Owens v. Mackall

Maulsby, J., delivered the opinion of the Court. The facts of this case are that in 1841, and prior thereto, Joseph W. Reynolds and Edward Reynolds conducted business in the City of Baltimore, as partners, under the name of Jos. W. & E. Reynolds & Co. — that in 1841 Joseph W. died, leaving a last will and testament, by which he appointed his wife, Ann Reynolds, the said Edward Reynolds, and Doctor Leonard Mackall, executors of his will, and devised to them all his estate, in trust for the uses and purposes declared, one of which was contained in this clause: “ Item — Whereas, my nephew” (the said Edward) “has generously offered to continue the business of the firm of Jos. W. & E. Reynolds, and divide the profits between himself and my family, as they are now divided between himself and me, therefore it is my will and desire that the said business be continued by him after my death, and that my trustees leave in said firm a capital, belonging to my estate, of five thousand dollars; and whereas I have in said business a capital exceeding ten thousand dollars, I do not wish my trustees to withdraw any part of the same, but as it may be necessary for them to do, as my executors, in payment of my debts.” Another clause of the will was: “ My sons being all young, and although steady and promising now, I know not how they may turn out to be, and the better to provide for my dear wife, are the motives of my appointing trustees, together with securing the property of my daughters.” The business was continued, according to the directions of the will, by Edward Reynolds until October 30th, 1857, when Thomas B. II.

Turner was taken into the firm, and an article of agreement was entered into between Edward Reynolds, acting in his own right, and jointly with Ann G. Reynolds, (the widow called Ann in the will,) and Leonard Mackall, trustees under the will of Joseph W. Reynolds, and ³⁸⁶ Thomas B. H. Turner, by which it was provided that the same business was to be carried on under the name of Joseph W. & Edward Reynolds & Co.; that this partnership was to be computed to commence on the 1st day of January, 1854, and to continue seven years from that date, and that the net profits were to be divided into three equal parts, one of which should go to said Edward Reynolds, in his own right, one-part “ to the trustees aforesaid,” and the remaining part to the said Turner. It was further provided that in case of the death of Edward Reynolds his “executors or trustees, or both,” should hold “ the same relation and power in regard to the co-partnership matters and business of said firm, as the said Edward Reynolds did in his lifetime.” Subscribed to this agreement was the following: We, the undersigned, Thos. Reynolds, Harriet G. Reynolds, and Jas. W. Reynolds, heirs-at-law of the late Joseph W. Reynolds, do hereby ratify and confirm the foregoing agreement of co-partnership.

Witness our hands and seals the day of the date of said agreement. Thomas Reynolds, [Seal.] Harriet G. Reynolds, [Sea?.] James W. Reynolds, [Sea?.] On the 29th of March, 1862, Edward Reynolds for himself, and Edward Reynolds and Leonard Mackall, surviving executors and trustees of Jos. W. Reynolds, deceased, and Thomas B. H. Turner, executed another agreement, reciting the foregoing, and the death of said Ann G., and that the foregoing agreement provided for the continuation of the partnership in case of the death of either of the parties, and providing for the continuation of the partnership for seven years, and that in case of the death of any of the parties, the partnership should be again renewed, and that the executors, administrators, trustees, or other legal representatives of the parties dying, should have full power to renew and con ³⁸⁷ tinue the partnership. This contract, like the preceding, was assented to by the representatives, the children, of Joseph W. In 1862, Edward Reynolds died, leaving a last will, by which he appointed William A. Dunnington, and the appellant in this case, executors and'trustees thereunder, and the sixth clause was: “ I contemplate increasing my interest in the firm of J. W. and E. Reynolds & Co. to an amount not exceeding ten thousand dollars beyond my present interest in said firm.

Should that not be done by me in my lifetime, in whole or in part, I hereby empower and direct my executors and trustees to carry out the same, by paying over to said firm the sum of ten thonsand dollars, or so much as may be required, in addition to any advance made by me in my lifetime to that view, to make up the sum of ten thousand dollars, provided my executors and trustees shall deem the same advisable atid judicious.” Dunnington renounced, and the appellant became sole executor and qualified. There is proof that business was carried on in the same name, at the same place, until the winter or spring of 1868. There is also proof that the appellee never took any part in, or intermeddled, in any way, with the business of the firm. A witness, who was book-keeper, cashier and salesman from 1853 to 1857, proves that he never saw the appellee about the business office o£ the firm, nor heard of him in connection with the business; never knew him to share in the profits, nor participate, in any manner, in the management of the affairs of the firm.

Another witness, who was bookkeeper from 1856 to 1867, proves that the appellee did not, during that time, in any way, participate in the management, control or profits of the business, and that he never heard his name mentioned in connection with the firm or its affairs. And another, who was book-keeper from September, 1866, to June, 1868, that he had never known or heard of the appellee as, in any way, connected with the firm, its business or profits. There is further proof that the appellee never, at any time, took any part in, or exercised any control over, the ³⁸⁸ management of the affairs of the firm; that he had never seen any of its books, nor ever had any business whatever with the firm. And further, that the appellant had said that he knew that the appellee never had anything to do with the business, and was not liable for the debts of the firm; that he knew that he never had any connection with the firm; and after suit brought, the appellant said he would go and have the appellee’s name stricken out of the suit, because he knew that he was not responsible for the debts.

There is no conflicting proof. There was also proof that the appellee had never given any authority for the continuance of the firm after the death of Edward Reynolds in 1862. The death of Edward put an end to the partnership then existing, by operation of law. There was no proof tending to show that, after the death of Edward, the appellee had entered, in any cháracter, into another contract of partnership.

The terms of the contract of 29th-March, 1862, in respect to a continuation of the partnership, are: “And further, it is declared ‘to be the intention of the parties hereto, that if, at the expiration of this contract, any of the parties hereto may have departed this life, the partnership hereby continued, shall be again renewed, upon- such terms as may be agreed on by the surviving partner-or partners, and the representatives of the one or more of them so haying died, and full power is hereby given to the executors, administrators, trustees, or other legal representatives of the parties, to renew and continue the aforesaid co-partnership.” No agreement was made by the appellee after the death of Edward; and there is nothing to relieve this case from the operation of the rule, that the death of one partner operates as a dissolution with respect to the whole, notwithstanding it is entered into for a term of years, unless provision is expressly made to the contrary. In this contract no provision to the contrary was made. On these facts, the appellant offered one prayer, and the appellee three, the last providing for the contingency of the ³⁸⁹ appellant’s prayer being granted. The prayer of the appellant was rejected, and the first prayer of the appellee granted, the third falling with the rejection of the appellant’s, and the second rejected.

We are called upon to pass on an exception by the appellant to the rejection of his prayer, and to the granting of the first prayer of the appellee. We do not concur in the proposition contained in the appellant’s prayer, which is that the simple execution of the two contracts mentioned in it, by and of itself, and without reference to anything else, constituted the appellee a partner in the firms mentioned in those contracts, and rendered him liable as such. Those papers, on their face, describe him as trustee under the will of Joseph W. Reynolds. To an understanding of his intention in executing the papers, it is indispensable to look to the will referred to, in order to ascertain what the trust was — to see what the appellee in fact proposed to do.

The first principle, underlying a partnership, is the consent of the parties to its formation — delectus persones — and that consent must be signified in some way, by writing, by parol or by acts. It may be express, or it may be implied by law, but there must be a consent apparent. It is not necessary to make a party a partner, so as to be liable to third persons for the debts of a partnership, that he shall have an interest in the firm profits; but if ho lend his name, as a partner, he becomes liable upon principles of general policy, to prevent the frauds to which creditors would be exposed, if they supposed that they were lending their money to three or four persons, when in fact they were lending to only two or three of them. But, lending his name is bis act, and evidences his consent.

So a party may do an act from which the law will imply his consent to be answerable to creditors of a firm, without bis intending that such a consequence shall follow his act; but still he must do the act or consent cannot be implied. Whether the execution of the contracts in question be, or not, such acts as the law will ³⁹⁰ therefrom imply, the appellee’s consent to become liable as a partner, must depend on the circumstances developed by those papers, and by the other paper referred to by them, and, in this case, from other facts and circumstances in proof. The other paper is the will of Joseph W. Reynolds, and to ascertain the nature and character of the appellee’s acts in signing the contracts, the will must be looked to. By that he is directed not to withdraw from the business of the firm any part of the testator’s funds invested in it, except such as may be necessary to pay his debts; and the testator’s object, in giving this direction, is declared to be, that the profits of the business may continue to be divided between Edward, and the family of the testator, after his death, in the same manner as they were divided at the date of the execution of the will, between Edward and the testator.

In both the contracts, the appellee declares that he executes them as trustee under this will, and the just construction of all the papers shows that he is carrying out the trust, to wit, that the profits may be divided with the family of Joseph W. Reynolds. The appellee does not appear to be devising a way of his own to benefit the family of the testator, but simply obeying the directions of the will under which he acts. A ratification of both the contracts, by the family of Joseph W. Reynolds, is subscribed to them. The appellee did no act, holding himself out to the world as a partner, or connecting his name with this firm, except the act of signing those contracts.

No creditor of the firm could know that the name of the appellee was connected with it, in any way, directly or indirectly, unless by reading the contracts, and on reading them, he would discover the true facts surrounding the transactions, and that the appellee was not participating, for his own benefit, in the profits of the partnership, nor holding himself out as a partner, but simply discharging an expressly declared trust, and that the actual partners in interest were, so far as the appellee was concerned, “the family” of Joseph W. Reynolds. ³⁹¹ It is said in the text books, and was insisted on by the appellant’s counsel, that the rules as to partnership liability apply, with full force, although the party is not personally interested, but only as trustee, executor or administrator for the use and benefit of others; and even though he does not interfere except in settling the accounts; and the authorities referred to in all the text books are the cases of Weightman vs. Townroe, 1 Maule & Selwyn, 412, and Ex parte Garland, 10 Vesey, 109, and Barker vs. Parker, 1 Term Rep., 287. Weightman vs. Townroe, was a case where the executors of a deceased partner continued, of their own motion, his share of the partnership property in trade, for the benefit of his infant daughter. They were not directed to do so by the will, but acted bona fide for the benefit of the testator’s daughter. Lord Eeleyboroucht said, “the fund subsisting at the death of the testator, under a due administration of the will, should have been disposed of by the executors, and converted into money, and distributed as assets.

Instead of that it is embarked de novo in the trade, in the purchase of other barley, and a variety of other contracts, to which the infant is not privy, nor bound by them, but may renounce when she comes of age, as damnosa hcereditas. If then the infant has such an option, who but the executors can be liable?” And Bayeey, J., said, “the executors in this case are mere volunteers. At law they became the legal proprietors in respect of everything belonging to the trade •, aud consequently are liable to the legal debts.” It is clear that the ground of the judgment, in this case, was the volunteer and unauthorized act of the executors, well intended, but still violative of their duty as executors. It was their act of embarking in the firm as partners, although the fund which they embarked was that of the estate, and their object was the benefit of the infant child of their testator ; still it was their act that made them liable, which act it was not their duty to do. ³⁹² .

In this case the appellee did no act of his own motion, except to carry into effect that, which the declaration of his trust commanded, not to be sure, in so many words, that he should execute the contracts, but to enable the partnership business to be carried on by Edward Reynolds, who, by the terms of the will, was to carry it on, and by Edward Reynolds and Turner, when Edward Reynolds deemed that desirable; and that he did so, is evidenced by the terms of the contract of March, 1862, in order that “the family” of Joseph W., might participate in the profits of the business, the object declared by the will. In the case in 10 Vesey, Henry Ballman bequeathed his estate to his wife Margaret, and three other persons, in trust, &c. He directed that his trade should be carried on by .his wife, the profits to be applied to her own use, and the maintenance and education of his children, and that the trustees should pay her six hundred pounds out of his personal estate, to enable her to carry on the business. She did carry on the business and became a bankrupt.

The testator had directed that a valuation should be made of the stock and effects in his trade, and that the wife should give to them her notes for the amount thereof, and also for the six hundred pounds. The other executors and trustees had advanced to her the further sum of £768, 12s and 4d, of the assets of the estate. The question arose on proving these several claims under the commission. The points made by the assignees were, that the surviving trustee, as a creditor on the notes, ought to be postponed to all the other creditors of the bankrupt, and, secondly, that the general assets of the testator were subject to the bankruptcy.

The Lord Chaucbeeoe decided the first point in favor of the assignees,' and on the second point, he finally allowed the proof of the £768, 12s and 4d, to stand against the bankrupt’s estate; or, that the general assets of the testator were not subject to the bankruptcy. In the argument of the cause it was said “ if an executor is directed to carry on the trade, and does