421
froro the frame-work of this bill,the absence, of any prayer to foreclose,' the course of the .argulllent, and tlie whole case, that plaintiff was driven to assume. a righ t to foreclose as the best possible ground upon ",hich to predicate the demand for a receiver; the real objection being dissatisfaction with its contract, as subsequent events developed itsweakness, and its purpose and endeavor to escape the consequences of a. misadventure in getting control of the enterprise. Railof adventroad mortgages are sometimes used as an Urous speculation rather than a safe security for money advanced, and while the courts should use every possible endeavor to save to the utthe security, when properly called on to do so, they most the should not suffer themselves to become likewise an instrumentality of adventurous speculatora seeking to use the courts as weapons of offense in the warfare that goes on among themselves. Courts should be confined strictly to the domain of courts of law and equity engaged only in the busines of settling, according to the established rules of law and equity, the controversies that arise and. come within the workshop of jurisprudence, but not those that lie outside and within the arena of gladiatol'ial strllggles for business advantages and speculations. The plaintiff here does not like-arid perhaps is alarmed, possibly, not without cause, at-the conduct of their joint enterprise by the defendants; but that dislike and alarm do not furnish any solid basis of interference by a court to appoint a receiver to quiet that alarm. We cannot look only to the mortgage, and shut our eyes to the other contracts and transactions between the parties from ;.vhich it appears that they, were joint adventurers in an enterprise of which this mortgage contains only a part of the agreements and stipulations. Looking at thero all, we do not find that the plaintiff is certainly now entitled to foreclose the mortgage, and to a receiver pending that foreclosure. Motion denied.
SPRAGUE MA.NuF'G
Co. and another
'V.
HOYT
and others.
(Oirtntit OO'Urt, D. Oonnecticut 1.
December 18,1886.)
PARTNERsHIP-PARTNERSHIP PROPERTy-TITLE II!i PARTNER-HEIRS SUBJECT TO PARTNERSIItP TRUST. "
., ,'FEDER:A.L REPORTER.
Su,b,s,e" c,hanged into ,a cO,rp,oration. and the varl, ,ous interests in tlie property cc)Uveyed to the!l0rporation in .for stock, all by the 'consel1tand agreement of all mterested; the mlnors bemg 'represelltedin the transaction by their ,legally appointed guardian. Afterthe corporation failed, "nd its property was conveyed to plaintiff in trust for its creditors. Plail1ti1f.,by this bill. seeks to restrain the said minor heirs from bringing ejM'tment on the ground that the conveyances as to them were unauthorized. and for a decree giving him the legal title. Held, that W. S. held the legal title subject to ,the partnership trust, and that the heirs received the same subject to the
I. 8.
,
B.urm-:-PAllTNERSHIP REALTY, FOR PARTNERSHIP PuRPOSES. PERSONALTY.
Held. also, that, for,the purposes of the partnership, the real property was personalty. '
B.um-CORPORATIONFOIDlED OF PARTNERSHIP TAKES ITS EQUITIES IN REALTY.
4.
Held, also, that the corporation having been formed by consent out of the partnership. the corporation taking the property as well as the debts of the and the owners having the same interest in the property of the corporat!on that they had had in the partnership, the trans,action gave the the same equitable estate in the property in question that the partnershIp had had. POWER OF UNITED STATES
EQUITY-DECREE-CONVEYANOlil OF ,TITLE COURTS.
Held, als,0, that courts of equity of the United States for the district of Connecticut, having the power to administer thll remedies provided by a statute of the state of Connecticut, l!-nd by virtue of that statute to vest the' title to real estate by decree, without any act of the respondent, the trustee is entitled to a decree vesting in him the legal title to the estate.
In Equity. Charles E. Perkim, for plaintiffs. Jame8 McKeen. and Thornaa E. Stillman, for defendants. SHIPMAN,J. The defendants William S. Hoyt, Edwin Hoyt, Sarah H. Lee, and Susan S. Francklyn, being the four children of Mrs. Susan Sprague Hoyt, who was a danghter of William Sprague, Sr., together with the husbands of Mrs. Lee and Mrs. Francklyn, brought in the superior court for New London county four actions of ejectment against the complainants, each suit demanding the seizin and peaceable possession of one undivided eighth part of certain tracts of land in the town of Sprague, in this state, forming what is known as the "Baltic Mill Property," together with the water-power and water-rights appurtenant thereto. Edwin Hoyt's suit was brought by his next friends, he being alleged to bea person of unsound mind. These suits were removed to this court, arid are now pending therein. This is a biU in equity by the defendants in the actions at law to enjoin the plaintiffs therein from further proceedings in said ejectment suits, and to compel the respondents to convey to the complainants the legal title in said real estate which is now vested in the respondeQts, or to have the same vested in the by decree of this court. Nearly aU the facts in this case are stated in the opinion of the supreme court in Hoyt v. Sprag·te,' 103 U. S. 613. The partnership, in the business of manufacturing, of Amasa Sprague and William Sprague, Sr., under the narne of A. & W. Sprague, before the year 1843; the death of Amasa Sprague, in 1843, leaving a widow, Fanny'Sprague"who was his
· A.
&;
W. SPRAGUEMANU}"G
co.
11. HOYT.
4.23
administratrix, and two sons, Amasa and William, and two daughters; the continuance, under the same name, of said business, with the joint capital, arid: the enlargement oUhe business, and oithe joint property, under· the active management of William Sprague, Sr.; his purchase of the interestof one of the daughters of Amasa; the taking into partnership,shortly before the death of William, Sr., of his Bon, Byron, and Amasa Sprague and William Sprague, the two sous of Amasa, Sr.; the death of William Sprague, Sr., intestate, in October, 1856, leaving a widow, Mary Sprague, who was his administratrix, one son, Byron Sprague,alid' the four children of his deceased daughter, Mrs. Hoyt, who ate the present defendan.ts; the non-settlement of the estate of WilliamSptague, Sr.; the continuance of the firm of A. & W. Sprague by Byron, Amasa, and William,Jr., with the consent of the two administratrixes and Edwin Hoyt, the father of said children, that the partnership estate should be continued in the business of the firm as before; the purchase by Amasa and William, in 1862, of the interest of Byron and the dtber daughters of Amasa, Sr., so that the only personstbereafterinterested in the firm property Were the widows of Amasa, Sr., and William, AmasfC,and William, Jr., and the defendants; the appointment, in February, 1857, by the probate court for the town of Warwick, of Mary Sprague, the grandmother of aaid four children, as their guardian; the chartering, in 1862, of the A. & W. Sprague Manufacturing Company; its organimtion, in 1865, for the purpose of holding and managing all the property ofthe firm, except that which was known as the "Quidnick Company Property;" the petition of Mary Sprague,.guardian of the four defendants, and of Edwin Hoyt, their father, to the legislature of Rhode Island, asking authority to vest in the corporations to be formed the title of the said four children in the firm property of A. & W. Sprague; the resolution'giving said authority; the important agreement ofApril 1, 1865, appointing Messrs. Thurston and Gardner referees to examine the entire property of said firm, ascertain its value, and the amount of each party's interest therein; the report ohaid referees; the order of the court of probate, upon the petition of Mary Sprague, guardian, empowering her to make conveyance to the A. & W. Sprague Manufacturing Company of all the right and title w4ich said four children had in and to the propertyand assets of A. & W. Sprague other than the Quidnick property; the conveyance, on August 9, 1865, by Fanny Sprague, individually and as administratrix, by Amasa and William Sprague, and by Mary Sprague, individually and as administratrix,-and as guardian, of all the property of said firm, except the Quidnick property, to said corporation; the allotment of stock therein to said guardian in accordance with tbeirinterest in Baidproperty; thesettletnent of the guardian's account; the delivery to Sarah S. Hoyt of the amount of their interest in the estate; sundry faCts in regard. to the acqUiescence of WilliamS.Hoyt and his two sisters in the transfer of,· the property in Rhode 'Island to said corporation; the subsequent insolvency of said cOrporation, in 1873; and the conveyance to Baid Chafee, in trust for its crOOitors,-are stated in said opinion.
· FEDE1tAr. REPQRTER.
OhApri117; 1847, Fanny Sprague, acting for herself and her miner childrea, and Mary Anna Sprague, one of her daughters, agreed with WiHiamSprague, Sr., that he might retain the possession of all the partnership property, and use and ,employ the same in the prosecution of the business formerly carried on hysaid firm of A. & W. Sprague, using the firm name, and conducting the busiu.ess for the mutual benefit of himselfand of the widow and cbildren· of Amasa Sprague, until September 12,1851. This contract'l'I'as subsequently ratified by Almira Sprague, the daughter of said Amasa. William. Sprague, Sr., purchased, withcopartnership 6rjoint funds, fUld for the business of A.& W.Sprague, the lands now known as the " Baltic Mill Property," between June 20, 1856, and September 30, 1856, receivell deeds thereof in his own name, and commenced, in th<;l. sum" mer of1856, to :build an extensive factory thereon as a part of the joint property. The lllillwas complp,ted by. the firm in 1857', after the death of said William, Sr., and about a million dollars of partnership money was expended thereon. The manufacture of print cloths was carried on there, bothiby the firm and, by the corporation, until the failure of the latter, in 1873. These cloths were "finished" at the print-works of the firm, in Rhode Island.. The referees appraised the Baltic. mill property, llind included its valuation in the assets of the firm.. The property went into the possession of the corporation under the ronveyance of August ,9, 1865, and was thereafter managed by it, as its ,own, until its failure, and was then con-, veyed to said .Chafee, who eptered into possession thereof, and expended upon it about $250,000 in the repairs of extensive damages which were caused by a flood. In deciding that, after the death of William Sprague, Sr., in 1856, the entire partnership e'state continued in the business of the firm, as it had been before, with the consent of those primarily beneficially interested, and without fraud; and that by such continuance, with consent, "the property became liable to the partnership debts subsequenUy incurred, as well as to prior debts;" and that Mary Sprague, as guardian, was authorized by the legislature of Rhode Island, and by the probate court, to convey the interest of her wards in all property situate in Rhode Islandtt> the A. & W. Sprague Manufacturing Company, by way of investing the said interest in its capital stock; and that her conduct was without fraud; and that the proceedings taken by the parties to effect a transfer of the partnership estate to the corporation were substantially regular,-the supreme court disposed of.nearlyall the important questions which exist in this case. The defendants insist that the property which is the subject of this suit is real estate situate in Connectiout, and that neither the legislature of Rhode Island, nor the proba.te court, had the power to authorize Mrs. Mary Sprague, as guardian,· to convey the real estate of her non-resident wards which was situate in another state.. It the defendants, at the time of the conveyance j owned real estate in Connecticut, the plaintiffs concede that the deed of Mrs. Sprague, either as administratrix qr as their
A. <It W. SPRAGUE
v.
BOYT.
4'25
Rhode Islanc1 guardian, could 110t convey such land. It is furtherniore that it was 'Ii conceded that they had the legal title, but it is bare title; that the land was partnership assets, anq was and is, for all partnership purposes, to he treated as personal property; that the equitable title. was vested in the corporation by the deed of the suryiving partners and of Mrs. Mary Sprague, as administratrix; that Mr. Chafee is properly vested with the same title; and that the defendants should be comp¢lled to convey to him the legal title also. The defendants insist that the English rule of nn"out and out" conversion of real estate, which was purchased with partnership funds for partnership purposes, absolutely into personal estate, does I?-0t exist here, and that,' by the. established doctrine of the courts of this country, the tenure of partnership real estate. which stands in the name of a deceased partner will hot be disturbed in. equity, except so far as is necessary to pay partnership debts, and adjust the' rights of the partners between themselves, which was not attempted to be done in this case. But they say thatnelther the English nor the American rule ispertinent here, because the property was not, accurately speaking, pitrlnership capital. It wasllllrchased by William Sprague, Sr., anel the entire business was carriedol1 by him alone, for the of himself and his brother's family ... They further say that althotigh, in its inception, this real estate waS-: riot, li6curately speaking, partnership capital, they do not dispute that the same ieasonswhich lead courts of equity to treat such capital invested real estate as .personalty, in settling partnership affairs, would have led to the treatment of this as personalty, in a suit which might have been instituted to wind up the business; but no such proceeding waS taken. They further say that it may be that a valid adjustment of accounts could have been made between the administratrix and the surviving partners which would have involved a release, valid in equity, ofher deceased husband's interest in the Baltic mill property, but nothing of that kind was done or attempted; that, in the contemofall the parties, the estate of the children in the mill was completely vested in them, and the attempt was to put the title thereto in the by a direct transaction with the Rhode Island guardian. They say that, in so far as William Sprague, Sr., was the owner in his own right ofthis property, the title thereto, legal and equitable, went to his heirs; so far only as he was a trustee for others, to that extent his heirs are trustees. I do not .think that much importance can be given to the fact that when the. mill-site was purchased William Sprague, Sr., was a sole surviving partner.. The land was bought between June 20, 1856, and September 30,1856, with the funds of A. &W. Sprague, for the enlargement of its manufacturing business,and became liable for its debts. Shortly before Mr; Sprague's death, which occurred October 19, 1856, he took his son, :Byron, and his two nephews, into partJier!'hip. The precise date doea not appear, but itwas probably after October 1, 1856. The mill arid :all!ts appurtenances were afterwards completed by the surat a' total expense of $1,000,000, paid from partnerShip viving
in
4.26 as jl. part of the extensive manufacturing busi. ness firm,. There was DC) separation of the Baltic property, as possessing a distinct character, from. the rest'of their property, and no valid be made between, this mill and the Rhode Island mills of the fi rtn, which were 1843.andJ856. All were equally and alike. partnership assets; and the interest of the Hoyt children in the Connecticut 'property was, both and before the transfer to the corporation, properly regarded as of the. same character as their interest in the Rhode IsJand .6$tate; thatia, it \Vas an interest in partnership stock. The next question is as to the, effect of the conveyance by the surviving partners ;,and Mary Sprague, as aqministrfl,trix, upon the children'sinterest ill the Baltic IDill property. It is not necessary to consider whether .the English rule in regard to partnership real estate has been or call be adopted in its, in this The principle which the decisions.o( the supreme court and of state courts of high authority is sufficient to Qontrol the case.. . In 104 which was a bill in equity to restrain of.tnedecease<l ,partner frompro13!lcuting a,ctions of ejectment ,the of partnership lfl,nd from the surviving partner, had been sold by hitn to pay partnership debts, the court saysthllt.the rightof:the partner iean equitable a.ccompanied by an and is an interest in the property which ,of chancery ,will,recpgnize' and support; and in reply to the question, ",What is the.. the courl furthe(says, "Not only that the' when necessary, .see that the real estate so situated is appropriated tp the satisfaction:of the partnership debts, but that for that li;nd to that extent, 'it shall be treated as personal property of the partllership, and, ljke'other personal Jlroperty, pass under the control of the ,surviving partper. .. This control .extends,' to the right to sell it, or sO)l1uchof it as is to pay the debts, or to satisfY.theJust claims ofthesu;nriving It is.not to be supposed that the court that ,the land is to be treated as personalty its avails are required to pay debts, ,or to satisfy the claims.of the survivingpl:!orUH;'lfiThe language. is. used with reference to the.'JaQts of the case whichwas underdiscussimi, and the principle is of:sornewhatbroaderscope. Accordingly, in. Allen v. Withrow, 110 U. p9".s. O. 3 Sup. Ct. litep. 517, the court say: "Real propertyowned by a partnership, and purchased with partnership funds, is, for the purpo,se qf settling the d.ebts of the partnership; and distributing its effects, inequity as;persona1 estate." In Foster's Appeal, 74 Pa. St. 391, the court. says that the reconversion of partnership real estate to its cQ,ndition as land .tafes place when the partnership is dis, solved, wound; ,up,and completely ended. . , The pcln<\iple of the .variouS cases is. that real estate bought for and applied tp with partnership fupds, is, after the death of one of the plirtners. to be treated in equity as persoria.lproperty, for all the proper necessary. purp.oses, needs, and requirements of the partnership. .How the part which remains after the pa.rtnershipneeds are
at.
A. &: W. SPRAG1JE:MANUV'a .co. fl. HOYT.
427
satisfied is toue distributed it is not necessary to c{>tisider., Pars. Partn. (1st BuchaJn, v. Swm'1lel', 2 Barh. Ch. 167:; Tillinghaatv. Champlin, 4 R. 1. 173; Way v. Stebbins, 47 Mich. 296; S. C.11 N. W. Rep. 166.; Skeare:r v. Skeare:r, 98 Mass. f07. . Tbe partnership property, business, and debts ofA. &W. Sprague had become too large, in the year 1865, to be continued in the name of individuals, whose lives must terminate. The assets of the firm were over 86,700,000, the liabilities were $2,870,000, leaving tbenet value ofthe estate about $3,860,000. 'fhebusiness of the firm· waBmanufacturing, which required the. ownership of mills and real estate. It was manifestly' impracticable to continue, as a firm, to manage real property of this magnitllde, some of which stood in the name of deceased partners, and the rest of. which must stand in the name of individuals. If the business was to be continued, the partnership must be converted into,and the assets must be transferred to, a corporation, and the various interests of the members of the copartnership, of the administratrixes, and of the tenants in oomnilon of the real estate, must be represented by stock. All persons interested in the estate, who were capable of contracting, agreed that the business should be continued, and that a corporation should be formed. The minors were represented' by their guardian and thei'r father, both of WhGffi, as is manifest by their petition to the general assembly of Rhode Island, were desirous that the partnership should be turned into a corporation, and that the property ofthe minors should be continued thereiu j and should be represented by stock. The faet that'the two persons who'represented the children, and were ina position to act in their behalf, united, earnestly and honestly, with all the persons offull age who hs.dany interest in the partnership, in its conversion to a corporation, is, a fact of importance; for it is nQt by any means supposed that surviving partners can; by' their own unaided act, tran!lfer the real estate of the'minor heirs of a deceased ,partner to a. corporation, and compel thelilto beoome stockholderR therein. The same consent was, in this case, given to the transfer of the real estate to the corporation which was given to the continuance of the partnership . estate in the business of the firmat'ter the death of William Sprague, Sr., and was given for the same reason, viz., the supposed benefit of the minors. The corporation was organized for the purpose of placing and vesting in it the property of the firm subject to its liabilities. By the deed of the surviving partners, and of the administratrixes of the deceased partners, the equitable title to the real estate was conveyed to the corporation, and it asstlmed debts of nearly $3,000,000 which rested upon the estate. The respective interests of the partners and owners in the assets, less the of the debts, were manifested in the form of stock, of received his.or her proportionalahare.. The transaction was the formation, by consent, of;a corporation outiof a copartnership; the corpqration taking the property.as well 88, tb,e debts of the firm,the oWllerahavjng the same interest in the property of the cQrporation that they formerly had in the partnership property. The equitable title,thus
428
FEDERAL REI>ORTER.
transferred remained in the corporation until its failure, in 1873, when it made lUl; assignment of allltsproperty to Mr. Chafee for the benefit of its creditors. The grandchildren attained their majority as follows: Mr. Lee in October, 1866; Mrs. Francklyn :in October, 1866; William T. Hoyt in January, 1868; and Edwin Hoyt in July, 1870. The actions'of ejectment were brought on October 1, 1879. I do not deem it necessary to consider any questions of estoppel against the right of the three elder children to maintain their actions of ejectment, growing out of the fact: that they accepted the dividends upon their stock, and might have known, "had they used the means and opportunities directly at their command," that the Baltic property, in Connecticut, was claimed to be a part of the assets of the corporation, incompenor shall I consider the questions growing out of the tency of Edwin: Hoyt to ,acquiesce. in any disposition of his property, because my conclusion is.that tbeBaltic property was, from the time of its purchase, partnership property, and liable fot its debts, and that, of the debts of the firm, it properly became a subject to the part of the 'assets of the corporation in 1865, and that thereafter only a bare legal title remained in the four children of Mrs. Hoyt, which title it is competent for a court of equity to direct to be released to its equitable owner. A statute of Connecticut provides that "courts of equity may pass the title to.real estllite by decree. without any act on the part of the respondent, when, in· their judgment, it shall be the proper mode to carry the decree into effect, and such decree, having been recorded in the records of lands in the town where such real estate is situated, shall, while in force, be as effectual to transfer ,the same. as the deed of the respondent or respondents." 'Courts of equity of the United States for this district have the power to administer this remedy. Fitch v. Oreighton, 24 How. 159; In re Broderick's Will, 21 Wall. 503; Oentral Pac. R. Co. v, Dyer, ISawy.641. . Let there be. a decree enjoining against the prosecution of said actions of ejectment, and vesting in Mr. Chafee .the legal title to said estate.
BURR 'V. KIMBARK.
(Oircuit Oourt, N. IJ. Illinois. January 17, 1887.)
1.
INJUNCTION-BREACH'- CONTEMPT KNOWLEDGE OF FILING.
INFRINGEMENT OF PATENT -
BOND -
.
Where a preliminary injunction to restrain the infringement of patent· rights is granted. on condition that a bond be filed by the plaintiff, and the defendant was'{lresent in court at the time the orderwll.8 read and approved, and the cOmpla1llant then exhibited the form of bond which he was required to give. and s'tated that the bond would be filed as soon as the surety's signa· ture could be obtained, and it was in fact filed on the same day, the defendant cannot, in proceedings to punish him for contempt in committing a breach of
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