APPEAL FROM THE CIRCUIT COURT OF THE UNITED STATES FOR THE EASTERN DISTRICT OF ARKANSAS.
MR. CHIEF JUSTICE FULLER, after stating the case as above reported, delivered the opinion of the court.
Upon the face of the bill, of which the transfer to the complainants formed a part, we think the latter could maintain the suit if a cause of action existed, and we assume that the demurrer was sustained and the bill dismissed as the result of the application of the statute of limitations or the doctrine of laches. Should this conclusion have been reached upon the facts admitted? By the terms of the agreement in question, the partnership was to continue for five years, provided Riddle, Coleman & Co. wished to remain in the coal business; but, if not, or if they desired to terminate this particular connection, J.M. Whitehill & Co. were "to wind up their affairs and sell the stock to the best advantage for all parties concerned." The five years ran out on the 7th day of March, 1875, but the firm went on in business. Many of the lots in question had been conveyed to Whitehill & Co. prior to 1875, and the term of the lease of the river front did not expire until May, 1877, when it was renewed for twenty years, an indication that the firm had then no intention of bringing its business to an end. The management at Arkansas City was confided to Whitehill, while Riddle, Coleman & Co. furnished the capital invested in the plant, and the coal from year to year, dealing in which was the specific object of the enterprise.
On the 15th day of October, 1877, the firm of Riddle, Coleman & Co., which had then been carrying on business at Pittsburg for more than twenty-seven years, was compelled to make an assignment. If a member of an ordinary partnership assigns, where the partnership is at will, the assignment dissolves it, and if it is not at will, the assignment may be treated by the other members of the concern as a cause for dissolution.
The assignee of one partner cannot be made a member of a partnership against the will of the other partners, but the absolute right to have the affairs of the firm at once wound up, when the specified duration of the partnership has not expired, may be subject to modification according to circumstances. Taft v. Buffum, 14 Pick. 322; Buford v. Neeley, 2 Devereaux Eq. 48; Monroe v. Hamilton, 60 Alabama, 226; Lindley on Part. * 364; Helmore v. Smith, 35 Ch. Div. 436. In the case at bar J.M. Whitehill & Co. continued in business after October, 1877, although the bill does not state for how long a time. The failure of Riddle, Coleman & Co. presumably prevented their furnishing coal, yet the averments of the bill show that the business of Whitehill & Co. had expanded far beyond the traffic to which it had been originally confined. But assuming that by the assignment the partnership of J.M. Whitehill & Co. was dissolved, it was the duty of Whitehill to proceed at once to wind up the business and sell the stock to the best advantage, not only for himself, but for Riddle, Coleman & Co., and this was in compliance with the express provisions of the agreement. It appears that a portion of the stock, to the amount of $16,000, was not sold until the 10th day of March, 1881, at which time the coal privilege at the landing was leased for ten years; and while some of the real estate had been disposed of, a large part remained yet to be divided, when the bill was filed. The proposed amendment showed that the firm's liabilities were not liquidated until 1883.
According to the allegations of the bill, on the 15th day of October, 1877, when Riddle, Coleman & Co. assigned, the firm of J.N. Whitehill & Co. was the owner of town lots, of river front, residences, store-houses, and a hotel, bought and paid for with the partnership funds. The title stood in the name either of J. M. Whitehill or of J.M. Whitehill & Co.; and part of the property was in use for partnership purposes and so employed, while a part was not, but represented the investment of partnership gains. A partnership, as such, could not hold the legal title to real estate, as it is not a person in fact or in law, and the situation in this case is well described in
Percifall v. Pratt, 36 Arkansas, 464, where it was held: "If the title be made to all the partners by name, they hold the legal title as tenants in common, without survivorship. If to one partner alone, the whole legal title vests in him, which is the case, also, where the title is to a partnership name, which, as in this case, expresses the name of one party only, with the addition of 'and company.' If the deed be to a name adopted as the firm style, which includes the name of no party, it passes nothing in law. The same occurs where the deed is to one already dead."
As to this real estate, whether the deeds ran to J.M. Whitehill & Co. or to J. M. Whitehill the latter held the title in trust, and it was so ruled in McGuire v. Ramsey, 9 Arkansas, 518. It is there said that "where real estate is purchased and paid for with partnership funds, but conveyed to one of the partners alone, a trust results in favor of the other partners;" and that lapse of time "cannot be allowed in favor of one partner in possession of real estate against the other, for the possession of one is the possession of both."
Lord Redesdale in Hovenden v. Lord Annesley, 2 Sch. & Lef. 607, 633, laid down the rule, that if the trust be constituted by act of the parties, the possession of the trustee is the possession of the cestui que trust, and no length of such possession will bar; but if a party is to be constituted a trustee by the decree of a court of equity, founded on fraud or the like, his possession is adverse, and the statute of limitations will run from the time that the circumstances of the fraud were discovered.
"As a general rule, doubtless," said Mr. Justice Gray, delivering the opinion of the court in Speidel v. Henrici, 120 U.S. 377, 386, "length of time is no bar to a trust clearly established, and express trusts are not within the statute of limitations, because the possession of the trustee is presumed to be the possession of his cestui que trust. But this rule is, in accordance with the reason on which it is founded, and as has been clearly pointed out by Chancellor Kent and Mr. Justice Story, sub ...