Court Opinion

ID: 6637337
Source: CourtListenerOpinion
Date Created: 2022-07-20 20:42:10.032906+00
Date Added: 2024-06-11T15:59:05.940533
License: Public Domain

KNOWles, J.,
dissenting. I cannot assent to the opinion expressed by the majority of the court in this case and will present my views as briefly as I can for dissenting therefrom.
I do not deny but that a verbal partnership agreement may be formed for trading in real estate; but I contend that when one partner comes into a court and asks that real estate held exclu*29sively by one member of the firm in his name shall be decreed partnership property, and an interest therein decreed to the applicant, such partnership must then be evidenced by some note or memoranda in writing, or it will be held to be within the provisions of the Statute of Frauds, unless it clearly appears that this real estate was acquired with partnership capital for partnership purposes, in such a way as to make the partner in whose name the property is held a trustee for the partnership. It is said that a verbal partnership agreement to deal in lands creates no interests in lands if it has for its object the acquiring in the future such property. But when lands are acquired under such a partnership, and one of the partners takes a deed to the same in his own name, what does create an interest in this land in favor of the other partner but the verbal partnership agreement, if he has any interest at all in it ? If a party to such an agreement comes into court and asks that he may be decreed an interest in this land, as in this case, as the basis of his action he must set up a verbál partnership agreement. I cannot see how there is any escape from the conclusion that under such circumstances an interest in land will be created by virtue of a verbal agreement. I cannot see why a partnership agreement should be treated as different from any other agreement. It is iirged, however, that lands held by a partnership have none of the characteristics of real estate, but are treated as personal property in a court of equity, and from this it follows that a verbal partnership agreement is never called upon to create an interest in land, but in personal property only. To what extent is land held by a partnership treated in equity as personal property ? I apprehend this to be the rule : When real estate is purchased with partnership capital and held for partnership uses, it is treated as personal estate in equity for these purposes and these only — the settlement of accounts between the partners, and the payment of partnership debts. When these are accomplished, it assumes the character of real estate and is subject to all its incidents. Pars, on Part. 382-385; Dyer v. Clark, 5 Met. 562. This question is elaborately discussed in a note to § 93, Story on Part., and I think the above conclusion reached. Sigourney v. Munn, 7 Conn. 11. *30Take the most liberal opinions upon this subject, save Holmes v. McCray, 51 Ind. 358, and I am sure it will be found that they all hold that the real estate must be purchased with partnership funds and devoted to partnership uses, before it can be treated as partnership property and classed as personal estate.
I will now recur to the allegations of the complaint. It is alleged that the plaintiff and the defendants Needing and Gassert entered into a verbal contract of copartnership for the purpose of prospecting, developing and mining quartz lodes and other mining property. That each was to have an undivided one-third interest in all mines discovered, pre-empted, located, recorded or mined, and wrere to share equally and alike in the labor and expenses in carrying out said purpose. That the partnership was to remain in force until dissolved by mutual consent. There is no allegation to the effect that they actually commenced operations under this contract. It is not shown that this mine was discovered by their joint labor, or located by their joint labor, or recorded at their joint expense. It is not shown that plaintiff has fully performed his part of this agreement. It is true that it is alleged that the said parties, plaintiff and defendants Gassert and Needing, as such copartners, discovered what is now and was then known as the Silver Girdle lode. This is one of those allegations that may be and probably is a conclusion of law. It may be claimed that the plaintiff and defendants being partners, the act of one is the act of all.
Put -the most favorable construction upon this allegation, and still it leaves out certain acts necessary-for the acquiring of title from the government of the United States. Por instance, there is no allegation that the plaintiff and defendants located this mine or recorded it, but that they discovered it. If A. and B. should discover a quartz mine, and A. should say to B., I want none of this lode, or should do nothing toward locating it, and B. should go on and locate it and record it, would it be possible that A. could come in and say, because we discovered this mine together, therefore I am entitled to one-half of it ? The reason that equity treats real estate purchased with partnership funds for partnership purposes, partnership property, is because a trust arises in equity in this *31property in favor of the firm. It is upon tbe principle, that, if A. furnishes B. money with which to purchase land for him, or on their joint account, and B. takes this money and invests it in land and takes the deed in his own name, a trust arises concerning this land in A.’s favor, and B. will be compelled to recognize it in a court of equity, although there was no memoranda or note in writing by which the above agreement could be proved. I think I am fully justified in saying, that, under the allegations in this complaint, it does not conclusively appear that there is any trust in this quartz claim in favor of plaintiff for the reason that it does not appear that the title to the mine was acquired from the general government with partnership funds, that is, joint labor and expense. And I hold that there is a further defect in this complaint if, as I claim, the true rule is that real estate purchased with partnership funds for partnership purposes is to be treated as personal property only for the purpose of settling accounts between partners, and the payment of partnership debts. There is no allegation that the partnership is indebted to plaintiff in any amount for any cause. There is no allegation that the partnership is indebted to other persons in any sums whatever for which plaintiff is liable. There is an allegation that defendants are taking out large quantities of quartz and disposing of the same, but whether to a profit or not is not set forth. There is one other allegation I must notice in the complaint. It is alleged that plaintiff, through his agent, has worked and assisted in developing this mine, but this allegation cannot be construed as an allegation of funds used in acquiring the mine. In my judgment we are presented with the question whether a mere verbal agreement for a copartnership will entitle a person to an interest in lands, although it was not acquired with partnership funds, and there is nothing to show that the partnership is indebted to him or to other persons for which debts plaintiff is liable. To hold that, by virtue of such a partnership agreement, a man may acquire an interest in land would be setting aside completely the Statute of Frauds and Perjuries in regard to creating an interest in land. The weight of authority, it-appears to me, is decidedly against allowing such a contract to create an *32interest in land. Sueh was nndu btedly the ruling in the ease of Smith v. Burnham, 3 Sumn. (C. C.) 435, and Thorn v. Thorn, 11 Iowa, 146. The eases of Hale v. Henrie, 2 Watts, 143, and Pitts v. Waugh, 4 Mass. 424, go further than I contend the rule is. The case of Gray v. Palmer, 9 Cal. 616, was a much stronger case for the applicant than the case presented here, but the court held that an interest in land could not be created by a verbal contract of copartnership to deal in real estate. Pars, on Part. 381, in discussing this question says: “In like manner the peremptory provisions of the Statute of Frauds would apply; and even equity would feel itself obliged to pay some regard to them. Hence, if a partnership were formed even to trade in lands, and for nothing else, the lands when bought must not only have an owner by legal title, and pass solely from him and solely by a legal title, hut all contracts mid agreements between the partners themselves, as well as between them and strangers, for the sale ‘ of lands, tenements and hereditaments, or any interest in or concerning them ’ should be written and signed. But in this there are conflicting views which we shall consider in the next section.”
In the next section, he shows what these conflicting views are. They are the conflicting view;s between what may be termed the American rule and the English. The English rule treats partnership real property as personal property for all purposes. The American rule treats the real property of a partnership as personal property for the purposes of settling partnership accounts between partners, and the payment of partnership debts and no further. Pars, on Part.'382-385. Hence, according to the English rule, the partnership being once established, then all property acquired by the firm is treated in equity for all purposes as personal property and hence the Statute of Frauds does not apply. But under the American rule, it is only personal property for the purposes of settling partnership accounts and the payment of partnership debts. Hence, in order to treat real estate as partnership personal property, there must be accounts to settle between the partners or partnership debts, which I have shown does not appear in this case, and hence this real estate cannot be treated as personal property. I will now review for a short space the cases relied upon by the majority of the court. *33Dale v. Hamilton, 5 Hare’s Ch. 368, is an English ease, and perhaps the principal one that is relied upon as establishing the English rule. But, when fully considered, it will be found that it is a very different case from this and presenting much stronger equities, and further, that the court did not decide that a partnership had been formed, but referred the question to a jury; and ordered that certain written evidence should be introduced in this trial before the jury, in regard to this partnership, that showed conclusively that there was a partnership to deal in lands and in the very lands in dispute. The case of Fall River W. Co. v. Borden, 10 Cush. 474, shows that a partnership to deal in real estate, evidenced by the written evidence that appeared in the case of Dale v. Hamilton, was not within the Statute of Frauds. 1 think further that the eases cited in support of Dale v. Hamilton do not fully maintain the views of the court in that case. The case of Chester v. Dickerson, 54 N. Y. 1, certainly cannot be considered a case in point. There no interest in land was sought to be created by virtue of any partnership agreement. That was for an action for deceit against certain partners who had sold some oil lands. I do not suppose any one holds now that a simple (verbal contract of) partnership to deal in lands is within the Statute of Frauds.
It is only when an interest is sought to be created in land that such an agreement is within the Statute of Frauds. In this case, the court admits that all it said upon the subject of verbal partnerships was dicta and not necessary to the decision. The case of Bunnell v. Taintor, 4 Conn. 568, is not in point. That was a case of a partnership in the profits arising from buying and selling certain lands. The land was not to be considered as partnership property, but as the property of one member of the firm, and the partnership was to be confined to the profits of the sale. This certainly was not a parallel case. The case of Smith v. Tarlton, 2 Barb. Ch. 336, was a case where real estate was purchased by a partnership with partnership funds, for partnership purposes, and used as such, and was but an incident to a manufacturing enterprise. The courts have generally held that such real estate was partnership property, no matter in whose name held. If in the *34name of one partner, be is a trustee of the firm. In this case, the object of the bill was to obtain a settlement of partnership accounts and concerns, and to restrain one of the defendants from misapplying partnership funds. The last sentence in that decision is as follows: “ But real estate purchased with partnership funds for the use of the firm, although the legal title is in the member or members of the firm in whose name the ■ conveyance is taken, is in equity considered as the property of the firm, for the payment of its debts, and for the purpose of adjusting the equitable claims of the copartners as between themselves.”
Judge Stoky, in the case of Smith v. Burnham, 3 Sumn. C. C. 435, expressly declares such a case without the Statute of Frauds. The case of Murley v. Ennis, 2 Col. 300, is relied upon. That was not a case where a title was sought to be created in land by virtue of a verbal contract of partnership to prospect for mines, and locate the same. The court holds that such a contract is not within the Statute of Frauds. This I do not controvert ; but when the court comes to discuss the right of Ennis to an interest in the mine discovered by Murley, it uses this language: Ci Nor does the interest or estate which is afterward acquired vest or inure by virtue of the agreement, but by the occupation and appropriation alone.” The point the court makes in that case is, that Murley acted as the agent of Ennis in discovering and appropriating the mine for which he was a competent agent. The case, it will also be observed, was not one where an interest in land was sought to be created by virtue of a partnership agreement, but an action to recover a debt; and it does seem that the right of Ennis to recover might have been placed upon different grounds from what the court did.
The only case I think that can be found which fully supports the views of the majority of the court is that of Holmes v. McCray, 51 Ind. 358, and that I have shown is decided upon the authority of a dicta, in the case of Chester v. Dickerson, 54 N. Y. 1, and which was not a case in point; the case of Holmes v. McCray and this stand, in my judgment, by themselves, and are not supported by authority or sound reasoning.

Judgment reversed.