Dupuy v. Leavenworth
Before: Field
Synopsis
In equity, real property acquired with partnership funds for partnership purposes is regarded as personal estate, so far as the payment of partnership debts and the adjustment of partnership rights are concerned; and it is immaterial in whose name the legal title of the property stands ; whether in the individual name of one copartner, or in the joint names of all—it is first subject to the payment of partnership debts, and then to be distributed among the copartners according to their respective rights.
The possessor of the legal title in such case, holds the estate in trust for the purposes of the partnership; and until such purposes are accomplished, each partner has an equitable interest in the property. Upon the dissolution of the copartnership by the death of one of its members, the surviving partner, who is charged with the duty of paying the debts, can dispose of this equitable interest, and the purchaser can compel the heirs-at-law of the deceased partner to perfect the purchase by conveyance of the legal title.
Where two partners purchased in the firm name, with firm funds and for partnership purposes, a lot of land, and one then absconds with all the available funds of the firm, leaving his copartner without sufficient means to pay the debts of the copartnership, and he in good faith first exhausts the personal property to pay debts of the concern, and this is insufficient, he may then convey in the firm name the interest of the firm in the lot to pay debts, and the grantee can in equity compel a conveyance of the legal title to the undivided half of the lot, standing in the absconding partner’s name, from him or from parties taking a conveyance from him with notice of its partnership character.
This rale is not in conflict with the doctrine that real property of a copartnership may be conveyed by one partner, on his individual account, to the extent of his legal title, so as to cut off the equitable rights of the copartnership, or its liability to the payment of the copartnership debts. A bona fide purchaser, for a valuable consideration, without notice of the partnership character of the property, will take the title in such cases, freed from the equitable claims of others, upon grounds of policy.
The civil law would, under the special circumstances of this case, reach the same result.
Morris, being a defendant, was a good witness for plaintiff.
Where several persons conspire to obtain the land of plaintiff, and in suit against them to recover the property, two of the defendants disclaim all interest therein: Held, to be no ground for dismissing the suit as to them, as they were proper parties and are liable for costs.
Field, C. J. delivered the opinion of the Court Baldwin, J. and Cope, J. concurring.
This is a suit on the equity side of the Court to quiet, or rather to perfect, the title of the plaintiffs to certain premises situated within the city of San Francisco. The facts of the case, as established by the evidence embodied in the record, are briefly as follows. In 1847, the defendants, Percy B. Shelly and Samuel Norris, were copartners in mercantile business in San Francisco. In July of that year the authorities of that town sold at public auction certain beach and water lots; and at the sale the defendant Norris bid off the premises described in the complaint—designated as lot number one hundred and eighteen—in the firm name of Shelly & Norris, fof six hundred and twenty dollars. Of this sum he paid at the time, to the first Alcalde for the town, one hundred and fifty-five dollars, and the defendant Shelly executed, in the name of the firm, an undertaking—in the form of a bond, but without any seal [266]affixed—for the payment of the balance, with interest, in three installments, at six, twelve and eighteen months. The Alcalde thereupon gave to Shelly & Norris a certificate to the effect that they had purchased the lot, and executed the bond referred to; that the bond and the deed for the lot were filed and recorded, and that the latter would be delivered on the payment of the last installment of the purchase money. The premises in question were intended for the purposes of the copartnership, and the cash payment at the sale and the first installment on the bond were paid out of copartnership funds. In March, 1848, Shelly, under pretense of making a visit of a few days to San José, absconded with all the available effects of the firm, leaving Norris without the requisite means to settle with their creditors. Attachments followed, which closed up the business of the concern. The effects and property remaining were turned over to the creditors and applied, so far as they would go, to the satisfaction of their claims. After the personal property was in this way exhausted, the lot in question was disposed of to William H. Davis, one of the creditors, in part payment of the debt due to him. The lot was not at the time worth the sum for which it was bid in at the sale, but Davis agreed to take it and credit the firm the amount advanced of the purchase money, and to pay the balance. Norris thereupon executed in the firm name of Shelly & Norris a conveyance to Davis, who paid the remaining installments and received the bond from the Alcalde, together with the deed prepared for delivery and placed on record. Davis subsequently went into possession of the premises, and improved them at an expense of several thousand dollars. The plaintiffs derive their title by sundry mesne conveyances from him.
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