Monroe v. Hamilton

¶1The mortgage is a conveyance to Monroe of Hamilton’s interest in and to the joint partnership crop, subject to the condition, that it is to become vbid, if at maturity he should pay the mortgage debts. These are his individual, not partnership debts; and as the crops would be gathered, and ready for market, before the maturity of the debts, it is stipulated, that when gathered, or in a reasonable time thereafter, Monroe should take possession, and dispose of them, for the mutual benefit of the parties, and should settle the partnership dealings, and divide the net profits into two equal shares; one of which should belong to him absolutely, and the other he should hold in trust for Hamilton, first paying therefrom the mortgage debt, and the residue paying over to Hamilton. The material question is, how far the mortgage operates a limitation of the authority of Hamilton, as partner, to dispose of the partnership crops, to persons not having actual notice of the limitation; and whether the registration of the mortgage operates as constructive notice of such limitation.

¶2An assignment by a partner, of all his interest in the partnership property, to a stranger, operates a dissolution of the partnership, of necessity: “ it gives rise to a state of things altogether incompatible with the prosecution of a partnership concern.” The other partners may not have confidence in the assignee, and may well say that they have not with him entered into a common adventure, nor consented that *232be should exercise the authority of a partner; nor may the assignee choose to risk his credit and property in an adventure with them.—Marquand v. N. Y. Man. Co. 17 Johns. 525; Parsons on Part. 400. An assignment by one partner to another, of his interest in the partnership property, is not, if so facto, a dissolution of the partnership. Whether it shall so operate depends on its terms, and the intention of the parties, as from these it may be collected. If the withdrawal of the assignor from the partnership is contemplated — if there is a termination of his authority and duty as partner, and, as between him and the assignee, exemption from liability for the future transactions which may be had by the assignee, in the prosecution of the original undertaking, it is as to them a dissolution. — Parsons on Part. 400. But, when the assignment is intended as a mere security for a debt, and is to operate only on the share of the net profits of the assignor, on a settlement of the partnership transactions, at the expiration of the partnership, and he remains bound to all duties as partner — bound to contribute time, labor, and skill to the prosecution of the common undertaking; it will not operate a dissolution, not even as between the partners themselves.—Taft v. Buffum, 14 Pick. 322; Buford v. Neely, 2 Dev. Eq. 481.

¶32. Applying this principle to the mortgage, it did not operate a dissolution of the partnership. Hamilton remained bound to all duties as partner, nor was he relieved from liability for the future transactions, within the scope of the partnership business. Such transactions were a necessity to the business in which the partnership was engaged, and are contemplated by the articles of partnership. At the execution of the mortgage, but a small part, if any, of the partnership crops could have been planted. In the course of cultivation, and of gathering, expenses would be necessarily incurred, for which no provision is made by the articles of partnership, than that they are to be borne equally by the partners. There, is no limitation in the mortgage, of the authority of Hamilton to make contracts for such expenses, nor of his authority to pay them when contracted. In this respect, his authority is precisely that which is derived by implication of law from the nature of the partnership business ; and there is no indication in the mortgage, of an intention to withdraw, or to restrain it. The whole effect of the mortgage is to take away his power as partner to dispose of the crops, conferring on Monroe the right to the exclusive possession of them, and the exclusive power to dispose of them when gathered, and to create a lien on Hamilton’s share of the net profits derived from a sale of the crops, as a secu*233rity for the payment of the mortgage debts. The mortgage has a two-fold operation — a limitation of the authority of Hamilton as partner, and a charge on his share of the net profits. The undivided interest of Hamilton in the partnership crops when gathered, or in any other part of the partnership property, would have been subject to levy and sale under execution against him, in favor of an individual creditor ; and a purchaser at such sale would have been entitled to his share thereof, as ascertained on a settlement of the partnership accounts.— Winston v. Ewing, 1 Ala. 129; Moore v. Sanple, 3 Ala. 319; Andrews v. Keith, 34 Ala. 722.

¶43. The mortgage, conveying an interest subject to execution, must have been registered in compliance with the statute, to protect the mortgagee against the rights of judgment creditors, or of subsequent purchasers from the mortgagor. Code of 1876, § 2162. The registration, when properly made, operates as constructive notice to all the world, of the mortgage — of the conveyance of Hamilton’s share of the crops— of the property which would be subjected to execution against him. No lieñ in favor of execution creditors can subsequently attach, and override and defeat it; and every subsequent purchaser from him, of such share, would be charged with notice of it. This principle of constructive notice from registration is confined to instruments which the statute authorizes to be registered. It cannot be extended to any and every instrument which parties may think proper to register. There must be a statute authorizing the registration, or mere registration will not operate notice. — Mitchell v. Mitchell, 3 S. & P. 81; Dufphey v. Freenay, 5 S. & P. 215; Baker v. Washington, Ib. 142; Tatum v. Young, 1 Port. 298. Nor will registration operate as constructive notice of any and every provision which may be introduced into an instrument, of which it is required. A conveyance of personal property may include a transfer of dioses in action, and, while operating as constructive notice of the transfer of the particular personal property described, it would not operate as a notice of the transfer of the dioses in action.—McCain v. Wood, 4 Ala. 258; Stewart v. Kirkland, 19 Ala. 162. The reason is obvious ; the law does not authorize the registration of transfers of dioses in actio'll, and, therefore, does not cast on those dealing with him who has the possession, and the apparent legal title, the duty to ascertain whether there has been an assignment of them. We have no statute (except as to limited partnerships), which authorizes the registration of articles of partnership, or of limitations or restraints which, by agreement, may be placed on the power and authority of a partner. While, so far as the mortgage *234is a conveyance of Hamilton’s undivided share of the joint crops, its registration is constructive notice thereof, so far as it is a restraint or limitation of his authority as partner, the registration is not constructive notice.

¶5Limitations or restraints, which partners, by agreements between themselves, may impose on the authority or power of the several partners, varying or qualifying that which the law implies from the relation, and the nature and character of the partnership business, have no effect upon third persons, dealing with the partners in good faith, and in ignorance of them, though they may be valid and binding as between themselves. — Parsons on Part. 93 ; Collyer on Part. § 386.

¶6The bill seems to. have been filed, rather in a double aspect — the one to assert the right of the complainant as mortgagee, to pursue the cotton Hamilton had disposed of, though such disposition was within the scope of his power as partner, if it had not been limited and restrained by the provisions of the mortgage, or rather the necessary implication from these provisions. The averments of notice of the limitation and restraint on his power, to those dealing with him, are referrible to the averment of the registration of the mortgage, which it is.evident the pleader supposed operated constructive notice thereof. The answers deny all notice, and of it there is no evidence. In this respect, therefore, the bill must fail.

¶7The other aspect is, the right of the complainant to pursue partnership assets his co-partner had misappropriated. In this aspect, the bill fails, for want of proof of such misappropriation, prejudicial to the complainant. Whatever of misappropriation may be shown, was in payment of debts for whicfy the complainant was bound individually. The partnership debts having been fully paid, from it no injury resulted to him.

¶8The decree of the chancellor was certainly as favorable to the appellant as the pleadings or facts would justify, and' it must be affirmed.