Van Syckel v. Arsuaga

delivered the opinion of the court.

When the court below delivered its opinion and made

This suit was begun by the widow and heirs of Paul Van Syckel to liquidate and distribute the assets of two partnerships of which he was a member, viz., P. Van Syckel & Co. and the Santa Cruz Sugar Co. The defendants were the other members of the firms. From the petition and the documents annexed, from the answer, and a cross-petition filed by the defendants to construe and limit a document referred to as an agreement for “postponement of rights,” as also from the issues taken on the cross-petition and from the opinion of the court and the statement of- facts which it made it is beyond question that the only controversy between the partners arose from an assertion by the' widow and heirs of Van Syckel that they were the holders of a subsisting lease covering an important piece of partnership real estate.

The solution of this controversy depended upon the answers proper to be made to the following questions: 1st, Did the lease which was owned by Van Syckel prior to the formation of the partnership of P, Van Syckel and Company pass to that firm as the result of its organization and the stipulations contained in the articles of partnership? 2nd, If the firm became the owner of the lease, was such lease extinguished by confusion (Civil Code, § 1192)

Concluding that these questions required an affirmative answer the court below rejected the claim based upon the existence of the alleged lease. The reasons which led to this conclusion were stated in an elaborate opinion and the facts which were deemed controlling were enumerated in a statement of -facts. While conceding that there is no power to review the facts, and while further conceding that if effect be given to the facts found, the judgment is clearly right, it is yet insisted by the appellants that there-should be a reversal upon the following grounds: a, Because the ultimate findings made by the court as to the non-existence of the lease were on the face of the record manifestly alone based upon inferences drawn from parol proof conflicting with the declarations of the parties contained in notarial acts and which under the local law were' not lawfully susceptible of being overthrown by parol proof; and, b, because moreover error is manifest on the face of the findings as well as in the legal conclusions based on the findings because it was impossible to conclude that the lease had no existence without permitting the defendants to repudiate their declarations made in notarial acts, to base a claim of right upon their deceit and fraud and to discharge themselves and their property from an obligation by giving efficacy to their wrongdoing. ' As these propositions in their final analysis challenge the adequacy of the findings made to sustain the legal conclusions

In June, 1897, by notarial act, Paul Van Syckel leased from one Montilla, the Santa Cruz plantation except a small portion previously leased to some one else. The rent was payable monthly and the term was indeterminate; that is, was to last as long as Van Syckel chose to pay rent. The property when leased was encumbered by mortgage. Van Syckel used the leased property for the business of raising cattle and carrying on a dairy. The registration officer refusing to record the lease because of the uncertainty of the term, Van Syckel, in October, 1899, made a notarial statement, fixing a term of six years and reserving the right, at will, to fix future terms. The registering officer refusing to record this statement, Van Syckel sued to compel its registry, and was successful, the Supreme Court of Porto Rico (or the Chief Justice thereof) having affirmed an order directing the registry to be made. The holder of the mortgage on the leased property having commenced executory proceedings to foreclose, Van Syckel sued in the Provisional Court created by the American military authority to enjoin on the ground of an alleged fraudulent combination between the debtor and creditor by foreclosure of the paramount mortgage to wipe out the lease and impliedly, on the further ground that having an interest, as lessee, in paymg the paramount mortgage debt, he was entitled to do so and take a creditor’s legal subrogation. (Civil Code, §§ 1203, 1210 and 1211.) The foreclosure proceeding was perpetually enjoined. The mortgage creditor acquiescing in the result, in March, 1900, transferred the debt to Van Syckel. During these proceedings there was pending in the local courts, suits in one or another

In June, 1900, before a notary, Van Syckel and thé firm of Sobrinos de Ezquiaga, an established and reputable commercial firm, formed a partnership styled P. Van Syckel & Company. The act recited that Van Syckel was the owner of enumerated property, viz: a small farm,'a lot'of cattle “as per inventory,” a lot of personal property, constituting the plant of a dairy, such as cans, bottles, milk straining apparatus, carts, milk wagons, etc., and besides a mortgage paper secured on the Santa Cruz plantation, inventoried at about 11,000 pesos; and lastly a sum of money stated in the .inventory as “value of working capital,” amounting to 1111 pesos. These various items gave a total value of 30,Q00 pesos, and one-half, 15,000 pesos, was paid in cash by Sobrinos de Ezquiaga to Van Syckel as the pinchase price of one-half the. property which thus became jointly owned, and was by. the joint owners, Van Syckel and Sobrinos de Ezquiaga, established as the capital of the new firm. The duration of the firm was two years and the purpose of its organization was declared to be the carrying on of a dairy business and the purchase of cattle. There were careful provisions as to the keeping and rendering of the accounts of the firm as to the equal, power of management by the partners and an equal division between them of profits. There was .a stipulation relating to the mortgage debt on Santa Cruz, providing that if the debtor, Montilla, paid the same the sum received should take the place of the debt as firm capital, and the- firm should not be dissolved thereby, and the same result, it was expressly provided would follow in -case Montilla should “recuperate the debt” and require an assignment of the same; that is, in case

The year following, in July, 1901, the firm of P. Van Syckel & Company and P. Van Syckel individually were parties to a notarial act styled “postponement of right,” by which the firm, after reciting its ownership of the mortgage claim on the Santa Cruz property and the paramount character of the mortgage as to a lease on the property, held by Van. Syckel, waived the priority of the mortgage, gave precedence to the lease and expressly renounced all right of the mortgage creditor “to rescind the lease” as against Van'Syckel and his “causa habientes.” This act was placéd on the public records. In September, 1901, Van Syckel & Company commenced executory proceedings against Montilla to enforce their mortgage ■debt and in due course, in November, Í911, the property was adjudicated to them for two-thirds of its estimated value and as was customary under the local law, the state of the record was referred to and the priority of the recorded lease was recited;

In May, 1902, the firm of. P. Van Syckel & Company was by notarial agreement extended for a period of four years to the first day of June, 1906. The articles of extension recited the original organization, the purchase from Van Syckel of the property which constituted the capital of the firm, including the debt secured by mortgage upon Santa Cruz. It then recited the foreclosure and the purchase of the property at less than the face value of the mortgage debt, and stipulated that the capital of the new firm should not be thereby diminished as the property took the place of the debt as a partnership asset. It would seem that after the foreclosure and probably after the extension of the firm, the suits brought by Montilla in the local courts, to which we have previously referred, were decided against him, but in .December, 1902, a new suit in the Porto Rican courts Was by him

During the interval, the suit last referred to, brought by Montilla was decided against, him in the lower court, and on his appeal in March, 1905, the judgment of the lower

Dealing with the facts which we have recited and the other proof before it, the court found that the sale made by Van Syckel to the firm of Sobrinos de Ezquiaga consisted of one-half the plant and assets of a dairy establishment and cattle farm by him carried on in part at least on the leased property and that not only as the result of implications necessarily arising from the provisions of the articles of partnership, but from the proof as to the situation of the parties and the manner in .which they gave effect to the articles of partnership, it clearly resulted that the lease passed to the firm as a part and parcel of the contract by which the firm became the holder of the assets and plant.

Thus the court said:

“It is our opinion that Mr. Van Syckel sold a full half interest in his dairy business and all that constituted it, which included every right he had to all property concerned for 15,000 pesos to respondents Sobrinos de Ezquiaga.”

And again, speaking on the same subject:

“We fail to see the force of the claim that Van Syckel put in a mere credit or mortgage debt, as an asset of this firm, the business of which was to carry on a dairy, and it looks ridiculous to say that these respondents simply invested in half of an interest-bearing mortgage. Van Syckel himself had béen using this ranch for some time

And this conclusion as to the ownership of the lease by the firm as the result of the formation of the partnership was reinforced by the following statements as to the conduct of the partners, their knowledge of the business, their participation therein, the accounts rendered concerning the same and the profits distributed. The court said:

'' There is not a word of evidence in the case which shows that P. Van Syckel & Company ever paid any rent to Paul Van Syckel for this lease, or have ever given him any credit for any such rent or that Van Syckel ever asked the firm to so give him credit for any rent, although it is in evidence that Sobrinos de Ezquiaga sent Van Syckel numerous statements of their accounts of the firm’s business while he was then living in Cuba.”

And again:

“The overwhelming weight of the evidence in the case, shows that Paul Van Syckel was just as prominent and even a much more active party than Sobrinos de Ezquiaga was in all defense against, or attacks upon Montilla. A reading of the'correspondence that is in evidence will convince any one of this.”

Indeed, the conclusive effect of the comprehensive findings of the court concerning the ownership by the partnership of the alleged lease is fully illustrated by finding XIV, a portion of which we quote, and finding XVII.

“XIV.

“The said Paul Van Syckel during his lifetime agreed with Sobrinos de Ezquiaga by the terms of his partnership

“XVII.

“The evidence in this case is clear, unequivocal and convincing that this lease of June 23,1897, was to have no life or effect as between the parties in their accounting during or after the date of the partnership, but that the same was merged in the fee at the time of the adjudication thereof to said partnership of P. Van Syckel & Company, if not before.”

Absolutely demonstrating, as these findings do, the want of merit in the contention that there was error in holding that the lease had no existence, if there was power to make and give effect to the finding, we come to consider those questions which at the outset we pointed out, are . the only issues in the case.

Passing whether the face of the notarial acts to which we have referred do not ir_ and of themselves fully establish the transfer of the lease by Van Syckel to'the firm and its extinguishment by confusion as the result of the purchase at the foreclosure sale, but without intimating any opinion whatever to the contrary, let us consider the subject in a somewhat narrower aspect.

Undoubtedly, under the local law (Laws of Porto Rico, 1905, p. 70), if there was intrinsic ambiguity, the right to resort to extraneous proof to dispel it obtained; that is proof, to use the words of § 28.of the statute, showing “the circumstances under which it (the document or contract) was made, including the situation of the, subject of the instrument, and of the parties to it ... so that the judge be placed in the position of those whose language ' he is to interpret.”

The articles leave no doubt concerning what the business of the partnership- was to be, that is,- the carrying on of a dairy and the purchase of. cattle; but there is nothing in the articles which expressly shows where and how the proposed business of the firm was to be conducted, and when light on this subject is sought from the implications of the text, to say the least, such a state of mental uncertainty is engendered as plainly justifies the resort to proof to clear up the ambiguity. We say this because in. the first place the property, one-half of which was bought from. Van Syckel by Sobrinos de Ezquiaga and the whole of which was then put by the joint owners into the firm as its sole capital in trade, on the face of the paper appeared to be an inventory of the assets and property of a preexisting business, which, from the nature and character of a large part of the tangible property sold, was a dairy and cattle business. In the second place because included in the articles bought was a sum of money stated to be “value of working capital” which so persuasively suggests the present purpose to continue an existing business as beyond all doubt to justify proof as to the situation of the parties and of the subject-matter to which the contract related. The proof then being admissible and establishing that Van Syckel was engaged in a dairy and cattle business upon the Santa Cruz property and that the assets and capital, one-half of which he sold, constituted the plant and assets of such business, which the firm continued to conduct, the question is, Was there such ambiguity in the contract as to the transfer of the lease as to again justify proof beyond the terms of the instrument to clear up that situation? Of this also we think there can be no doubt, for the following reason: The inclusion among the

This leaves only for consideration the contention that the action of the court was erroneous because it gave effect to fraud and deceit, and enabled the defendants to recover by alleging their own turpitude. Before we approach that subject, however, we dispose of another matter to which considerable attention was devoted in the argument at bar.

During the course of the trial Señor Vacuna, who had been the attorney of Sobrinos de Ezquiaga, of Van Syckel and of the partnership, was offered as a witness to prove that “the postponement agreement” was advised by him and was executed as a mere precautionary-measure to protect the interest of the firm in the lease, that is, to preserve the lease in case, by an adverse decision in the Montilla suits, the foreclosure proceedings were annulled and the firm deprived of its resulting ownership of the property. . In other words, that the purpose was to leave the lease in such a position upon the public records that if it should result from the Montilla suits that the title resting upon the foreclosure was destroyed the lease would not be treated as having- been extinguished by confusion because on the records the ownership of the property and

Indeed, when it is considered that the controversy is between partners and concerns acts in which they all bore an equal part, and that the charge of fraud is advanced to sustain the asserted right of one partner to recover, to the detriment of the other partners, property which he sold to the partnership and for which he was paid without ■ a return of the price, the want of merit in the contention becomes apparent.

Affirmed.