Wade v. Rusher — 17 N.Y. Super. Ct. 537

Majority

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George Wade, Executor, &c., of George Rusher, v. John B. Rusher, David T. Easton and others.

Headnote

1. Where suit is brought by one of two partners against the other, to obtain an accounting and payment of a balance justly due from the defendant to the plaintiff, and to set aside as fraudulent a release from liability as such partner executed by the plaintiff to the defendant; a third person who has fraudulently and without consideration obtained from the defendant portions of the partnership property may also be made a party, in order to subject the property so held by him to the nayment of any balance due from the defendant to the plaintiff

2. The cause of action is single, viz.: the right to an accounting and an application of the partnership property to the payment of the sum due from the defendant.

3. The partner to whom a balance is due has a lien upon the partnership property, and upon other property into which it may have been converted by the debtor partner; not only as against him, but as against all assignees of it who are not Iona fide purchasers of it for value.

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4. Although portions of such property may have come to the possession of different persons, all such persons who are not purchasers of it for value are proper parties, as'the subject of the action, the partnership property is single, as well as the object of the action, an application of it to pay a balance to the partn'er to whom it is due.

(Before Bosworth, Ch. J., and Hoffman and Moncrief, J. J.)

Heard, April 15;

decided, April 30, 1859.

This is an appeal by the defendant, Easton, from an order made by Chief -Justice Bosworth in December, 1858, overruling a demurrer taken by defendant, Easton, to the plaintiff’s amended and supplemental complaint.

The original complaint was filed by George Wade, as executor of George Rusher, against John B. Rusher and Mary A. C. his. wife, and stated in substance as follows:

That previous to the year 1841, George Rusher was engaged in business as a tinman in the city of New York, and had a stock therein of the value of $400; that in the said year 1841, a partnership was formed for carrying on such business between the said George and the defendant John B. Rusher, under the name J. B. & G. Rusher; John B. was to advance $800 in cash, and George his stock and fixtures, experience and skill, which were to be taken as of equal value with the said $800. The interest of ■ each in the capital, profits • and losses was to be same. . The partnership was to be continued from year to year until dissolved by mutual consent. It lasted until the 18th of September, 1851, when it was dissolved by such consent.

The death of George Rusher, leaving a last will and testament by which the plaintiff was appointed his executor, and proof of the will in August, 1853, are then stated.

It also stated that the books were kept, and the financial part of the concern'was managed by John; that they were carelessly kept, yet show a balance due to the estate of George of over $10,000; that the books have been examined by a competent accountant. Some details from them are then stated, from which the allegation of such a balance of debt appears to be made out.

That the health of said George began to fail in 1845, after which John B. had the mangement, and George no information of the affairs of the concern, except as derived from him. John B. represented, when applied to for money, that the concern was

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earning little, and could not afford to pay more than was paid, as afterwards set forth.

That from the time George Rusher became indisposed until the 2d of December, 1848, he received only $3 a week from his partner; from that date until the 4th of December, 1849, but $2, and from thence to the month of December, 1851, but $1, when the allowance was wholly stopped.

That the said George brought an action in the Supreme Court against the said John B., to compel an account and payment of the balance due him, on the 15th September, 1851, and obtained an injunction. On the 18th of September, upon the representations of John B. of his utter inability to pay the amount due to George, it was agreed between them that the whole business should be assigned to George; and John B., in consideration thereof, should be fully released.'

The bill states the repeated false and fraudulent representations of John B. made to induce this settlement, both as to his own inability to pay, and the state of the partnership business. In consequence of these representations, and believing and relying on the truth thereof, the assignment was accepted, the suit discontinued, and a release given to John B. from all liability on account of the arrearages of profits.

That since such settlement, discovery has been made that John B. had applied the partnership earnings to his own use, and that of his wife, Mary A. 0. Rusher, except the sum of about $1,005.51 paid to George in his lifetime, and that the sum so applied amounted to $20,000.

There is then an allegation that the profits and earnings were employed in purchases of real estate, and that John B. caused conveyances of such real estate to be made to Mary A. C., his wife; that such real estate, or some part of it, was purchased with the profits of the firm, and is held by said Mary as trustee for her husband, with the fraudulent intent to keep the same from the creditors of said John B. There is then a specification of various parcels of property alleged to have been thus purchased and holden, with an averment of the full knowledge by said Mary of the fraudulent acts of her husband.

The complaint prayed, that an injunction against parting with or encumbering the property be granted; that a receiver of it be

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appointed; that the release be declared null and void; and that the property so held by'the said Mary might be declared liable for such sum as should, upon an accounting, be found due by the said John B. Rusher to said George, and that the plaintiff have judgment therefor.

The amended supplemental complaint, so far as it is necessary to be recited for the present purposes, states that in the latter part of 1851, John B. Rusher employed the defendant Easton, to attend to certain professional business, who thus became ac quainted with such business and with the wife of John B.; that Easton became an inmate and boarder in his house; that the wife influenced the husband to give Easton a full power of attorney, authorizing him to sell, convey, and mortgage portions of the real estate; that Easton fraudulently and for a nominal consideration conveyed all the real and personal property of JohnB. Rusher amounting to upwards of $15,000 to one McGinness, who, on the same day, reconveyed it to said Easton. The lots and parcels of property so held by Easton and by Mary the wife-are specifically set forth. And it is averred that a large portion of the funds of the partnership, appropriated as aforesaid, are invested in the said several lots of land so held by said Mary and by said Easton. Edward K. Orrell and Mary Orrell are also made parties defendants by the said supplemental complaint, and it states that they are the father and mother of Mary A. C. Rusher, and that said Mary Rusher and Mary Orrell broke open a trunk belonging to John B. Rusher containing funds belonging to said firm, and took and stole from it $800, which money is in the possession of Mary Orrell, and is represented in whole or in part by certain specified real estate, the title to which is nominally in said Mary Orrell.

The supplemental complaint prays for an injunction and receiver, “ and that the plaintiff may have judgment herein as before prayed;” by the words “before prayed,” referring to the original complaint.

The defendant Easton, demurred to the amended and supplemental complaint oh the grounds: First, that several causes of action had been improperly joined, viz., causes arising on contract and causes arising in fraud, and causes of action against part of the defendants only, with other causes against all. Second,

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that the complaints do not state facts sufficient to constitute a cause of action against the defendant Easton. That they do not show the plaintiff to be a judgment creditor of John B. Rusher; that they show a' release of the original cause of action uncanceled; that they do not show a demand for the rescission of such release; neither do they ask any final relief against the defendant Easton.

The demurrer was overruled, with liberty to withdraw it and answer within twenty days, and from the order entered thereon this appeal is taken.

E. S. Van Winkle, for appellant.

I. The grounds of demurrer first assigned, are sufficient to sustain the demurrer, viz.:

That several causes of action have been improperly inserted in the complaint, causes of action founded on contract, and causes of action based on fraud and conspiracy to defraud, a cause of action by a creditor at large against one defendant only, with a ' cause of action for equitable relief against other defendants, and particularly against this defendant, founded on their and his alleged possession of property alleged to belong to the alleged. » debtor, and causes of action against part of the defendants only, with causes of action against all of the defendants.

Section 167 of the Code of Procedure, shows what causes may be joined:

1. “ All causes joined must arise out of the same transaction, or transactions connected with the same subject of actions.”

2. “ Or all arise out of contracts express or implied.”

3. “ Or all arise out of injuries, with or without force, to person and property, or -either.”

4. Or all arise “ out of claims to recover real property with or without damages for the withholding thereof, and the rents and profits of the same.”

5. Or all arise out of “claims to recover personal property with or without damages.”

6. Or claims against “ a trustee by virtue of a contract, or by operation of law.

“But the causes of action so united must all belong to one of these classes, and must affect all the parties to the action, and must be separately stated.” (Boyd v. Hoyt, 5 Paige, 65.)

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The causes in this complaint manifestly do not all belong to one class, nor do they affect all the parties, nor are they sepa rately stated.

The rule whereby the impleading of several parties not jointly concerned in all the transactions charged, has been held not to be multifarious, is only applied to cases where there was one connected interest all centering in the point in issue in the cause, or one common point of litigation, or that the joinder tended to prevent a multiplicity of suits. (See the two leading cases in this State; Brinkerhoff v. Brown, 6 Johns. Ch. R., 139; Fellows v. Fellows, 4 Cow., 682 ; see also Cross ads. New Haven R. R. Co., 7 Abb. Pr. R., p. 47.)

What is the point in issue in this case, or the common point of litigation ?

Is it not that John Rusher obtained the release by fraud ?

If the release is good, can this action be sustained at all ?

If the release is bad or null, will not the point in issue be whether John owed George anything ?

If Easton has defrauded John of property, what has the plaintiff to do with that ?

If John had filed this bill against Ms co-defendants, he might bring it within the rule that all the acts centre in the point in litigation, that is, combined fraudulent acts to deprive him of his property.

If the conspiracy charged were to defraud the plaintiff," there might be a single point in issue within the meaning of the rule.

H. The second cause of demurrer is as follows:

The complaint does not state facts sufficient to constitute a cause of action against Easton, because:

I. It does not show that the plaintiff is, or that the testator was a judgment creditor of John B. Rusher, and therefore entitled to ask relief against this defendant. (Wiggins v. Armstrong, 2 Johns. Ch. R., 144.)

In this case the Chancellor says: “This is the case of a creditor on simple contract, after an action commenced at law, and before judgment, seeking to control the disposition of the property of his debtor under judgment and executions, upon the ground of fraud. My first impression was in favor of the plaintiffs, but upon examination of the cases, I am satisfied that a ere

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ditor at large and before judgment and execution, cannot be entitled to the interference which has been granted in this case, (an injunction.)” In support of this position, he cited and commented on Angell v. Draper, (1 Vern., 399,) and Shirley v. Watts, (3 Atk., 200,) Bennet v. Musgrave, (2 Ves., 51,) Balch v. Wastall, (1 P. Wms., 445; Mitford, 115; Cooper Eq. Pl., 149,) The Corporation of New York v. Mapes, (6 Johns. Ch. R., 46,) Snowlen v. Noah, (Hop. R., 353,) Brinkerhoff v. Brown. ( 4 Johns. Ch., 671 .)

2. In this case the plaintiff has neither judgment nor execution, but on the contrary shows himself that he gave the debtor a release, which release is now in force, and yet he seeks to recover from Easton property which never even belonged to the debtor.

3. The complaint does show an outstanding release of the alleged cause of action against John Rusher.

4. It shows no privity of contract between the plaintiff and this defendant.

5. There is no conspiracy to defraud the plaintiff alleged, but merely a conspiracy by some of the defendants to defraud another defendant, which is no ground of action by plaintiff.

6. No demand for the rescission of the release is alleged. (Boughton v. Bruce, 20 Wend., 234 .)

7. No offer to return to John Rusher the property received from him as a consideration for the release.

This is necessary. (Masson v. Bivel, 1 Denio, 69 ; Bruen v. Hone, 2 Barb., 586 ; Rosenbaum v. Gunter, 3 E. D. Smith’s, 203.)

8. But plaintiff has no right to rescind. The release was given on a compromise of plaintiff’s claims, then sought to be recovered in a suit at law, and the cause of action therein was the very cause herein set up.

The release is given in 1851.

The original complaint is filed in 1854.

The supplemental in 1858.

This settlement was made at arms-length, when plaintiff’s testator had impleaded John Rusher for the fraud, and if they then took his mere assertions for truth, they are bound. (See Fisher v. Conant, 3 E. D. Smith’s, 199.)

9. No final relief is asked against this defendant. No one is a proper party against whom no judgment is prayed.

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A third party cannot be impleaded merely to ask an injunction against him; there must be some substantive relief prayed for. (See Sweet v. Ingerson, 12 How. Pr. R., 331; Enos v. Thomas, 4 id., 48; Tompkins v. White, 8 id., 520; Dorman v. Killam, 4 Abb. Pr. R., 202.) There should be judgment for defendant Easton, on the demurrer, with costs

James Morrogh, for respondent.

The question may properly be examined upon the rules which would have governed a similar case before the Code; and then upon" the point, whether the Code has varied the rules we may find to have prevailed.

In the first place, it is necessary to advert to a most important position of the. defendant’s counsel, upon which much of his reasoning proceeds, and which I apprehend is erroneous.

The cause of action—the point in issue—the common point of 'litigation, is not, as he urges, the setting aside of the release given by George to John B. Rusher. The foundation and primary cause of action is the partnership relation between the two, the asserted debt from John to George upon the transactions of that partnership, the investment of the funds of the firm (among other property) in various parcels of real estate specified, and the right to follow that property for the satisfaction of that demand.

Test this point by the ancient practice of the Court of Chancery before the disuse of special replication, and the introduction of what is termed the charging part of a bill. The plaintiff here would have set out his case as representative of the deceased copartner, alleged an indebtedness, demanded an account, asserted a lien upon the property in which the firm funds were invested, and sought to reach it by a decree. The defendant would have set up a release by plea or answer. A special replication would have assailed the release on the ground of fraud.

But afterwards the system of anticipating a defense arose, and the pleader put it in the shape of a pretense of the defendant, and met it by a charge of matter designed to overthrow, it. (See Hoff. Ch. Pr., vol. 1,41-43.) An example is given by Lord Redesdale of an heir-at-law filing a bill upon some equitable ground; and expecting a will to be set up, states it by way of a pretence of the defendant, and makes charges to impeach it.

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Although Mr. Justice Harris appears to consider that this mode of framing a complaint is no longer proper, yet in the case before him, the pretense and charge were clearly improper under the former system of pleading. The charge was merely a restatement of the fact alleged in the complaint, and the pretense a statement of the defendants’ denial of it. (Clark v. Harwood, 8 How., 470 .)

I do not suppose that there is anything in the Code prohibiting a plaintiff from framing a complaint in the manner this complaint is framed—setting forth an original right off action; setting forth a defense,-such as an account stated, or release, which may interfere with that right, and making statements which tend to remove that defense. The test of the question is this : that, without the statements showing the original cause of action, irrespective of the release, the complaint would be useless, however sufficient its allegations might be to set aside that release. The case of Phillips v. Gorham, (17 N. Y. R., 270,) appears to me decisive of the point: indeed, it is a much stronger case.

I apprehend, then, that the primary subject of the action, and its primary object, is the right to, and relief by, an account of the partnership dealings, and the payment of the debt alleged to be due, with the judicial determination that a lien exists for that debt upon the property specified. The removal of the release is' subordinate and auxiliary thereto.

The next point of importance insisted upon by the defendants’ counsel is, that the plaintiff cannot sustain such a claim for relief as he seeks against the defendant Easton, until he has obtained a judgment for his demand against the copartner of his testator, involving, of course, the cancelment of the release; that a lien is indispensable to entitle any one to assert any claim to the real estate in the hands of Easton; and that the relation is precisely the same as that of a creditor without a judgment.

. I apprehend, however, that there are few points in the law of partnership more fully settled than this: that, where real estate has been purchased with partnership funds, each partner has an equitable lien upon it, not only as representing creditors to secure their rights through such lien, but for payment of his own eventual demand. If thé title is taken in the name of one, he is a trustee, and the copartner a cestui que trust. This equitable lién

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may always bé successfully asserted against the partner, against his heirs, devisees, or his voluntary assignees, and against all except purchasers for value without notice. (The cases are collected in Oollyer on Partnership, 4th Am. ed., §§ 125, 127, 135, and notes.)

If this conclusion is correct, then the two cases of Fellows v. Fellows, ( 4 Cow., 682 ,) and Boyd v. Hoyt, (5 Paige, 65,) appear to be decisive of the right to sustain the action as framed. When a judgment is obtained, a creditor’s bill may be filed to reach the debtor’s property; and different grantees of different parcels transferred fraudulently may be made parties to one bill. The lien affects every parcel and every grantee. The concurrence in accepting and upholding the fraudulent transfers creates a common responsibility, and makes the main object of the suit common to all.

It can scarcely be necessary to say, that the joinder of causes of action and of parties, which would have been allowed before the Code, will be permitted under the 167th section.

It remains to be examined whether the allegations of the present complaint are sufficient to bring the case within the rules of the authorities cited.

Easton is alleged to have been the attorney of John B. Rusher, and well acquainted with his dealings as well as those of his wife with the property in question. It is very clearly averred that the funds of the firm were invested in these specified parcels, some of which Mary took fraudulently to aid John.in deceiving creditors, or to deceive himself and get control. Easton gets a power of attorney, through which he effects a transfer of the legal title to himself of all these parcels without any consideration, and apparently in violation of his duty to John. • But, at any rate, under such conveyances as he claims upon, he stands exactly in John?s position—thelands in his name are charged and affected with the equitable lien as fully as they would be if they remained in John’s name.

The order at Special Term must be affirmed, with costs.