183 be .preserved withontobedienee to our own laws, nor :social order presel'ved if the judicial branch of the government countenanced and sUlltained contracts made in violation qf the duties which the law imposes, or in contravention of the known and established policy of the political department, acting within the limit of its constitutional power. " ",
by the desire to promote the cause of freedom. BntOul' own freedomcl\nnot
This was said in a case where it W8J!sought to. enforce a contract made in this country after Texas declared itself but ,before its in'dependence had been ac'4,nowl,edged ,1>Y the United ,States" whereby the .complainants agreed to furnish,and underwbich they<iili furnish, 'money· to a general in theTexanarniy, to enable him to raise and .equip troOps.to be Mexico." Hut the case is, 'In my opinion, 'equally apPlicable it is sought to .enforCe;anagreement ,nui:de contrary to tbe pUblio p61ic;:y oftbegovern.ment, in, contra one 'of its, and, in nrip:eipleembodied in itscoJ1stitution. Such a contraetis abeQlutlllyvoid:,
andshtnjld 'not be enforced in
United .. .·. '' . ' stat-ed,llou order\vill:be the at reference to other pointsmadlJ , I
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court.of
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V.PERIN et rd·. , (CirouU L GlJARDUN AND
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L
Code Civil Proc. Ky. 5 sale by proceedings iD chanCery of real jointly by tw;o or; perllons, when the same caDnot be divided witho,l:lt lOa,terially ,iD1paiP l1 i Its vlClue, even thougl1 some of the ownerll are infants or of unllOund mind. He!iL; that a sale thereunder of an infant's interest on appli· . cation:.<of Its, statut.ory guardian con"eY8' ,abllolute title when the oourt finds that the requillite faotill exist. Powm'v. Powm'. (Ky.) 15 S. W. Rep. 523, followed. OJoPAR" , . ' , 'l'IBS.
W ARD-S.u.. IOJ' RBALTr.:' ,
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JlJnIsDICnoN
a.
Where a part. owner of adillt1llery joipsa ,number of osso.elates .in a contraot. purohase the whole. and for that purpose a/p.:ees to conveyhiB existing interest therein,and afterwards, being ready,and,wllling to ,perforlll his contract, joins . other, vendors in I a SU,I fpr specific performance, he is a proper. party . plBintift. and cannot be conllidered a 'defendant· for the' purpose of destroying tile , , 'diversity of citizenship necessa1'1 to maintain. the,uit in 110 federal court SPBOIIl'IO. PB'RlI'OmUNOlli- BTOClEOIl' OO1U'OR4TION.
... BAK....X;NOUXBRANCBB. ,
. A clause in a contract ,fo, the, purchase 01 all .the stock 01 a distillery company may be specificall.y enforced'against the purchas61's when it appesl'8t1iat ltwas. as.all to allOUre the pertoo:mance of tbe Dlain atipulareal aD(Hllallt. . tioD.whicb wall forthe transfer of
.
'pge on the lands when it .Pl)lilI\rS y!-at,
:Aveudee cannot avoid a llpeolilc ]lertOnDBnce of biS do1i.tract· bedause ofa mort,agre,ament been for the, fOr
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184
yoI. 49.
In Eqrlity.. Suit by 'T. 1. Megibben's administrators and others against Oliver .L. Perin and others for specific performance of a contract. Decree for c0nlplainants. . JamilS O'Hara and Peck kShacffer, for complainants. Ramsey,' Maxwell & Ram8ey, for respondents. SAGE, District Judge. The bill is for the specific performance of the following contract: "In consideration of the 8urh of twenty-five dollars in cash, the payment of whlnli!'ishereby acknowledged, said payment baving been; made by O. L. Redn, japon behalf of himself and others, K. Megibpen and the J. Megibben, deceased, Rnd of the Undertakings of sail1 Perin, for bimllelt and otber,s, as hereinafter set forth, it is agreed as follows: sell and convey unto sard Perin, for himthe distil'lerfes Eiccelsio.r and Sharpe, situated at· Lair's statii;lii; with all grounds connected therewith, being· about sixteen 'adfes;tDoreor less,and allftouNiJills. warehouses. buildings,l1nd outbuUdiJ:lgs conneetedtherewith, and ·all good-!Will, brands, trade-marks; ,c!>pyrIghtg, pat· ents.lately held by Thomas J. :Megibbim, deceased, James:J{. Megibben, .a»'ll, 1\:. o'r and or either of them,or to use aU 'patents an'tfpiocesses. used by'l)im'or ihein In distillatio1i, and' allappurtenances and appliances connecl:efi witIriBai(HUliItllleries ani! premises. ' "Saili property to be conveyed by deed of general warranty, free of all incumbrances; taxes now levied to be paid by vendor. Price to be paid for said property $42,500.00, to be paid-in cash on delivery of deed, after examination and approval of title. "Cincinnati. July 9, 1890." "It now aboye are by two corporations. the agree'I'nent is that'the' entire stock of said corporations shall betransferred to Perin and associates upon the above considerations, said corproperty porations OOitl!l'·;freefrom all.indebtednes!i.:The shall be conveyed to the said Perin on same consideration. '[Signed] "JAB. . '" "'JAMES W,'MEGIBBEN. ".}A\I1ES, W:·. !.!EGIBBEN. Administrator. "ESTATE OF T. J. MEGIBBEN. .. "0. L.PERIN, for. Himself and .Associates." ,equities of the cause are with the complaillants,uniess the title· to the real estate described in the contract is defecth'e. Thomas J. Megibben died intestate, leaving minor ,heirs. He wlls seised at the time of his death of the legal title to an undivided one-half of the real estate pfthe Sharpe distillery,and to an of the real estate of the Excelsior distillery. These pieces of real estate were property,-the first, of the Sharpe Distilling Company, a firm:cOID}xlsed of'J. K. and T. G. 14egipl;>en, of the one part, and the G. R. 'Sharpe Company, inoorporated, of.the other part; the second, of the firm of T. J. MegibbeIi and J. KMegibben, of the one part, and the Megibben.E:l\i.celsior COPlpany, incorporated, of the other part. :On the aOthofJanullry, K.,Megibben, as surviving rartner of saId 'company; in consideration of 875,000, paid by the delivery to· him of 7508100 shares of paid-up capital stock of the said G. R. Sharpe
MEGIBBEN'S ADM'RS·
v.
PERIN;
185
Distilling Company, incorporated, conveyed to said company in fee the undivided one-half of the'i'eal estate of the .Sharpe distillery, of which Thomas J. Megibben died seised. On the same day, in consideration of$75,OOO, paid by the delivery to him of 750 8100 shares of the up capital stock of the Megibben Excelsior Company,James K. hen, as surviving partner Of T. J. Megibben & Bro. ,conveyed in fee to the Megibben Excelsior Company the undivided two-thirds of the real estate of the Excelsior distillery, of which Thomas J. Megibben died seised. It is conceded that James K. Megibben, as surviving partner, would have been entitled, in a proceeding against the widow and heirs of Thonlas J. Megibben, to sell said property if necessary for the ment of partnership debts, bu.t defendants deny the validity of the sale, because it appears frotn the recOrd that there were no partnership debts; It is not clear from the authorities generally that the deeds were fore invalid. The supreme court in Shanks v. Klein, 104U.S. 18, held that the right of the surviving partner to the real estate of the copartnership is all equitable right, accompanied by an equitable'title. The legal title of copartnership property may be in one or more of the partners; hut in every sucb case equity regards him, or' them as holding in trust, and thec()partnership liS the beneficial owner. in such case the survivor cannot by his deed pass thA legal title, which descended to the heir of the deceased partner, yet as the heir holds the title in trust to pay the debts, and the survivor is charged with that duty,' his deed will convey the equity to the purchaser, who' may compel the heir to convey the legal title. This was the holding in And'fews' Heirs v. Brown's Adm'r ,21 Ala., 437, andin Dupuy v. 17 Cal. 262, cited with approval by the supreme court in Shanks Klein. ,'It has been held that the buver is not bo'und to see to' the application of the purchase money 1 as" sueQ burden would greatly reduce the value. Tillinghast v. 4R. 1. 173; Griffe,!! v. Northcutt, 5 Helsk. 746, in accord ance with the statutein Tennessee.) It may be, therefore, that the purcbiiser was not bound to ascertain whether, as a matter of fact, there were debts of the (lopartnership, for the paymentOf which it was necessary to sell the real estate, and that the would transfer to him the equitable ownership of the partnership, eveil if there were no debts, notwithstanding the general rule that the grantee of an equitable title takes no greater interest than his grantor had the right to convey. and that the remedy of the heir at law would be against the surviving partner personally, unless it was shown affirmatively that the purchaser knew, or was chargeable with notice, that there were no debts. The rule approved by the court of appeals of Kentucky is that real ,estate bought with partnership flinds, to be used in the partnership bUsiness and for partnership. purposes, is to be regarded as partnership property, impressed with the characteristics of pel;sonalty for all poses, not only as between the. partners inter se, and the firm and its .ereditors, but also as to distribution between the l;\dministratol.', distriQUr :tees,andheirs. Divine v.Mitchurn,4 B. Mon. 488; Ba'llkv.
116
FEDERAl< REPORTER,
vol. 49.
Bush, ,678; Wdabn, 80 Ky. 590j and Flanagan Shuck, 82 Ky.:626. ,From,thesecasesittappearsthattherule in Kentucky is that real estate purchased by the partnership for the conduct of its business is to be regarded as personalty, and that surviving partner has the power to. sell, and with the aid of a court of chancery can convey the title toll.: purchaser.', See, also, Ramme18betg v. Mitchell, 29 Ohio St. 53. But it is not necessary to decide these questions, for it appears from the record that counsel for the defendant Perin and his associates ob· jected to the title on the ground that the deed by the surviving partner was not valid. Thereupon the adult heirs of T. J. Megibben, together with James K. Megibben, conveyed to the incorporated companies all their interest in these properties, and those companies thereby acquired title to .uI the property excepting the interest of the minor heirs of T. J. Megibben. It ftittherappe4rs from th.e record that by proceedings in the chancery COl.lrt of Harrison county, Ky., instituted by the guardian of the minorebildrenof. Thomas J. Megibben against the G. R. Sharpe Com", pany and others, and like proceedings against the Megibben Excelsior Company and others, the conveyances aforesaid by J. K. Megibben, as surviving partner, to said companies, were confirmed, audit was further decreed that conveyances should be made by the master commissioner of said court to said companies of all the right, title, .and interest ofthe . minor>childrenand heirs of.Thomas J. Megibben, and deeds were made accordingly. This proceeding was conducted under section 490 of the Civil Code of Practice of Kentucky, whiC'h provides thatII A vested estate in real property. jointly owned by tWQ or more persons, may M sold. by order of a court of equity. in)lD action brought by either of the ,plaintiff or defendant be of unsound mind, or an infant. them, III III III if the estate be in possession, and the property cannot bedi vided without materially impairing its value. or the value of the plaintiff's interest therein." ' The were. found by the court to be such as, under the requirements of this provision, were necessary to authorize the sale and conveyance. The mother of the minor children joined in the suit with the minors, who appeared by their statutory guardian. The court found that the property was partnership property, that it was indivisible, and was QnJ,y suitable for a distillery, and that their interest required that it should be sold to the cornpanies aforesaid. The court of appeals of Kentucky, in the case of Power v. Powe:r, (Ky.) 15 S. W. Rep. 523, (decided February 19, 1891,) held, in a Cl'se involving like questions, that the power of the court to order tbe sale and conveyance was unquestionable. The court said: "TheappelleeB and appellant own astor l-house and lot in Maysville. with a front of thirty-three feet. The appellant owns three-sixths of the lot, and balf, subject to the one-third dower interest of the tbe. appellees the Widow. i'he widow and her cO.Ilt>pellees tiled this petition under section 490 of the Code. It Is Alleged that this propertycllnDot be sold without materially impairing iuvalue. and that B'salewould redound to the interest Of all parties. The interest of the infant appellees is asked to be rein vested for
MEGIBBEN'S ADM'RS
PERIN.
187
them by the chancellor.· It is apparent from the record that no division of this property can be had, and cannot perceive why it should not be sold, and proceeds dividep·. ! The widow, who has a dowerin this .lot, 1$ not procepcling in her own right to deprive by sale the remainder-men of the fee, under section 491. This is a vested interest, by parties in possession of property that cannot be divided, and the·qupstion of whether the sale will be beneficial is not involved, though alleged; and, while the chancellor will that the interests of the infants are not sacrificed. a party jointly interested has the right, where the property cannot be divided, to demand a sale. By virtue of the provisionl!l of section 490, the infants the right to sue by their mother, who is theIr statutory and no defense is required to be them where they unite as plaintiffs. "The object of the guardian is to reinvl'st the proceeds for the infants,that is, to the extent of their intel'est,"-and no bond Is required; as the proceeds will be under the control of the chancellor." This case is decisive, and leaves no room for doubt that by virtue of the deeds, and of the legal proceedings aforesaid, the entire title passed to and is vested in said companies. Upon the hearing it was claimed for the defendants that the complainant JamesK. Megibben is to be treated as a purchaser in this case, and that he is therefore a necessary party defendant; and being such, and with the other complainants a resident of the state ofKentucky , the court has no jurisdiction of the case. This is ingenious, but not sound. James K. Megibben is not a party defendant, nor can he in any view be regarded as such. It is true that he is one of the associates of the defendant Perin, but he is ready and willing to perform the contract. The decree is sought against Perin and his associates, who are unwilling; and it would not be against him, but against them, to compel them to join with him in receiving and paying for the capital stock, which represents the real property involved. He is therefore properly a complainant, and as much interested in securing a decree against the defendants as are hie co-complainants. It was also claimed upon the hearing that this is not a case for the remedy of specific performance, because the contract relates to personal property; that is to say, to the entire capital stock of the two corporations owning the real estate. The purpose was to transler the real estate and the plant connected with the distilleries. That is apparent from the contract itself, and is abundantly proven by the testimony. In Leach v. Fobes, 11 Gray, 510, the court decreed specific performance of the contract, holding that where the agreement for the sale of the shares forms part of a contract for the sale of real estate, and the suit is brought for the conveyance of the land, as well as the transfer of the shares, the contract may be enforced in equity. In England it is well settled that any sale of shares of stock in a private corporation may be enforced by a decree for specific performance. Duncuft v. Albrecht, 12 Sim. 189; Shaw v. Fi.aher, 2 De Gex & S. 11, 5 De Gex, M. & G. 596; Wynne v. Price, 3 De Gex & S. 310. 'fo the same effect are the following cases in this country: A8he v. Johnson, 2 Jones, Eq. 155; White v. Schuyler, 1 Abb. Pro (N. S.) 300; JolvnBon v. Brooks, 93 N. Y. 337; 7Teaaurer v. Commercial Co., 23 Cat 390. In this last case the authorities are re-
188:
REPORTER;
viewed, land the question fully Qonsidered, Where the contraot is for the'sale' of securities issued by the government, specifio performance will not be decreed, since they may be easilypurohased in the market; but vendee's remedy is at law for damages. ROB8V. Railway Co., 1 26, 32; Cud v. Rutfp, 1 P. Wms. 570; Colt v. Nettervill, 2 P. Wrnl:!. 304; Buxton v. Lister, 3 Atk. 38p. If stock ofaprivate corporation contracted to be sold is easily obtainable in the ijlarket, and there are no special reasons why the vendee should have the particular stock m¢ritioned in the contract, he is left to his actionatlil.Wfor daolages. Cook, Stocks, § 338. But here the contract is fOf aU: the stock of the corporation, and that clause of the contract was evidently' adopted as an eJ!:pedientjo secure, the trunl!fer of the real estate. · objection to the jurisdiction of the court on ,this ground has, however, belln practically abandoned., It is without merit, and cannot be sustained.' only,remaining js that of the'alleged inQUIPPfill1CeS upon the real estate, or indebtedness by the qorporations, , The Excelsior Company is free from debts, as appears from t11e testimony of J. W. Megibben. 'rhe Sharpe Compan.yhas a J,'flqrtgage upon its lands for about 87 ,000, which it is by an arrangE;lmentwit9 the holder, the Farmersl Bank of Cynthiana, to be paid off and vyhenever the thepropeJiy, and the payment and,cltncellatiou can be,provided for by th,e decree, which will be forthecpmplainants, with cos1;&. " , , ,
FARMERs' .,Lo,AN& 'TRUSTCO.'l1. '''<CtrcUtt L
SAN
s.
8.
In fOreclose a I;llortgag\'l given by ,8 lOtreet-rai\road company to payment"ot 'ceM;ain' bonds, it. appeared that' the bonds were invalid; but, all the by the mortgage beinA' in possession of a,receiver appointed pend· ing the who had issueil ce.rtificatesfor eJlpenses incurred .for the PreSErvation of the property, a d.eoree was entered, upon consent of all parties in inter; est,aIlcertalning and fixing thelamounts of their respectiveolaims, and direoting a sale of all the· property pf. the satisfy the.same. Held, that rails. fish-plates, and bolts purchased by the' company for use on its road, but which had not been actUally. used, and were stacked upon land not within' the right qf",ay,wero within the terms of the mortgage, which includeQ all real and personal prop'ertyof every kind and description "used or intended to be used in conneotioll with or for the purpose of said railroad, " and came clearly within the decree. SAME.
AND' SALE-"'PIIOPERTY INCLUDED,
Certain'11Otes, secured by mortgage, which had been executed to the company by a land assOQiation',were set out in the, receiver's inventory of property taken possession of by hiI!l under ardEll' of the court, and were in his hands at the time of making the decree by consent for the sale of all the company's property. Held, that eveQ: .,tboug!j, :such notes and mortgage were ,not included in the mortgage' sought foreclosed, as they bad been brought into the custody of the court under color' of its authority, and all parties in interest were parties to the suit, the court badjurii!dict,ipn to decide!,!l conflicting rigbts thereto, and Should not release its control of them in order thilt. tbeymlght bfl subjected to process obtained by creditors of the company froin a state coUrt,' nor should it award sucb creditors a. prioritY!>! lien by reason Qf their prqceedings in t.he state oourt.
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