Updike v. Doyle and Others

7 R.I. 446

Opinion

Ames, C. J.

The exceptions to this report, which have been most strenuously urged upon us at the argument, are, in substance, that the master has taken the accounts which he was directed to take by the decree appointing him: and are rather objections to the decree as not supported by the -allegations of the bill, than to the master’s report. The master, with a correct view of his duty, as an officer of the court, to obey the instructions of the court, took the accounts he was directed to take; and, certainly, in this respect his report is unexceptionable. Without doubt, a decree may be wi-ong; but that is a matter to be attended to when it is entered up; or, if afterwards, it is found that it will uselessly involve the parties in an expensive hearing before the master, application should be made to the court to reform it in the objectionable particulars; but as long as it stands, it is imperative upon the master, who, if he would assist the court in the matter committed to him, must assist them in the way in which they have invited his assistance. ' If for no other reason, this class of exceptions to the master’s report must boverruled; since he was right in reporting in conformity to the decree, though the decree may be wrong in directing him to examine into and report upon what it directs.

These objections proceed, however, upon an entire misconception of the case of the original plaintiff and misapprehension of the bill which he filed to redress it. They treat the former as if it was a case in which none but the plaintiff and defendants were interested, and the latter, as if it were a mere bill to establish ¡a legal title in the plaintiff to the Coddington Mill estate and property. The case of the plaintiff was of far wider scope than this, and his bill was aptly framed, to meet it. His case was, shortly, that having formed a copartnership, by articles, with the defendants, Dojle and Bishop, to carry on the manufacturing business, as. the Rhode Islan^ Manufacturing Company, and having purchased and paid for, and assumed heavy liabilities upon the faith of, a deed of one-third of that company’s estate and property subject to its debts, which was executed and delivered to him -by Doyle, that Doyle and Bishop took advantage of his absence on a distant journey, and suppressed the deed, which Doyle had received from him to put on record, and the articles of copartnership, which, he had possession of as treasurer and agent of the company, and totally excluded him, both from the property he had purchased and the copartnership which he had entered into with them. Not only this, but Doyle had sold and conveyed anew to the Rhode Island Bleaching and Cambric Works, — a corporation of which Bishop and the defendant Jackson were the sole members, — the same third of the Coddington Mill estate and property which he had before sold and received the consideration for, from the plaintiff, — the corporation and its members Having actual notice of His copartnership and prior deed. The bill was filed on the 9th day of December, 1856, a month after Doyle, — who had become, or was always, insolvent, — had retired from the firm. Bishop had also published his dissolution with it, and had set up a new firm, called the Touro Manufacturing jpompany, composed of himself and the Cambric Works, which had possessed itself of all the property of the Rhode Island Manufacturing Company, and was -using it for the purposes of his new firm. Now the bill, in substance, states this case, and asks that the right of the plaintiff, as a purchaser of one-third of the Coddington Mill estate and' property, subject to the debts of the Rhode Island Manufacturing Company, and as a copartner in that company, may be established against the Cambric Works as a subsequent purchaser with notice: that a receiver be appointed to collect and receive the debts due and coming to the Rhode^ Island Manufacturing Company, and - the defendants enjoined from meddling with the same, and from operating the Coddington Mill and machinery; that an account be taken of all the copartnership dealings and transactions, and of the moneys paid and received by the complainant, Doyle and Bishop, respec tively, and that Doyle and Bishop be decreed to pay to the complainant what might appear, upon the taking of the accounts, to be due to him from them, and concludes with a prayer for general relief. The bill, in other words, is, in its statements and prayers, as it was necessary that it should be for the relief prayed, a bill for the complete administration of the property of a dissolved copartnership, in which an account is to be taken, both of its property and debts, and as between the copartners, in order that the- plaintiff might have what he prayed for, — relief against the copartners who had excluded him. In order to this relief, according to the rules of equity, the portion of the copartnership property to which the plaintiff was entitled, was only the share due to him, after the copartnership debts were paid, and the balances struck between him and his copartners.

Upon the hearing of the bill, the court decided, upon the proofs, that the plaintiff was entitled to the relief prayed for, established the plaintiff’s title to one-third of the copartnership property, and his rights as a copartner, appointed a receiver of the copartnership property, and a master to take the accounts necessary to show what the same, and'value of the same was, and what had been done wjth it, who had been, and who were, the creditors of the firm, and the amount of the debt of each. In this the decree went no further, at least, than was necessary to administer, with due attention to the rights of all interested, the assets of the dissolved firm, and to ascertain the sum, if any, which was to be paid to the plaintiff by his copartners who had wrongfully excluded him.

The creditors were not, indeed, parties to this bill or decree; but as the latter provided for the ascertainment, in order to the payment of their debts, they were interested in it. Any creditor could avail himself of it; and after it, could be enjoined from proceeding at law for his debt, for the very reason, that the decree opened to him a mode of recovering it. In Clarke v. the Earl of Ormonde, which was a bill filed by devisees and legatees, for the execution of the trusts of a will, insisting that certain Irish estates ought to be sold to x>ay debts and incumbrances, in relief of services of plate and other effects specifically bequeathed, a decree was entered, directing, amongst other things, a general account of the testator’s property and debts. After the decree, upon a motion made in the cause, to enjoin certain creditors of the testator from proceeding at law to levy on the testator’s property, and for other purposes, Lord Eldon said, “ Ever since the case of Morrice v. Bank of England, Cas. Temp. Talb. 217, it has been the settled doctrine of the court, that when a decree has been obtained for payment of creditors, it is in the nature of a judgment for all; and. the court, therefore, will not permit any particular creditor, by proceeding at law, to disturb that administration of assets, which this court, in the execution of that judgment for all creditors, will decree; and the court not being in the habit of taking the word of any one as to the amount of the assets or of the debts, till it has a report finding what they are, and considering that, equal justice must be done to all, will not, in the meantime, allow any to touch the assets. Even if the creditor has got a judgment before the decree, though he may come in and prove as such, he must not take out execution.” Clarke v. Earl of Ormonde, 1 Jacobs, 108, 123, 124. See, also, Wilson v. Wetherherd, 2 Meriv. 406; Shewen v. Vanderhorst, 2 Russ. & Mylne, 76; 1 Ib. 348; Handford v. Storie, 2 Sim. & Stu. 198; Waring v. Robinson and others, Hoffman’s Ch. Rep. 524, 529, 530; Rogers v. King, 8 Paige, 210.

During the term succeeding that in -which this decree was entered, the plaintiff’s assignees, who before the decree had been made parties to the bill, settled their claim upon the defendants, and sold to them all their interest in the copartnership property, and then came into co'urt and directed the cause to be entered upon the docket as “ settled.” Certain persons claiming to be creditors of the firm, by petition, apprised the court that this had been done without their knowledge or consent, and in derogation of their rights, when the court,-r-no decree dismissing the bill having been entered, — ordered the entry of “ settled” to be stricken from the docket, and sent the case to the master to make the examinations and report upon the matters directed by the decree.

The objection to the course pursued, in this respect, supposes, that because not parties to the bill, though interested in the decree, thevcourt had no right to act thus upon the petition of the creditors; that the case was wholly in the disposition of the parties, notwithstanding the decree, and that the creditors should be left to pursue their remedies otherwise, as they were advised. This does not strike us as just, or in accordance with the course of chancery.

Already, as we have seen, the creditors of the firm had reasonably waited for the administration of its assets in their favor through this bill; and after the decree, would have been compelled to wait for the account provided for them by it. The decree is their decree, as well as of the parties to the suit, and without their consent, the bill can no more be dismissed by the other parties, than by the plaintiff without the consent of the defendants; or by the plaintiff and one of the defendants, without the consent of the other defendants. All parties, and all persons interested in a decree entered in a causexin chancery, have aright to insist upon its execution, and to the aid of the court in' executing it. Waring v. Robinson and others, sup.; Shewen v. Vanderhorst, sup.; Handford v. Storie, sup.; Williamson v. Wilson, 1 Bland. 418, 424-428, 430-432; 2 Daniell’s Ch. Pract. 930, n. 1, and cases cited.

' Not only, therefore, was the master bound by the decree to take the accounts directed by it, but the decree itself conformed in the particulars objected to, to the equity of the case and the allegations of the bill; and the court, in striking from the docket the entry of “ settled,” when apprised by the petitioning creditors of the injustice attempted to be done to them, acted only in accordance with its duty.

The principal remaining creditors of the copartnership, or who claim as such, are not those whose debts originated after the 1st day of September, 1856, when the articles were signed, but those whose debts were contracted prior to that time, when Doyle was carrying on business alone, as the Rhode Island Manufacturing-Company; and these are contested by Bishop the defendant, as debts of the firm. The master has reported these debts separately from the acknowledged copartnership debts, and submitted the question to us, upon the proof taken and returned by him, whether they are the debts of this copartnership ?

Certainly, they were originally the debts of Doyle alone; and the matter left for our decision is, whether they were assumed by the incoming partners, Updike and Bishop, as debts of the firm. They all pertain to the business of this mill, and were reckoned in the cost of, or supplies to, it. Incoming partners may assume the debts of the concern with which they connect themselves; and this assumption may, both at law and in equity, be proved, either by their express covenant or contract, or be inferred from the terms of it, or from the treatment of such debts by the firm, to the knowledge of the incoming partners, as the debts of the new firm. Collyer on Partnership',' §§ 239, 520-526, and cases’ cited.

The evidence upon this matter reported to us by the master is derived from both sources of proof, direct- and inferential, embracing the original proposition of Doyle, in writing, to sell Updike and Bishop, each, one-third of the concern, and by them in like manner accepted, and the fact that the books were kept, and this class of debts paid by the firm as they came in, with its own debts, precisely as if the incoming partners had been partners from the time when Doyle-first bought, and began to prepare for operating the Coddington Mill.

The proposition of sale is based upon the idea of an equal copartnership between the proposer and those to whom it is addressed, of which he is to remain, at a salary, the-managing partner or agent, and contains clauses, applicable both to the sale and terms of sale, and to the past and future management of the concern. It begins by proposing to sell to Bishop and Updike, each, one-third of the concern known as the Rhode Island Manufacturing Company, “ they taking the concern from the time I bought it, — say April 10th, 1856, — and pay me one-third, each, of the cost of the establishment, from that time to the present; the cost to be taken from the books of said establishment, which are open, and vouchers for each to be given, if required.” He then goes on to refer to the books and to a trial balance from them up to September 1st, showing the cost of the estate to date, so far as bills Time been rendered. He then estimates the amounts of different outstanding accounts, but adds, if they exceed, though he shall be able to give vouchers for the same, he shall not expect to be held for any excess. After speaking of the state of his personal account, with the concern, and in another place, of the amount which he shall expect to draw by reason of it from the concern, he again calls the attention of his proposed partners and purchasers to the bills payable account, its gross amount, and to whom due, and enumerates, amongst these claims, some of the very debts which are now contested. As to outstanding claims for work of different kinds, done or in progress, he gives the terms of payment — credit or cash — as matter interesting to the purchasers. After other remarks explanatory of the books, and of his proposed ’management of the concern as its agent, he adds, beneath his signature, these words : “ I shall, of course, expect the purchasers to be bound for any contracts that I have made for the concern.”

Now, this offer in writing is expressly accepted in writing, by both Bishop and Updike, who sign the acceptance jointly with Doyle, each agreeing to pay one-third of the cost of the estate on the terms mentioned, and to pay their respective portions of the cost from said April 10th, — about $17,000 in November; $10,000 in December, 1856; $15,000 in February,' 1857, and $10,000 in April, 1857, and the balance as may be deemed necessary for the use of the company.

No one can read this offer and acceptance without perceiving that the parties contracted upon the basis that the incoming partners were to be received as partners from the beginning, entitled to its property at cost, subject to its debts and contracts due and to become due, and for that reason, entitled to know from the books and suppletory explanations of the seller, the precise condition of the concern as to its debts and property on hand. Excluding the closing words of the proposition, we should come to this conclusion; but it seems to us that these words put the question beyond doubt, being large enough to cover all past liabilities contracted by the seller for the concern. When to this are added the facts, that the books of the firm went on, without any line of demarcation, precisely after as before the accession of these copartners — that the prior debts were paid equally with the subsequent — we are compelled to the conclusion that the property of the Rhode Island Manufacturing Company was purchased by Bishop and Updike, subject to its debts, which are to be paid out of it, and by them, equally with debts contracted after the signature of the articles, and before the dissolution of the firm.

The preceding covers the principal matters of this report; but there are two, in the first of .which the master asks of the court' the construction of its decree, and' the other, which is the basis of an exception.

The decree directs- the master to take an account of the value of the copartnership property, “ at the time of said conveyance from .said Doyle to said defendant- copartner as aforesaid, of all the dealing-s and transactions' of said corporation, and of the said defendants with the said copartnership property, including,” &c. It is obvious that the words “ defendant copartner” should read “ defendant corporation,” as well from the context, as because this was the period when, the property of Updike in the firm was wrongfully converted by the joint action of all the defendants, through Doyle’s deed, to the use of the Rhode Island Bleaching and Cambric Works, — the corporation intended, — and for this amount Updike would have been entitled to a decree against all the defendants. The master has returned the value of the firm property both at this date, — October 27th, 1856, — and at the date of Doyle’s deed to Bishop, — September 27th, 1856; but as Updike’s assignees have sold out all his interest in the copartnership property to Bishop, it seems to us, that for all the purposes of the enquiry, — to ascertain Updike’s surplus, — the difference, if any, can be of no importance.

This disposes, too, of the exception to the master’s allowance of the item of fl0,448.16, in the master’s report, of the value of the firm property at the above date of Doyle’s deed to Bishop,— this sum being found by thfe cash-book of the company to be on hand at that date. If this were otherwise, however, we see no reason from the evidence reported, to disturb the master’s finding, that at that date,' it represented fairly the cash of the company on hand.

The conclusion is, that the several exceptions to the master’s report be overruled, and the report confirmed; and that the decree, as to the questions submitted to us by the master, conform to this opinion.