Baldwin v. Richardson & Co.

33 Tex. 16

Opinion

Lindsay J.

At the suit of the appellants an attachment issued and was levied upon real estate, as the property of John M. Moore and J. A. Richardson, constituting a mercantile firm under the name and style of “ Richardson & Co.” The appellee intervened in the cause, and claimed the property by purchase from J. W. Vineyard, whom he alleged to have been the owner of the property at the time of the levy of the attachment. The firm of “ Richardson & Co.” was indebted to the appellants by note, in the suit for the recovery of the amount of which the attachment was sued out.

In regard to the proceedings on this attachment, the record presents about this state of facts: On the trial the intervenor, to manifest his title to the property attached, introduced a deed bearing date October 11, 1860, from John Low to “ Richardson & Co.,” duly proven and admitted to record on the fifteenth of January, 1861. He then offered in evidence a deed of trust from “Richardson & Co.” to N. Owen Vineyard, bearing date the twenty-fourth of July, 1868, and admitted to record upon the affidavit of one ©f the subscribing witnesses on the day of its date, and which was admitted to go to the jury by the court only upon the condition of the reiterated sworn statement of that witness before the jury; which statement was accordingly made, with the addition that he saw J. A. Richardson, of the firm of “ Richardson & Co.,” sign the deed, which he had been called upon to attest, and did attest; and that J. A. Richardson and John'M. Moore were then partners, trading and doing business together as a firm, under the style of “Richardson & Co.” The sheriff stated, that when he levied the attachment, on thé ninth of June, 1866, the appellee and one J. H. Moore were in possession of the property, carrying on business together as partners, and that the appellee then told him he could not levy on it because it was the property of J. W. Vineyard. Another witness proved that John M. Moore, the other partner of the firm of “ Richardson & Co.,” knew and approved of the making of the deed of trust by J. A. Richardson, and that it was executed to secure the repayment of a loan to the firm of $5000 by J. W. Yineyard; that he also knew of the sale under the trust deed. The deed made by the trustee to the purchaser, at the sale under the trust deed, was introduced, bearing date the fourth of March, 1865, which had been duly acknowledged ■by the trustee on the thirteenth of March of the same year, and recorded in the proper office. A deed from J. W. Yineyard, the purchaser and the beneficiary under the trust, was introduced, dated the third day of January, 1867, in which he conveys the property to the appellee, the intervenor in the cause.

The only real and important question to be determined in this controversy is the admissibility, as evidence, of the trust deed executed in the name of “ Richardson & Co.,” to secure the repayment of the loan of $5000 to the firm by J. W. Yineyard. Whilst it is readily conceded that a deed, executed by one partner in the name of the firm, is not, by the common law, a valid deed to bind the other partners, yet the execution of such a deed by the previous consent, or subsequent ratification of it, by the other partners, even in parol, may create an equity which no court of equity, whose business it is to dispense justice, will hesitate or cavil for one moment about enforcing. In this case the land attempted to be conveyed by one partner, in the name of the firm, was partnership property. This is made manifest, both by the deed of conveyance of the land to the firm, in the firm name, as well as by other positive proof on the trial. It made a part of the stock in trade of the partnership, and one partner could as well make contracts about it as another, just as well as he might about any personalty belonging to the partnership. It is too late now to question the well established doctrine, that real estate may be bought and sold by a firm, and held for partnership purposes, and as a part of the stock in trade. In short it is absolutely treated as personal estate. If it be thus considered as partnership funds, it is the subject of contract, as other partnership funds, whatever may be the forms of law required for perfecting the legal estate in its alienation. If there be a defect in the forms observed in its alienation, the firm, in its action as a firm, by its writing obligatory at least, passes the equity whenever the assent of all the . members of the firm has been given, whether verbally or in writing, antecedently" or subsequently, to the contract for its disposi-, tion.' It is subject to the same equitable rights and liens of partners and of creditors as the personal estate of the firm, and in equity passes to the personal representatives, rather than to the heirs, upon the death of the partners.

Real estate belonging to the partnership being treated as personalty, and each partner, by the common law view of the relation as well as by the consideration of the community of rights and of interest in the funds and effects, possessing the power to sell, pledge and dispose of all the personal effects of the partnership, his acts’ are as valid and binding in equity iu reference to creditors and other partners as well in relation to the realty as to the personalty, if such acts are done for purposes within the scope of the partnership. In such eases, the contracts in relation to the realty are obviously good for the interest of the partner contracting, and as the accredited representative of the firm, it is good as the act of the agent of the other members of the firm. This, however, is to be understood of partnership property; and tbe act or contract must be within the scope of the business of the partnership. When this is the nature and character of the transaction, it creates an equity in the person who trusts the acting partner in the negotiation. The real estate is chargeable in equity with the partnership debts, whether those debts be made by contracts having direct reference to the specific real estate of the firm, or simply to the general stock, funds or effects of the partnership. In the language of Chancellor Kent, .“each partner, in ordinary cases, in the absence of fraud on the part of the purchaser, has the compíete jus disponendi of the whole partnership interests, and is considered as the authorized agent of the firm.” Whatever may have been the limitations upon the powers and rights of partners over the partnership property by the Roman or civil law, the common law, which is the rule of decision to control this court, when not altered by statute, imposes no such restrictions as will impede all facility in the transaction of commercial business, and which may operate most inconvenienly to the public. It is true that the civil law imposed a restriction upon each partner about contracting debts to bind all the partners, or to dispose of more than his share of the partnership property, unless a special authority was so delegated in the terms of the partnership. But no such rule obtains in the common law, in which each partner is the general - agent in the administration of the partnership. It seems right that it should be so, because the relation is based and established upon the mutual confidence and trust of the several members of the firm, and the public deals with them in reliance upon such mutual trust and confidence. • If this be the power of each partner over the partnership effects, and real property may constitute a part of those effects, then one partner may make an assignment in equity of the realty, either to secure an antecedent debt or to provide for debts thereafter to be contracted on account of the firm.

Although the instrument of writing executed by one member of the firm of “ Richardson & Co.,” as a security for the $5000 borrowed for the use of the firm, did not, according to the rule of .the common law, (and it is by that law this case must be decided,) pass the legal title, it created an equity against the firm, who then held the legal estate in trust for the lender of the money, and which the lender could unquestionably enforce against them, and all persons deriving title from them, having notice of the trust. It was, to all intents and purposes, an equitable lien upon tbe property, and neither creditors, nor subsequent purchasers, with notice, could successfully controvert or defeat it.

It being, therefore, clear that this writing, in the firm name, by one of the partners, created a trust in favor of the creditor, the lender of the money, it remains to be considered whether the attaching creditor had such notice, actual or constructive, as will defeat his right to subject the property to his demand.

The instrument of writing purporting to be a deed of trust, executed by one of the partners in the name of the firm, was proved before the recorder by one of the subscribing witnesses thereto, and was duly and regularly recorded. By the statutes of registration all bargains, sales,- deeds, conveyances, liens, legal or equitable, bills of sale and other instruments of writing, may be recorded in the clerk’s office of the county court of the proper county. The registration of any equitable title is constructive notice to all creditors and subsequent purchasers, provided it be of such an instrument as is authorized by law to be registered; and by the registry act of this State almost every conceivable character of written instrument, which embraces a contract, or confers a right, legal or equitable, is authorized to be recorded, upon proof by subscribing witnesses or acknowledgment by the maker.

' This deed, then, of “ Richardson & Co.,” passing, as it did, an equity to J. W. Vineyard, and creating a lien for the repayment of the money borrowed for the benefit of the firm, being prior in. time was prior in right to that of the attaching creditor. As the evidence of the equity, of which the appellants had constructive notice, it was á legal instrument of proof, under the system of judicial proceeding in this State, for the establishment of the prior lien of the vendor of the intervenor in this cause. The judgment of the court below is therefore affirmed.

Affirmed.

Morrill, C. J.

The requisites of an instrument for the conveyance of an estate of inheritance or freehold, or for a term of more than, five years, in lands and tenements, are :—

First—That the instrument be in writing.

Second—That it be signed by the party or parties making the same, and be delivered.

Third—That it be acknowledged by the maker or makers; or proved by a subscribing witness.

Fourth—That it be lodged with the clerk of the county court, to be recorded. (Arts. 997, 5087.)

The method of acknowledging an instrument of writing for the purpose of being recorded, requires the grantor or person who executed the same to appear before some officer authorized to take such acknowledgment, and stating that he had executed the same for the consideration and purposes therein stated. ^Art. 5007.)

The proof of any instrument of writing, for the purpose of being recorded, shall be by one or more of the subscribing witnesses personally appearing before some officer authorized to take such proof, and stating on oath that he or they saw the grantor, or person who executed such instrument, subscribe the same ; or that the grantor or person who executed such instrument of writing acknowledged in his or her presence, that he had subscribed and executed the same for the purposes and considerations therein stated; and that he or they had signed the same as witnesses, at the request of the grantor, or person who executed such instrument. (Art. 5008.)

These are statutory provisions, and the reason thereof is obvious. In order that every person may know where and in whom the titles to real estate are vested, and may have assurance of good title in the purchase of the same from the ostensible owner, the statutes require titles shall be publicly recorded. At the same time, lest these statutes, being designed to prevent fraud, should be productive of fraud, it is further provided- that if they are not recorded they shall still be deemed good and valid, as between the parties and their heirs, and as to all subsequent purchasers with notice thereof, or without valuable consideration (Art. 4988) ; but, unless recorded, shall be void as to all creditors and subsequent purchasers, for valuable consideration, without notice. (Arts. 4988, 997.)

The equitable provisions of the statute are equally obvious. While- one who has no claims as a creditor of the -vendor, and who has actual knowledge of a sale of land, is not permitted by connivance with a vendor to defraud a purchaser; on the other hand, one who, by refusing to comply with the registration act, permits another to incur debts, upon the supposition that the debtor is the real owner of real estate, or who would prevent a creditor from making the property of the debtor liable for a previous debt, is entitled to no favor unless he complies with the requirements of the statute. The protection of creditors has received the same legislative favor in this State as in the other States, as is apparent from the statutes concerning frauds and fraudulent conveyances, as well as the acts upon registration.

The first question - for consideration is, was the deed duly probated for registration ? - The proof required by the statute is that a subscribing witness shall make oath that ‘‘ he saw the grantor or person who executed such instrument subscribe the same,” etc. The proof in this case is that the subscribing witness “ saw Richardson & Co. sign the same.” It is admitted that Richardson & Co. was the name of the firm, and not the name of either of the members. It is further admitted that the person and the only person who signed the deed was J. A. Richardson, who signed the firm name to the deed. Richardson did not purport to execute the deed for or as agent of Richardson & Co. If he had so assumed or had executed the instrument, then, by proof that, the witness saw him execute it, the probate would have been good. It is the person who really signs’ the deed whose act is to be proved, and whether he signs as agent of another or of a firm, makes no difference. The witness does not say that he saw J. A. Richardson sign it, but- that he saw Richardson & Co. sign it. He stated what Could not be true, and what it is admitted is not true; because Richardson & Co. is the name of a firm ; it is the name of what has no animal existence; goods may be bought and sold by Richardson & Co. by any one having power to do the business of the firm; that is to say, by either of the partners. Each has the right to sell the goods belonging to the firm, but neither of them singly is identical with the firm. Richardson can represent Richardson & Co., and so can Moore the other partner; hut to say that Richardson is the same as Richardson & Co., and that Moore is the same as Richardson & Co., would make Richardson and Moore identical; or, to take the case, before us, we could not know who signed the deed from what the witness deposes; it might be either or neither, and the witness does not tell the name of the person who signed it, for, although there is a person by the name of J. A. Richardson and another by the name of John W. Moore, there is no person by the name of Richardson & Co.

The framers of the statute had in view the fact that a deed is sometimes signed by the grantor in person, and sometimes through an agent. It therefore provides for the acknowledgment or proof of the one actually signing the deed. The execution of the deed must be proved, and whether executed by principal or attorney, it matters not, as the deed itself explains that.

This deed was not legally recorded, because the subscribing: witness did not say who signed it, and the registration is a nullity;

■ As the deed was not legally recorded, the creditors had no constructive notice, and as to them it was void. (1 Story’s Eq., $ 404; 10 Pick., 72; -1 John, Ch. 300; 5 Green, 272.)

‘‘ A deed duly recorded is constructive notice of its existence and its contents, to all persons claiming what is thereby conveyed' under the same grantor by subsequent purchase or mortgage; but not to other persons. Thus, where one of several co-tenants conveyed the entire estate by deed, which was recorded, it was held not to be a constructive notice to bis co-tenants of such deed, inasmuch as they did not claim under him.

“ But the record of a deed is not constructive notice of its existence or contents, unless all the prerequisites, such as its acknowledgment and the like, have been complied with; nor would it be constructive notice if the deed were on record in any way not authorized by law; and the same would be true of any instrument not required by law to be recorded. It is also true that the registry of a defective deed is no notice of title to any one. If defective in the formal requisites of its execution or proof, it is not entitled to registration at all.” (3 Washburn on Real Property, 285.)

If the parties appellant were either J. A. Richardson,, or John W. Moore, or their heirs, or their subsequent purchasers, with notice of' the trust deed, then the provisions of the statute would not allow them to call in question the trust deed; but as they represent, and are creditors, they are expressly excepted by the statute. If the statutes of our own State are not law, or if the courts of the State can directly or virtually set them aside because, they are inequitable according to our ideas of equity, or for any other reason than because they are unconstitutional, then I should, be compelled to withdraw my dissent to the opinion of the majority - of the court.

I do not propose to discuss this question. It is not the duty of a court to refuse to enforce a positive statute because it seems inequitable or to involve equitable principles in the construction of the plain requirements of statutes.

“ The discretion of a judge is said to be the law of tyrants; it is always unknown; it is different in different men; it is casual, and depends upon constitution, temper and passion. In the worst,, it is every vice, folly, and passion to which human nature is liable.. Optima lex quce minimum relinquit arbitro judiéis ; optimus judex qui minimum sibi. (Bouvier’s Law Dictionary, page 428.)

This is sufficient to dispose of the case. But the deed, signed-by one of the firm only, whether in his own name or the name of the firm, is inoperative to convey the real estate of the firm. It does not follow, as a necessary consequence, that because real property can be conveyed to a firm, in their firm name, that it can be conveyed by the firm in the same way. Infants, persons insane, and persons under other disabilities, can receive a deed to land.

In order that every person may know the validity of titles to real estate, and that contracts therefor may not be hindered or de-feated, and that frauds may be prevented, the statutes require that the titles shall be conveyed by writing. Whoever owns it must convey it, either directly or through an agent, and if by an agent, this agency must be in writing. The land belonging to a partnership, if conveyed, must be conveyed by all the members of the firm. And here is the difference between a partnership and a corporation. The latter is a legal, statutory, single person, possessed of an immortal body. A partnership has neither body nor soul. Because a corporation is a statutory body it is empowered, by statute, to convey real estate; and e converso, because a partnership is not possessed. of either such animal or statutory body, it cannot speak, write or do anything, except by its agents, the partners.

When Richardson signed the name of Richardson & Co. to the trust deed, the utmost that was conveyed was his individual interest in the land mentioned in the deed. I do not wish to be understood as saying he conveyed anything, for that is not before us.

In Story on Partnership, § 94, it is said: “Each partner is required, both at law and in equity, to join in every conveyance of real estate, in order to pass the entirety to the grantee; and if one partner only executes it, whether it be in his own name or in that of the firm, the deed will not ordinarily convey any more than his own share or interest therein.” (Coles v. Coles, 15 Johns., 159, 161.)

One other great American author, Parsons, in his- work on Partnership, p. 376, says: “No partner, and no proportion of the partners, can sell Or transfer the real estate of the firm outright for money, or by way of mortgage to secure a debt, or to assignees in trust for debts, without the consent and authority of the other partners.”

The author had in view the case of a partner holding the title of the property in himself in trust for the partnership, as he adds : “On the first point, that he who happens to have the legal title cannot sell the real estate without the consent and authority of the rest, so as to give title to a grantee having notice, we are quite sure that must be the law.

“ He (or partner) may contract debts and make contracts, which will indirectly reach the realty, because this must finally be subject to the debts of the firm. But he cannot directly convey or appropriate it, excepting so far as he has the legal title in himself. ’

■The difference, as I understand the case, between the opinion of the majority of the court and myself is, that the court places creditors in the same position, as to their rights, with heirs and subsequent purchasers, with notice or without consideration. The court decide upon what is called equitable principles, and I confine, myself to the statutes.

What the partners may have done or said, either to each other or to anybody else, cannot supply the requirements of the registration act, so as to affect creditors. What the sheriff told the attaching creditors, for the same reason can have no effect or influence, and is not evidence.

Even had there been a deed made by both partners, and recorded without the proof of its execution, creditors could not be affected thereby, or restrained from attaching the property conveyed, as we have already shown by authorities unquestionable.