constructive trust, unless there has been a fraudulent concealment of the cause of action, lapse of time is as complete a bar in equity as at law.' Courts of equity sometimes act in obedience to the statute, and sometimes apply it by way of analogy. Where the cause of action is legal, and the statute has barred the remedy at law, the defense is as complete in equity as at law; but, where the case falls within the proper, peculiar, and exclusive jurisdiction of a court of equity, the statute is not necessarily applied. Real estate purchased with partnership funds for partnership uses, though the title be taken in the name of one partner, is in equity treated as personal property, so far as is necessary to pay the debts of the partnership, and to adjust the equities of the partners; but the principle of equitable conversion has no further application. Clagett v. Kilbourne, 1 Black, 346, 349; Shanks v. Klein, 104 U. S. 18; Allen v. Withrow, 110 U. S. 119, 3 Sup. Ct. Rep. 517; Buchan v. Sumner, 2 Barb. Ch. 165; Collumb v. Read, 24 N. Y. 505. Whitehill here was in possession for the benefit of the parties lawfully entitled, and apparently occupied no position adverse to them.
We are not prepared to decide that there is a definite rule of law that statutes of limitation commence to run immediately upon the dissolution of a partnership, irrespective of the circumstances of the particular case. Mr. Justice Lindley, in his excellent work on Partnership, says: 'So long, indeed, as a partnership is subsisting, and each partner is exercising his rights and enjoying his own property, the statute of limitations has, it is conceived, no application at all; but as soon as a partnership is dissolved, or there is any exclusion of one partner by the others, the case is very different, and the statute begins to run.' Amer. Ed. 1888, *510. The learned author in his last edition cites Knox v. Gye, supra, and Noyes v. Crawley, 10 Ch. Div. 31, in which Vice-Chancellor MALINS quotes the above language with commendation, and dissents from Miller v. Miller, L. R. 8 Eq. 499. Where, however, partnership affairs are being wound up in due course, without antagonism between the parties, or cause for judicial interference, where assets are being realized upon and liabilities extinguished, and no settlement has been made, the cause of action has not accrued, and the statute has not begun to run. Of course, where the partnership expires in accordance with its terms, or is dissolved by agreement, each partner, as a general rule, has an equal right to the possession of the partnership property; and, if they cannot agree as to the disposition and division of it, a court of equity will appoint a receiver to collect and apply the effects. Each partner has a right to have the partnership assets applied in liquidation of the partnership debts, and to have the surplus assets divided; and each may insist on a sale, and that nothing shall be done except with a view to wind up the concern. But, in case of dissolution by death, surviving partners are invested with the exclusive right of possession and management of the whole partnership property and business, for the purpose of paying the partnership debts, and disposing of the effects of the concern for the benefit of themselves and the estate of the deceased. Emerson v. Senter, 118 U. S. 1, 6 Sup. Ct. Rep. 981. If they go on with the business under the credit, and risking the effects, of the firm, and profits result, they will be bound to account for those profits as belonging to the firm; and they are liable to be charged with interest on the funds they use, though no profit, or even a loss, is made. And so, upon dissolution by an assignment, the sl vent partners are in equity entitled to hold the effects and property in the way that surviving partners do; and, if they continue the business, it is at their own peril, in the absence of special provision. When the right of action accrues, so as to set the statute of limitations in motion, depends, as we have said, upon circumstances, and cannot be held, as matter of law, to arise at the date of the dissolution, or to be carried back by relation to that date. Todd v. Rafferty's Adm'rs, 30 N. J. Eq. 254; Partridge v. Wells, Id. 176; Prentice v. Elliott, 72 Ga. 154; Hammond v. Hammond, 20 Ga. 556; Massey v. Tingle, 29 Mo. 437; McClung v. Capehart, 24 Minn. 17; Hendy v. March, 75 Cal. 566, 17 Pac. Rep. 702; Foster v. Rison, 17 Grat. 321; Roggs v. Johnson, 26 W. Va. 821; Atwater v. Fowler, 1 Edw. Ch. 423. In Causler v. Wharton, 62 Ala. 358, the court held that where one partner, by a written agreement with the other, left the partnership assets with him to dispose of whenever he could do so at a fair price, a continuing trust was thereby created, and the bar of the statute of limitations would not begin to run against the right to an account of the partnership dealings so long as the party to whom the assets were delivered acted under the trust, or admitted that it was still continuing. Under the agreement here, it is obvious that it was Whitehill who was to close up the business at Arkansas City, which had been under his management; and, under the averments of this bill, such a trust was created as would not be barred by the statute of limitations until it was repudiated by Whitehill, which attitude on his part there is nothing here to disclose, unless his defense to the bill may be construed as such.
In the case at bar the business of Riddle, Coleman & Co. was finally wound up by the payment of its debts in full, to do which, as we understand the bill, coupled with the terms of the deed to the complainants, a public sale was had, with the consent of the creditors; and the complainants purchased the interest in, and the rights and claims against, certain companies and individuals in the south, along the Mississippi river, including the interest and claims against Whitehill and the late firm of J. M. Whitehill & Co. This was within four years after Whitehill had disposed of the enumerated assets, and made the lease of the coaling privilege, and within three years after the payment of the outstanding indebtedness, according to the amendment. Certainly Whitehill ought not to be allowed to complain that he was permitted to take his time in selling the stock of the concern to the best advantage; and it is clear, as the case stands at present, that the statute did not run as against the trust in the real estate conveyed to him or to J. M. Whitehill & Co., and purchased with the money of the firm. The decree is reversed, and the cause remanded with directions to allow the complainants to amend their bill, and for further proceedings in conformity with this opinion.

References: v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v.