Tillis v. Folmar , 145 Ala. 176 ( 1906 )

HARALSON, J.

1. It must be admitted that where one partner sells his interest in the firm to another partner, ancl the same thing is true when a stranger buys out the interest of one of the partners, such purchase, unless it is otherwise provided by the contract of sale, operates such a change in the position of the seller, that he no longer has any claim based on the partnership relation, which would justify an accounting between the partners; and the compensation agreed to be paid must be enforced at law, equity having no jurisdiction to enforce the agreement. — Brown v. Burnum, 99 Ala. 114, 12 South. 606.

By the terms of the contract of sale, Tillis, who was a stranger to the partnership, together with Byrd, who was a member of the firm, bought out the interest of complainant, Folmar, and J. 0. Walden, another one of the firm. The purchase involved the entire stock of goods, wares and merchandise and office fixtures of said firm, located at different points, and all notes, mortgages, books, accounts and dioses in action of said firm at the places specified; also till the real estate belonging to said firm, the intent being as stated, to convey to the purchasers, the entire interest of said firm in and to the partnership property, real, personal and mixed, of every character. The purchase price was $25,000.00; $5,000.00 in cash, which Avas paid, and tAvo notes of $10,000.00 each of the Henderson Boyd Lumber Com- . pany, payable respectively, on the 1st of October, 1902 and 1903, which notes Avere delivered, the purchasers agreeing also, as a part consideration of the sale, to pay “all the debts, notes and accounts and liabilities of the firm of Folmar, Walden & Byrd, as sIioavii by the books of the firm, together Avitli any accounts that may be due the local merchants for monthly bills.”

By such a contract, Avliile the old firm Avas primarily liable to its creditors, yet, as betAveen the sellers and purchasers, Folmar & Wakíen and Tillis & Byrd, the former became the guarantors of said debts to the creditors, and their sureties for the payment of the same. As betAveen Folmar & Walden and Tillis & Byrd, the latter were primarily liable to the creditors. — Mason v. Hall, 30 Ala. 599. This agreement to pay these debts by Tillis & Byrd was not a coArenant for indemnity, merely, but bound them, Tillis & Byrd, as purchasers, to discharge Folmar & Walden from all liability for the debts. This meant that they would pay them as they accrued and exonerate complainant from paying the same.— Peacey’s Creditors v. Peacey’s Adm’r., 27 Ala. 683. The bill avers that the debts were all past due, and the failure of .defendant to pay, the promise to pay being an affirmative one, gave, it is true, the complainant an immediate right of action on the contract, for the debts he had already paid, and also for all such as he was liable for, but this did not operate to deprive him Of his right to file his bill to compel the purchasers to pay the debts and exonerate him from the payment of the same. The prayer of the bill is for a specific performance of the covenant, and for damages for its violation.

As to the right of a surety to file his bill to compel his principal to pay the debt in exoneration of the surety, Mr. Brandt observes: “After the debt for which the surety or guarantor is liable has become due, he may, without paying the debt, and without being called upon by the creditor, file a bill in equity to compel the principal to pay the debt, it being unreasonable that a surety or guarantor should always have a cloud .hanging over him even though not molested for the debt. The principle is universally recognized, and has been applied to a great variety of circumstances.” — Brandt on S. & G. (3d Ed.) § 245; Baylies on S. & G. p. 301.

In 1 Story’s Eq.. Juris. § 327, it is said, “Sureties, also, are entitled to come into a court of equity, after a debt has become due, to compel the debtor to exonerate them from their liability, by paying the debt.”

In the case of Thomas v. St. Paul’s M. E. Church, 86 Ala. 141, 5 South. 509, this court, recognizing this doctrine employs this language: “No principle in equity is more familiar, or more firmly established, than that a surety, after the debt for which he is liable has become due, without paying or being called on to. pay it, may file a bill in equity to compel the principal debtor to exonerate him from liability by its payment, provided no rights of the creditor are prejudiced thereby.” The demurrer so far, as it questioned the equity of the bill on this ground Avas proper] y overruled. See also the case of West v. Chasten, 12 Fla. 315, Avhere many decisions are collated.

2. The respondents pleaded the statute of frauds,— that the agreement in said bill alleged and sought to be enforced Avas ineffective, in that a part of the property agreed to be purchased by respondents, and for Avhich an entire and indivisible consideration Avas agreed to be paid, consisted of considerable real estate situated in various places in CleneAra county; that said agreement was not in writing, nor Avas any note or memorandum thereof in writing signed by respondents or by any one thereunto authorized, etc.

The bill alleges, in substance, that Avhile Walden Avas not a party himself to said contract of sale, except as complainant represented his interest and undertook to dispose of the same, the complainant has placed the respondents in the full possession, ownership and enjoyment of the property and dioses in action sold them, and said Walden has affirmed and ratified his said action and is satisfied to look to complainant for his share of the proceeds of the sale of said property; that a portion of the property purchased was real estate, and that an entire and indivisible consideration Avas to be paid for it, and the real estate was situated in different places in Coffee county; that said agreement was not in Avriting, signed by complainant; that Walden never executed any Avritten agreement to convey, and that Folmar had no authority in writing in the premises from Walden; that a part of the consideration Avas then and there paid and respondents put in possession of a part of the land, but not in possession of the entire lands. The bill alleges,- as stated, that the purchasers Avere put in possession of the entire lands.

The language of the prayer of complainant’s bill is, after requesting a reference to ascertain and report the-sum due said several creditors by the firm of Folmar, Walden & Byrd, which the defendants in the contract bound themselves to pay, that the court Avould “render a decree, requiring the said Tillis & Byrd to specifically perform their said contract by paying the amounts due' each of said creditors respectively, and upon their failure to do so, judgment he entered against the said Richard Tillis and Robert E. Byrd for said amount, and that they be also compelled to refund and repay to your orator the debts already paid by him, for which they are liable under said contract.” There was no prayer that the legal title to the lands be divested out of Folmar & Walden and be invested in Tillis & Byrd. Indeed, Walden was not a party to the bill. .

“Partnership lands in equity and for partnership purposes -are to be treated as personalty (4 Mayfields, Dig. p. 397, § 301). Real estate acquired with partnership funds, or on partnership credit, and for partnership purposes, in a court of equity -is esteemed partnership property, subject to the-payment of partnership debts, in priority of the separate debts of the several partners, and it is not material whether the legal title resides in the partnership or in the several partners as tenants in common, or in the name of one partner only.” — lb., p. 398, § 321.

It is said in Browne on the State. of Frauds (5th Ed.) § 259; that “where land is owned by a partnership, each partner, of course, is entitled to his proper share of it. And here must be remarked an important exception (for so it seems we are forced to regard it) to the operation of the statute as it affects^ interests in land. Where two men are found jointly occupying a piece of land, incurring equal expenditures upon it, and enjoying equal profit from it, the relation which from such facts would be presumed to be existing between them is that of joint tenancy, and, as incident to that joint tenancy, upon the death of either the whole would go to the other by right of survivorship. * * * But when the parties are really partners, and the land has been brought into and actually held and used by the partnership'for partnership purposes, the courts have dealt with it as partnership property, although the ownership has not been apparently in all the members of the firm; or, if in all, not apparently as partners, but under some other title. * * * It seems that the earlier authorities to the effect that real estate used for partnership purposes maintains its character of realty, and goes to the heirs of the partners respectively, have been overruled, and that all property whether real or personal, involved in a partnership concern, is now, upon the dissolution of the partnership distributable as personalty, and generally is to be, for ordinary purposes, regarded as stock in trade,” to which the statute of frauds is not applicable.

The contract being entire, and the purchaser having gone into possession of a part of the property, there was such part performance, if that were important, as satisfied the statute of frauds. The effect of the act of taking possession of a part is as applicable to entering into the whole as if the whole had been actually entered upon. — smith v. Underdunck, 1 Sandf. Cr. 579, 581.

“Possession of a tract of land must generally be, from the'nature of the case, a possession of a part only as representing the whole. So long, therefore, as the contract under which possession is claimed to have been taken or delivered is an entire contract, though the land consists of several parcels, it would seem more reasonable to hold that possession of one of such parcels was equivalent to possession of the whole,” etc. — Browne on Statute of Frauds (5th Ed.) § 475. The exceptions to the plea of the statute were properly sustained.

Under the facts alleged, Walden was not an indispensable party defendant..

Let the decree be affirmed.

Tyson, Anderson, and Denson, JJ., concur.