HOLLADAY et al. v. LAND & RIVER IMP. CO., 57 F. 774

FULLER, Circuit Justice, after stating the facts, delivered the ppinion of the court. As by the terms of the agreements of May 25, 1855, and August 12, 1857, there was, in effect, community of interest in capital, profit and loss, and subject-matter, Ewing and Sweetser correctly referred to themselves as partners, and the executors to the “land partnership” between them. The enterprise was not limited to a particular adventure, nor merely to the purchase of land to be held for advance in value.

Town sites, and interests in town sites, town lots, half-breed land scrip and other scrip, shares in land companies and associations, were to be acquired. If found advisable some of the property might be sold, and the proceeds divided, or reinvested for the joint account. The claims and purchases were referred to as joint capital or joint means. Each was to contribute equally to the expenses of the business. Joint land books, and regular accounts of expenses and costs, were to be kept.

One-half of all the profits and gains, either in property or money, after all debts and advances were paid, belonged to each. ' Sweetser was-to cause land scrip to be located, and to sell lands, but to consult with Ewing in large transactions, and so on. The defendants rightly admitted the existence of the partnership in their answer.

The question to be determined is not whether the legal title to the undivided one-half in controversy passed to Sweetser by the deed of December 11, 1866, but whether, through a settlement of the affairs of the partnership by and between Ewing’s executors and Sweetser, the latter acquired such equitable right thereto as justified the decree of the circuit court.

Unquestionably, this real estate belonged to the firm, and while the duration of the partnership was specified as five years from May 25, 1855, (including the extension,) purchases of many hundred acres were apparently made after that period expired, and the partnership affairs, confessedly, had not been closed up when Ewing died, May 29, 1866. The contention that by the execution of the declaration of trust of July 28, 1860, the lands therein embraced (‘.eased to be partnership real estate does not commend itself to our judgment.

Under the agreement of May 25, 1855, the party in whom the title was vested to be held for sale for joint and mutual benefit was to execute a declaration of trust on request. This particular declaration was not executed on any settlement of accounts and -adjustment of equities between the partners, and lands were subsequently purchased; but, as far as it went, it furnished proper evidence that the lands named therein belonged to the enterprise, and not that the shares of an ascertained surplus were thereby transferred, and taken out of commerce.

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; and there may he cases of a partnership confined to dealing in real estate, where it might well he held that, being thus a commodity, it should he regarded as converted into personalty, out and out. ' Riddle v. Whitehill, 135 U. S. 621, 10 Sup. Ct. Rep. 924; Allen v. Withrow, 110 U. S. 119, 3 Sup. Ct. Rep. 517; Brown v. Slee, 103 U. S. 828.

In any view, until the equities are adjusted and the surplus ascertained, the property is held subject to the same equitable rights and liens of the partners as if it were personalty, and the control of the surviving partner extends to the right to sell it, or so much of it as may be necessary to pay the partnership debts, or to satisfy all just claims of the surviving partners; and such sale vests the equitable ownership, so that the purchaser can, in a court of equity, compel the heirs and devisees of the deceased to convey their title. Shanks v. Klein, 104 U. S. 18.

If he sells and conveys the same in good faith for a, valuable consideration, without an order of court, he passes the equitable title to the purchaser. Walling v. Burgess, 122 Ind. 299, 22 N. E. Rep. 419, and 23 N. E. Rep. 1076. Of course, the power of an executor to convey his testator’s real estate must he found in the provisions of the will, or in the order of the appropriate court, upon proper application, under statute.

But the executor of a deceased partner, if not a member of the firm, may agree with the survivor that the share of the deceased may he ascertained in a particular way, or he taken at a certain value; and if the executor and the survivor, in good faith, come to an accounting respecting the partnership affairs, and settle the same as a final account, such settlement cannot he overhauled, except on the ground of fraud (or such unfairness as is equivalent thereto) or mistake. Colly. Partn. (6th, Ed.) 382; Lindl. Partn. 1069; Sage v. Woodin, 66 N. Y. 578; Roys v. Vilas, 18 Wis. 174; Kimball v.

Lincoln, 99 Ill. 578; Ludlow v. Cooper, 4 Ohio St. 1; Arnold v. Wainwright, 6 Minn. 358, (Gil. 241.) The opinion in Valentine v. Wysor, 123 Ind. 47, 23 K. E. Rep. 1076, discusses the general subject, with much citation of authority. That was the case of a hill filed by the heirs of one Jack to set, aside a conveyance by Jack’s executors to Wysor, his surviving: partner, in settlement of partnership affairs, and for an accounting, complainants offering to pay whatever might he found due. The conveyance was made in 1866, and the suit commenced in 1880.

The court held that the power conferred by the will to settle, adjust, and compromise testator’s debts, and to settle with his partners, and to sell and convey his real estate, included the power to settle at discretion, and to sell and convey according to the executors’ host judgment; that a surviving partner has the right to the control and possession of the property of the firm, and may dispose of it in order to adjust the partnership accounts; that the rights of the heirs are subject to the adjustment of all claims between the partners, and attach only to the surplus which remains when the debts are paid, and the affairs wound up;that if the' transaction was, for any reason, invalid, then the property would remain partnership property, unaffected by what had transpired; that the conveyance by the executors would not be disturbed by a court of equity unless impeached as fraudulent or unfair, or unless collusion were shown; that, a settlement and accounting between the executors and the surviving partner having been had, a court of equity would not, after a lapse of 14 years, unexplained by circumstances,' decree the opening up of the account, although it appeared that the settlement had been irregularly made.

By the agreement of August 12, 1857, Ewing and Sweetser declare their intention and belief that, if either or both parties die before the business is finally closed up, their legal representatives should, will be able to, and can do so; and the correspondence shows that Miner was fully authorized by Ewing to conduct the negotiations pending from January, 1866, to Ewing’s death, for a complete settlement and adjustment of the partnership affairs.

The will was executed February 17, 1866, and provided for the payment of testator’s debts, the improvement and lease of certain real estate, and the distribution of rents, issues, and profits; and the executors were empowered to sell and convey, after appraisal, such of testator’s lands in Ohio, Indiana, Illinois, Missouri, Minnesota, ' Wisconsin, and Kansas as should be necessary to carry out its objects and purposes; to make conveyances for such real estate as had been disposed of, and not conveyed; to receive rents and profits; and out of any moneys in their hands, arising from sale or otherwise, to pay taxes, expenses, salaries, and costs “of executing this will, or defending and protecting any of the property of which I may die seised.” By the thirteenth clause “in view of the long and intimate relations existing between myself and my worthy friend Byrum D.

Miner,” the sum of $2,500 is bequeathed to Miner, and it is provided: “And, in view of Ms long and intimate connection with, my general business, it is my will and desire that he' shall b© my active executor, and give his personal attention to Settling up and protecting my estate, and carrying out the provisions, meaning, and intention of this, my last.will and testament; and in consideration thereof I will and direct that he shall receive forty-five hundred dollars ($4,500) per annum for the term of ten years, should he continue so long my executor.” Miner, accordingly, proceeded with the negotiation which had been commenced in Ewing’s lifetime, and was in his charge at the time of the execution of Ewing’s will, and of his death, and brought it to a conclusion in December, 1866.

April 30, 1866, Ewing had executed a conveyance to Sweetser of certain lands, which was left in Miner’s hands for delivery upon compliance with certain terms and conditions. Sweetser had offered $100 for Ewing’s interest, but it is not shown that he had agreed to the conditions prior' to December, 1866.

On the 8th of December, 1866, the executors made their deed to Sweetser, reciting that, by the articles between Ewing and Sweetser, title to the lands named in the deed had been acquired; (lie execution by Ewing of the declaration'of trust, and of the deed of April 30, 18(50, conveying to Sweetser “all (he lands acquired under said contracts, except the lands hereinafter described;” the death of Ewing, and probate of his will, and (he power to make conveyances “of such real estate as (he testator had disposed of, and not conveyed;” and thereupon, in consideration of the premises, the executors quitclaimed to Sweetser (he undivided half of the land in controversy in

section 14,113.81 acres, and of 110 acres in

section 24, in Douglas county, Wis., and of 820 acres in St. Louis and Lake counties, Minn., being 543.81 acres in all.

By release bearing (lie same date, December 8, 1866, (the revenue stamp being canceled “8-12, 18(5(5,”'variously interpreted as the 12th day of the 8th month, or the Sbh day of the 12th month,) Sw'eetser recited Hie conveyance of April 30, 1866, as executed in settlement of the contract of May 25, 1855, and supplemental contracts, and that “in further settlement thereof” the executors “have (his day conveyed to me certain lands in Douglas county, Wisconsin, and delivered to me all the personal property held by them acquired under said agreements;” and thereupon it was declared that the contract of May 25, 1855, and the “supplemental contracts,” were wholly and Anally ended, and the executors and the heirs and legal representatives of Ewing discharged from further liability to Sweetser “or any one else, growing out of the same,” and Sweetser assumed “nil the liabilities, of every name and nature, of the late partnership,” and to “hold the estate of said Ewing free and entirely harmless from all suits, costs, and expenses in relation thereto.” December 11, 1866, Sweetser executed his promissory note, payable to Miner and W.

A. Ewing, for $100, the revenue stamp on which was canceled that day. This note was duly entered on the executor’s account hooks on December 31 tli, and ivas subsequently proved up as a claim against Bweetser’s estate. On the same day, Sweetser paid the executors, as appears from their hooks, $4,700 due Ewing as an individual loan or loans.

On the same December 13th, the executors made their deed to Sweetser, reciting their conveyance of December 8th “by authority vested in them by the sixth clause of the said will;” that “on the 11th day of December, 3866, on a further settlement of the affairs of the late land partnership of said Ewing and Sweeiser, growing out of their contract of 1855, and the supplements, in consideration that said Sweetser has taken upon himself to assume to pay any liability of the late imrtnership that may he unpaid, and released the said estate of and from all claims that he might have against said estate, as per an agreement and release dated December 8th, 18(5(5,”— and proceeded: “Hew, therefore. to make a full and final compromise and settlement of all said land operations, and the mutual matters of account growing -out -of the same, it was proposed by said executors that they would convey to said Sweetser the other undivided half, of the lands embraced in said conveyance of December 8th, 18(50, except the one hundred and ten acres in the southwest quarter of

section twenty-four, township forty-nine, range 14, in Douglas county, Wisconsin, which is to remain owned one-half by the estate of said George W.

Ewing; and the other half by the said Sweetser, which proposition having been accepted by said Sweetser as a full and complete settlement of the matters of account, of one against the other, for all those land operations and expenses incident thereto, the delivery of this conveyance to be a complete bar to all actions at law or otherwise against each other in regard thereto: Now, therefore, in consideration of the premises,” the executors quitclaimed to Sweetser the 320 acres in St.

Louis and Lake counties, Minn., and the 113.81 acres in question in Douglas county, Wis., and it was then stated: “Thus by the conveyance of April 30; 1866, made by said Ewing, and by the conveyance of said executors' of December 8, 1866, and by this conveyance, the representatives of said George W. Ewing are divested of all their title to all the lands acquired under those land operations, except their title in and to the undivided half of the one hundred and ten acres in the southwest quarter of

section 24, town 49, range 14 east, in Douglas county, Wisconsin.” Upon the contracts of May 25, 1855, and August 12, 1857, the statement of May 21, 1855, and the declaration of trust, appears the indorsement of cancellation “by deeds and agreements of December 8 and 11, 1866,” signed by Sweetser and Miner, as executor, and subsequently, as he explains, by W. A. Ewing, as executor. We concur with the circuit court that these papers are all to be taken together, and form parts of one and the same transaction.

The money consideration of the deed of April 30, 1866, was $100, which was satisfied by the note of December 11th, and although the release bore date December 8th, we think that it and the deed of April were delivered with the instrument of December 11th, and on that day.

We conclude, therefore, that there existed a partnership between Ewing and Sweetser; that the land in question belonged to the estate in partnership, and was impressed With that character at the time of Ewing’s death; and that the transaction in December, 1866, was in complete adjustment and settlement of all the partnership 'affairs, and all outstanding indebtedness, and of all claims and equities between the partners.

The complainant took possession in 1884 under recorded documents evidencing its equitable ownership, and was not called on to vindicate its rights until, in 3890, the proceeding in partition was instituted. There was some evidence tending to show that there were debts; that Sweetser made claims on his own behalf; that partnership property had been sold or conveyed; that partnership property was in litigation; that there was personalty belonging to the firm, apart from real estate.

But all those matters were included in what must be presumed, on the face of the papers, to have been a final settlement upon an accounting, — a settlement prima facie valid and binding, and presumptively properly made, 'and in the exercise of authority properly exerted. So that the case is to be determined upon the contention of defendants that the settlement should he set aside for fraud or mistake, or such gross irregularity as vitiated its force and effect.

Probably, it might Lave been wiser if the executors had invoked judicial 'interposition in affirmation of the settlement, hut the settlement was not absolutely void because this was not done; and, regarded as voidable, merely, the general rules apply to an attempt to set it aside.

The averments of the answer (to he treated as equivalent to a cross bill) by which the settlement was sought to he impeached are. in brief,' that there were no partnership debts; that Sweetser had no claim after the execution of the deed of December 8, 1866; that' Sweetser falsely represented to the executors that there were claims against the partnership, that he had a valid claim, and that the real estate was of little or no value, whereby the executors were fraudulently induced to execute the deed of December 11, 1866.

This hill was filed nearly 24 years after the transactions complained of, and these averments fall far short of the distinctness( and precision required where fraud and mistake are charged after such Lapse of time. Apart from this, we are to remember that Ewing, Sweetser, Miner, and the bookkeeper, Lytle, were all dead, and that the letters, papers, and hooks relating to the period prior to Mr. Ewing’s death were destroyed, or not produced.

Inasmuch as Miner had been in the employment of Ewing since 1838; was his confidential friend, and familiar with his affairs; was intrusted wit.h the closing np of these very matters by Ewing, living, and especially charged by Ewing, in his will, to give his personal attention to settling np and protecting his estate, — while his diligence a.nd faithfulness are nowhere impugned, the theory of ignorance on his

part is wholly inadmissible, and we find no evidence upon which the position that he was deceived in the premises can be sustained. Both parties, in their correspondence, refer to debts of the concern, and, in one of his letters, Sweetser claimed a balance due to him. So far from undervaluing the lands, the evidence discloses that Sweetser insisted that they were valuable, and that the ill success of the business was attributable to want of expected money advances. Land had been sold. Property was in litigation.

In his letter of March 26th, Ewing says that the list of January 30th was “full and complete, except as to that then and now in litigation.” A. suit with one Bratt, in New York, is particularly mentioned. Miner declares, in the letter of January 30th, the matter “complicated,” and that he is determined “we will he rid of the annoyance and perplexity attending it.” These and other things appear, but the grave has closed over those who could have slated and explained all the facts, and the record keeps the silence they might have broken. We have not been unmindful of the testimony of W. A. Ewing, Mr.

Miner’s coexecutor, but he was not at this time active in the management of the estate, and did not reside at its headquarters; and a careful examination of his evidence, which we do not care to analyze, does not lead to any satisfactory conclusion at vaiiance with the statements in the papers in whose execution he joined. The witness testified 25 years after the transaction, and under the disadvantage of having naturally left the dealings with Sweetser to Miner, who had been particularly charged with their adjustment. Something is said of heavy advances shown by a memorandum book made up by Lytle, under Col.

Ewing’s direction; of differences of opinion between Col. Ewing and Sweetser “about the expenditure of this money for lands which Col.

Ewing thought were either worthless, or the title was not good;” of heavy losses in the Wabasha and Traverse de Sault matters; of Sweetser’s claim that more' money should have been advanced to protect and save these “vast interests;” of the witness’ view that the deed of December 11, 1866, was not valid as a conveyance, was yielded to Sweetser’s importunities, and filled with “Lytle’s buncombe.” But the fact remains, and is corroborated, that Miner was acquainted with the situation in all its details, and had been Ewing’s confidential man of business for years, while there was.no averment nor evidence against him of fraud or collusion in the premises.

And this is also true of Lytle, in commendation of whom, as well as of Miner, the dead man spoke, through his testament, in such emphatic.terms.' What apprehensions, if any, were entertained in respect of the title to the half-breed lands named in the declaration of trust, which ¡were conveyed to Ewing by Sweetser under power of attorney for the benefit of himself as well as Ewing; whether Col.

Ewing’s alleged advances were largely in other transactions, or were chiefly ¡made in connection with the lands enumerated in the deed of April '.30th; the nature and extent of the claims and counterclaims of the parties, and the reasons that prompted the adjustment arrived ¡at, notwithstanding Sweetser’s previous offers when negotiating with others for money advances,- — are all matters with which Miner was manifestly thoroughly acquainted when the settlement was made, but which the record, substantially, leaves to conjecture.

The memorandum book was not produced, nor were Sweetser’s receipts for advances referred to in the agreement of August 12, 1857, nor was the executors’ bbok of deeds prior to October, 1870, in which the conveyances in question were recorded for the information of all concerned.

When Hammond applied for a quitclaim of the legal title held in trust for Sweetser’s grantees in virtue of the settlement, Miner was still alive, and survived for several years thereafter; and the evidence of Holladay shows that, the destruction of the old books -and papers took piace between 1882 and 1886, they being considered as of no value.

The instrument of December 11th declares that it wa.s the executors who proposed to make the final compromise and settlement upon the basis of that conveyance, and that Sweetser accepted; -and we are not constrained, by any -adequate proof, to a result adverse to the adjustment so made, which could only be reached at the expense of the reputations of those who participated, and were permitted to end their labors without assault, until they wore no longer personally present to repel it.

As heretofore stall'd, we are of opinion that (he transaction of December was one transaction, and that the documents should be taken together, and regarded as delivered on December 11, 1866, in full settlement and adjustment. We cannot accede to the argument of -counsel that the deed of April ?>0th, and the release and deed of December 8th, are to be treated as independent of the deed of December 11th.

In his letter of January 30th, Miner wrote, if Sweetser made an acceptable proposition, “I shall require of you the surrender of the declaration of trust, and the canceling of the original agreements and amendments, and a release from all further claims against Col.

Ewing on account of the same.” But, as we have said, while Bweetser offered 8100, it does not appear that he agreed to (lie condiiions as stated, and the release executed covered, not only all liability to Bweetser, but to any one else, the assumption of all (he liabilities of the partnership, and an agreement to hold the estate of Ewing “free and entirely harmless from all suits, costs, and expenses in relation thereto.” To hold that a release thus comprehensive, the deed of December 8th, which was merely in compliance with the declaration of trust, and the deed of April 30, 1866, were delivered as a consummated, separate tramsa,ction prior to December 11th, would be irreconcilable with the giving of the note that day, the recitals of the latter deed, and the terms of the cancellation.

Besides, the language of the release itself appears quite conclusive in this regard.

It refers to the deed of April 30, 186(5, as having been given in the settlement of the affairs of Ewing and Bweetser, and recites that “in further settlement thereof” the conveyance of an undivided half has been “this day” made, and all the personal property of the concern in the hands of the executors delivered; and as it does not refer to the; deed of December 8th by its date, and that deed purported to be given under the power to convey real estate which had been disposed of, and not conveyed, and not in settlement, the inference is reasonable that the deed referred to is that of December 11th, intended to be executed December 8th, and, failing that, delivered contemporaneously with ihe release on the. latter day.

In the view we lake of the case, it is not material whether the deed of December 8th was within the power or not, nor that the deed of April 30, 18(5(5, took effect by relation; and, although the bill averred that the deed of December 8th was delivered on that day-in settlement “in part,” that averment does not, in itself, essentially affect our conclusion. It is said in Hammond v. Hopkins, 143 U. S. 244-250, 12 Sup. Ct.

Rep. 418: “Xo rule of law is Loiter settled tlian that a court of equity will not aid a parly whose application is destitute of conscience, good faith, and reasonable diligence, but will discourage stale demands, for the peace of society, by refusing to interfere where there have been gross laches in prosecuting rights, or where long acquiescence in the assertion of adverse rights has occurred.

The rule is peculiarly applicable where the difficulty of doing entire justice arises through the death of the principal participants in the transactions complained of, or of the witness or witnesses, or by reason of the original transactions having become so obscure by time as to render the ascertainment of the exact facts impossible.

Each case must necessarily be governed by its own circumstances, since, though the lapse of a few years may be sufficient to defeat the action in one ease, a longer period may be held requisite in another, dependent upon the situation of the parties, the extent of their knowledge or means of information, great changes in values, the want of probable grounds for the imputation of intentional fraud, the destruction of specific testimony, the absence of any reasonable impediment or hindrance to the assertion .of the alleged rights, and the like. ' Marsh v. Whitmore, 21 Wall. 178; Lansdale v. Smith, 106 U.

S. 391, 1 Sup. Ct. Rep. 350; Norris v. Haggin, 136 U. S. 386, 10 Sup. Ct. Rep. 942; Mackall v. Casilear, 137 U. S. 556, 11 Sup. Ct. Rep. 178; Hanner v. Moulton, 138 U. S. 486, 11 Sup. Ct. Rep. 408.” We think that the circumstances disclosed here require the application of this salutary rule to the attack upon the settlement. That settlement was made between Sweetser and the active executor, Miner, both of whom are dead. The papers were in the handwriting of the bookkeeper, Lytle, and he is dead. The deeds of December 8th and 11th were witnessed by Lytle and Kentner, and Kentner is dead.

The release was witnessed by Lytle and George W. Ewing, one of the heirs, and Ewing is dead. The books and papers which might have shed light upon the transaction were destroyed by Miner, with the knowledge and consent of the then trustee, Holladay, before the bill was filed, though not until 16 to 19 years after the settlement. There was no adequate evidence of actual fraud, the instruments were duly recorded, the means of information were originally abundant, no concealment or suppression was shown, and the record demonstrates the utter in-practicability of restating an account between the partners.

Evidence was given on both sides as to the value of the property in 1866, and thereafter, but it fails to convince us that at the time of the settlement the value of the half conveyed to Sweetser was so great as to raise any serious suspicion of fraud in that connection; and it is apparent therefrom that 17 years after, when the purchase was made by the company, the value had largely appreciated, while the enterprise upon which the company then embarked imparted an immense speculative increase.

By the settlement the property in question lost its partnership character, and became the separate property of Sweetser, and the principle of laches may justly be regarded as fatal to the maintenance of a suit to set aside that settlement, whether brought by the executqrs or the heirs,and devisees; and, moreover, without resting the decision on that point, we hold that defendants failed to overcome the presumptions in favor of the settlement arising upon the documents. • The answer treated as a cross bill did not seek an accounting and adjustment of the partnership affairs, and discharge of the partnership debts, if any, but a decree adjudging the legal title in them, free from any equities of complainant, and as if no settlement had ever been made, on the ground that the executors liad no power to convey, and that the settlement should be avoided because of fraud, and the absence of a state of facts justifying the executors’ action.

In respect of the issue thus raised, whether by way of defense or of affirmative relief, the burden was upon the defendants. The circuit court was right, and its decree will be affirmed. (October 4, 1893.)