Case Name: JONES v. SMITH
Court: Supreme Court of South Carolina
Jurisdiction: South Carolina
Decision Date: 1889-11-22
Citations: 31 S.C. 527
Docket Number: 
Parties: JONES v. SMITH.
Judges: 
Reporter: South Carolina Reports
Volume: 31
Pages: 527–547

Head Matter:
JONES v. SMITH.
1. A complaint which alleges that plaintiff and one S being partners, plaintiff transferred his moiety in certain real estate to S for the purposes of the parlnership, and that the partnership was now fully settled, and praying a reconveyance of such moiety to himself or a sale of the property and division of the proceeds, does not improperly unite several causes of action ; and the action was properly brought against the devisee of S, who was in possession, claiming the same as her several and absolute property. '
2. In action by J against the devisee of S, to recover his share of certain lands held in S’s name, but which were really the partnership property of J and S, and so held and used and so repeatedly acknowledged by S to be, both by words and acts, down to the time of his death five years before action brought, the defences of laches, statute of limitations, lapse of time, and adverse possession are unavailing.
3. Two partners holding land in their names jointly, one of them, just after the war, conveyed his interest therein to his copartner, and in this his action to procure a reconveyance, the complaint alleged that the deed was made by plaintiff because he “was apprehensive of embarrassment personally on account of claims outstanding against him, mostly as surety of others; and in order to facilitate the adjustment of the affairs of the said firm of S & J, and in order that the property of the said firm should not be embarrassed by the existence of the indebtedness then outstanding against the plaintiff in his own right,” but the complaint did not say that the conveyance w'as executed for the purpose of defrauding plaintiff’s creditors, and did state that plaintiff thereafter openly treated the property as that of the firm, whose debts were now all paid. No creditor of J was before the court. Held, that the complaint did not allege a fraudulent intent in this deed and so fail to state a cause of action.
4. In such an action, either party should be at liberty to apply for an order for an account of the rents and profits, although not asked for in the complaint.
Mr. Justice McIver, dissenting.
Before Fraser, J., Edgefield, November, 1888.
This was an action by Lewis Jones against Ella L. Smith commenced in March, 1888. The complaint was as follows :
The complaint of the above named plaintiff respectfully shows unto the court:
1st. That many years ago — anterior to the late war between the States — the plaintiff above named, and E. L. Smith, late of the county and State aforesaid, formed a partnership as coach-makers, and transacted business as such under the firm name and style of Smith & Jones; that said partnership existed for many years, and of which there was no actual dissolution until the death of the said F. L. Smith — although for many years theretofore the active operations of .the firm had been discontinued, and the same practically existed in name only.
2nd. That during the1 existence of said copartnership a considerable amount of property ivas accumulated in the firm name.
3rd. That at the termination of the late war between the States, and as a consequence thereof, the said firm of Smith & Jones was considerably embarrassed with debt; and there were many claims against numerous parties outstanding in favor of said firm, some of which were good, some doubtful, and others of no value whatsoever; besides which the plaintiff was apprehensive of embarrassment personally bn account of claims outstanding against him, mostly as surety for others.
4th. That in order to facilitate the adjustment of the affairs of the said firm of Smith & Jones, and in order that the property of said firm of Smith & Jones should not be embarrassed by the existence of the indebtedness then outstanding against the plaintiff herein in his own right, the plaintiff, on the 2nd day of October, A. D. 1868, under his hand and seal, conveyed to the said F. L. Smith his “undivided moiety and interest in all those tracts, lots, or parcels of land situate, lying, and being in the District (now County) of Edgefield, and State aforesaid, in the village of Edge-field, viz. * * *
5th. That notwithstanding the execution of the said instrument in writing, the use, occupation, enjoyment, and ownership of the property described in the next preceding paragraph hereof were in no wise changed or affected thereby, but in all respects remained thereafter as they had existed theretofore, and it was fully and distinctly understood and agreed that said interest, or moiety, was to be reconveyed to this plaintiff upon the completion of the adjustment of the affairs of the old firm of Smith & Jones.
6th. That it was distinctly understood and agreed by and between the plaintiff and the said F. L. Smith, that the use, occupation, enjoyment, and ownership of said property were in no wise to be affected by the execution of said instrument in writing ; and with said understanding and agreement the said F. L. Smith remained perfectly satisfied until the day of his death, and oftentimes expressed his willingness and purpose to reconvey the said moiety to the plaintiff.
7th. That thereafter, and up to the time of his death, the said F. L. Smith, on repeated and numerous occasions, and to divers persons, acknowledged the joint ownership of the plaintiff with himself in said property.
8th. That after the execution of said instrument in writing, as effectually and as openly as theretofore, the plaintiff, with the full knowledge and approval of the said F. L. Smith, exercised acts of ownership over the said property ; made and entered into contracts for the rent or lease thereof, received the rents, issues, and profits thereof, paid taxes thereon, and otherwise.
9th. That all and singular the claims which existed in favor of and against the firm of Smith & Jones, have been settled, as far as they can ever be settled, so.that they no longer exist.
10th.'That heretofore the said F. L. Smith departed this life, leaving of force his last will and testament, wherein and whereby he devised all and singular his estate — of every kind and description whatsoever and wheresoever situate — to his widow, the defendant herein.
11th. That oftentimes heretofore — directly and indirectly— the plaintiff has demanded of the defendant compliance with the agreement between the said F. L. Smith and himself to reconvey the said interest in the said property, with which reasonable request she has refused, and still refuses, compliance.
Wherefore the plaintiff prays that the defendant may be required to reconvey to the plaintiff his moiety in all and singular the property mentioned and described in paragraph four hereof; or that all and singular the said property may be sold and the proceeds thereof equally divided between the plaintiff and defendant; and that the plaintiff may have such other and further relief as the nature and circumstances of the ease may require, together with his costs.
The decree of the Circuit Judge and other matters are fully stated in the opinion of this court.
Messrs. Ernest G-ctry and W. T. Gary, for appellant.
Messrs. Sheppard Bros., contra.
November 22, 1889.

Opinion:
The opinion of the court ivas delivered by
MR. JUSTICE McGowan.
Many years ago, before the late Confederate war, one F. L. Smith and the plaintiff, Lewis Jones, were partners in the business of carriage making, under the name and style of "Smith & Jones." Their business seems to have prospered, and besides other property, tools, outfit, plant, &c., the partnership owned four small lots in the town of Edgefield, connected with their business, which for convenience we will designate as (1) the Smith & Jones carriage shops, (2) the Golding, lot, (3) the Christie workshop, and (4) the blacksmith shop. At the end of the late war the business was very much reduced and broken up, but the firm had a large unsettled business, many debts were due to it, some of which were good, but many doubtful or desperate, and the firm itself was considerably embarrassed by debts which it owed, besides, as complaint states, "the plaintiff was apprehensive of embarrassment personally on account of claims outstanding against him, mostly as surety for others; that in order to facilitate the adjustment of the affairs of Smith & Jones, and in order that the property of the said firm should not be embarrassed by the indebtedness then outstanding against the plaintiff in his own right, on October 2, 1868, under his hand and seal, conveyed to the said F. L. Smith, his partner, his 'undivided moiety and interest' in all the aforesaid lots; that notwithstanding the execution of the said instrument in writing, the use, occupation, enjoyment, and ownership of the property described, were in no wise changed' or affected thereby, but in all respects remained thereafter as they had existed theretofore, and it was fully and distinctly understood and agreed that said interest or moiety was to be reconveyed to the plaintiff upon the completion of the adjustment of the affairs of the old firm of Smith & Jones that the said Smith always acknowledged the joint ownership of the plaintiff with himself in said property.
The condition of affairs remained in this state, both admitting joint ownership, subject to the payment of the debts of the firm, until Smith died some four or five years ago (the precise date not stated) leaving a will by which lie gave his whole estate to his widow, Ella L. Smith, and she claiming under her husband's will, and denying the joint interest of the parties in the lots after the deed of 1868, set up a claim in herself as the absolute and several owner of said lots; and thereupon the plaintiff, all the debts of the firm having been paid or settled, instituted this action against her for 'partition or the sale and division of the proceeds of said lots.
The defendant answered, admitting the original partnership between the plaintiff, Lewis Jones, and her late husband; deny ing, however, as a matter of fact, that there had been any joint use and occupation of the lots after October, 1868, when the partnership was dissolved, and her late husband purchased aud paid for Jones's interest in the lots and was ever after until his death in exclusive adverse possession as the several and absolute owner thereof. She interposed several defences : (1) laches and lapse of time; (2) that the alleged parol agreement to reconvey after the partnership debts were paid, was repugnant to the statute of frauds; (3) that the cause of action did not accrue within six years; (4) that devisor of defendant had been in adverse possession for more than ten years; (5) that the warranty of the plaintiff in his deed estops him from claiming any interest in the lots; (6) that the action should have been brought against the personal representative (administrator or executor), instead of the devisee of Smith, the late partner; (7) that the plaintiff had improperly joined several causes of action in one, &c.
The cause came on to be heard by Judge Fraser, before whom the testimony was offered in open court. It appeared that on October 1, 1868, the day before the conveyance of the lots in contention (October 2), Jones transferred and assigned all his interest in all the personal property of the firm, such as carriages, buggies, &c., to his partner, Smith, in consideration as stated of $1,000, and that the said Smith would pay all the outstanding debts of the firm. It further appeared from abundant and uncontradicted testimony that Smith & Jones continued to hold, rent, and use the lots as partnership property during the life of Smith, &c. The judge held, among other things, "that from the date of the deed (October 2, 1868) to the death of Smith, a period of nearly fifteen years, all of the lots were returned for taxes in the firm name of Smith & Jones, and taxes paid thereon accordingly. The control was joint and the rents were divided between the two, and in 1872 or 1873 a written lease, now lost, of all or a large portion of these lots was executed by Smith, by which Smith & Jones were made by him parties of the one part, and one Robert Schley, the tenant, the other party. When the property was leased to Schley, Smith & Jones took one-half of the profits between them, &c. From all this testimony I conclude that these lots were at one time partnership property, and that, though there .may have been a termination of the partnership as to future transactions, by the deeds of the 1st and 2nd of October, 1868, there never has been a final settlement between the parties of their interest in the partnership property (P«rs. Part., 386). As to the real estate, it is not material in whose name the title stands. It may be in all the members of the firm, or in the name of a stranger, and it is held in trust for the firm. It is not necessary that the trust be expressed, if it exists, and is capable of proof, and the land be in part and in substance partnership property (Pars. Part., 364, 365). When the title is in the name of one member of the firm, the presumption is that it is his individual property until shown to belong to the firm. 'For this purpose parol evidence is admissible between the parties and their representatives to show that a conveyance to a partner was for the benefit of the firm. The same evidence which could make it partnership property for the payment of debts and adj usting the equities between the parties, established it for the purpose of final division.' Alb. Trial Eoid., 228, 229." Andhe ordered the lots sold for partition.
From this decree the defendant appeals upon the following grounds:
I. "Because his honor erred in overruling the defendant's oral demurrer, that the complaint showing on its face that the cause of action was made in fraud of the creditors of the plaintiff, and that the cause of action stated therein is a complete bar at law to the recovery of the said plaintiff.
II. "Because his honor erred in deciding that the plaintiff could offer parol testimony, falsifying and contradicting the terms of the written deed.
III. "Because his honor erred in not deciding that the plaintiff was estopped by his covenant of warranty in his said deed from asserting any claim to the property described in his said complaint.
IV. "Because his honor erred in allowing the plaintiff to introduce parol proof of an alleged agreement with reference to a reconveyance of the lots of land described in the complaint, the said proof being repugnant to the statute of frauds.
V. "Because his honor erred in decreeing that the plaintiff was entitled to one-half interest in the several lots of land described, said plaintiff having failed to show by competent proof that he had any interest in the same.
VI. "Because his honor erred in assuming that the allegations of the complaint were true, he having ruled that the plaintiff could not testify as to the transactions between him and the deceased Smith. And the plaintiff having failed to prove the allegations of the complaint by any testimony save that of himself, which was incompetent and ruled inadmissible.
VII. "Because his honor erred in deciding that there had been no adverse possession to give title under the statute of limitations.
VIII. "Because he erred in deciding that bis (plaintiff's) 'use and occupation was jointly with Smith, and for less than twenty years.'
IX. "Because his honor erred in deciding that 'the control of said lots was joint and the rents were divided between the two.'
X. "Because his honor erred in deciding that said real estate was partnership property, and held in trust for the firm.
XI. "Because the decree is against the evidence, the weight of evidence, and without evidence to support it," &c.
The action was for partition of certain lots as partnership property of the firm of Smith & Jones; and, of course, involved the issues of partnership and of joint ownership. We do not see that several causes of action were improperly joined. All the questions made were "connected with the same subject of action." Nor do we think that the action was improperly brought against the defendant, who claims the lots in contention as her several absolute property under the will of her late husband, F. L. Smith, the alleged partner of the plaintiff.
Although the plaintiff himself could not testify as to the alleged parol agreement with his partner, Smith, who is now dead, it nevertheless did appear from other competent testimony, and the Circuit Judge as matter of fact so found, that there had been a partnership between the deceased, Smith, and the plaintiff, which owned these lots; that there never had been any formal dissolution of the firm or a final settlement and division of the property; and that after the execution of the deed of October 2, 1868, the lots in question were openly and publicly held, used, and enjoyed as still partnership property down to the death of Smith, as stated to be some four or five years before the commencement of this action. This finding is well sustained by the testimony of disinterested witnesses; and, as we think, effectually answers the defences of lapse of time, laches, adverse possession, and the statute of limitations. The parties holding jointly, the statute of limitations did not run. The defendant claims under her husband, Smith. She is entitled to no higher rights than he had/ Surelys, if Smith were living and the action were against him, he would not have made the defences of lapse of time, adverse possession, &c., in the very face of his repeated admissions and declarations that the aforesaid lots were still as between the partners, held as partnership property, and a consistent, steady, and unbroken course of conduct on his part in the same line, for more than fifteen years and down to his death. Most probably if Smith had lived, the question made here would never have arisen. Lord v. Lowry, Bail. Eq., 510.
This view, it seems to us, effectually disposes of all the questions in the case, except, it may be, the point made in argument on the motion to dismiss the complaint, for the reason that it did not state facts sufficient to constitute a cause of action, which, as we understand it, was formulated in the first ground of appeal: "Because his honor erred in overruling the defendant's demurrer to the complaint, the said complaint showing on its face that the cause of action therein was made in fraud 'of the creditors of the said plaintiff, and that the cause of action stated therein is a complete bar at law to the recovery of the said plaintiff." In considering the demurrer, the facts stated in the complaint must be assumed to be true. (The complaint should appear in the report of the case.) It will be observed also that there is here no question as to the rights of creditors, either of the firm or of its members individually, but that it is a question pure and simple between the parties.
Did the plaintiff state himself out of court? In speaking of the object of the deed of 1868, after stating that the firm was embarrassed, he proceeded as follows: "Besides which, the plaintiff was apprehensive of embarrassment personally on account of claims outstanding against him, mostly as surety of others; that in order to facilitate the adjustment of the affairs of the said firm of Smith & Jones, and in order that the property of said firm should not be embarrassed by the existence of the indebtedness then outstanding against the plaintiff in his own right," the plaintiff executed the deed, &c. The conveyance of his interest by Jones to his partner was certainly not in fraud of the co partnership creditors; for whether the title was in one or both partners, it was alike liable for partnership debts. Lands owned by a partnership are not held by the members as tenants in common, but as joint tenants, and the conveyance by one partner of his interest carries no more than a right to an account. "A joint tenancy resulted from the union of the partners, and took its character from the purpose of the joinder. The contract creates the relation of partnership, and invests the partners with an estate by entireties during the continuance of the firm. That is to say, until the final settlement of the account each partner has a vested right, which no dissolution can destroy, to apply the firm property to the payment of firm debts. The title is joint, but neither partner can dispose of the general property nor any portion of it, or of his individual interest, except in subordination to the obligations of his relation, and in accordance with the rules by which it is governed," &c. See Pars. Princ. Part., § 100, and notes.
Now as to the individual creditors of the plaintiff, Jones. Does the complaint admit that the conveyance to his partner was made for the purpose of defrauding his individual creditors ? Considering that fraud is not to be presumed, but must be proved, and taking the statements of the complaint as a whole, we cannot see that there was any admission that the deed was made to "defeat, delay, and hinder" the individual creditors of Jones. At the time the deed was executed (1868), soon after the war, all commercial affairs were in great confusion. Securities were uncertain, and were unreliable if not entirely worthless. The partners manifestly desired to separate the partnership from individual property, and especially for the purpose of "disembarrassing the affairs of the firm." For keeping the property of the firm separate, the plaintiff gives two reasons, first, that the firm was embarrassed, and, second, his apprehension that he might be per sonally. But there is no expression in the complaint which indicates that the plaintiff conveyed his interest to his partner for the purpose of defrauding his creditors, and no creditor is here complaining. This court has lately held that partnership property is first liable for the payment of partnership debts, and that an assignment of it for that purpose is not fraudulent as against an individual creditor, who is only entitled to participate in what may come back to his debtor after the settlement of the partnership debts. Trumbo, Hinson & Co. v. Hamel & Co., 29 S. C., 520. We cannot say that the Circuit Judge committed error in holding that the statements in the complaint as to the purpose for which the deed of October 2, 18(58, was executed, do not make such a case of fraud.as should deprive the plaintiff of his remedy as against the devisee of his late partner.
An account is not asked, but it is the usual incident of the settlement of a partnership, and if the parties, or either of them, move for an account of the rents and profits of the lots in question since October, 1868, we incline to think it should be granted.
The judgment of this court is, that the judgment of the Circuit Court be affirmed.