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Hanna v. McLaughlin.


lin, is insolvent. The foregoing facts are set out in the first paragraph of the complaint, and the relief sought in that paragraph is an accounting, a personal judgment against Charles W. McLaughlin, and the enforcement of a lien for the amount due on the real estate conveyed to Mrs. McLaughlin. The second paragraph charges a conspiracy between McLaughlin and his wife to defraud the appellants, and alleges, substantially, the same facts as the first. It asks for an accounting, a personal judgment against the appellee, Charles W. McLaughlin, a cancelation of the entry of satisfaction of the Hutchens mortgage, and the foreclosure of that mortgage for the use of the appellants. The appellee, Vone McLaughlin, demurred to each paragraph. Her demurrers were sustained, and judgment was rendered against the appellants. The rulings on the demurrers present the only questions for determination on this appeal.

It is urged in support of the decision of the trial court that a demand for a settlement before the commencement of the suit was necessary, and that neither paragraph of the complaint alleges such demand; that the suit was prematurely brought, because the partnership had not been wound up; and that, upon the facts pleaded, the appellants were entitled to no relief.

(1) No demand was necessary before bringing the action for an accounting and settlement. 15 Ency. Pl. & Pr., 1058; McClung v. Copehart, 24 Minn. 17. (2) The copartnership had expired by its own implied limitation. This was, at most, a technical partnership only. There was but a single transaction in which the parties were jointly interested, and that transaction was fully closed before the suit was brought. The facts closely resemble those in Felbel v. Kahn, 29 App. Div. 270, 51 N. Y. Supp. 435, where it was held that the contract was not one of partnership which required an accounting to settle the rights of the parties, but a joint adventure, which, having been executed, might be recovered on at law. The complaint in this suit, how

Hanna v. McLaughlin.

ever, is in the nature of a bill in equity, and, treating the contract as creating a copartnership, we think a good cause of action is stated. It is shown that the object for which the copartnership was entered into has been fully accomplished, and that nothing remains to be done except to divide the assets among the partners. It appears that one partner has wrongfully seized upon, and appropriated to his own use, the entire assets of the firm. The partnership cannot be regarded as still subsisting, but, its purpose having been carried out, it may be treated as dissolved. By the express terms of the contract, there can be no further dealings of the partnership, and the difficulty suggested by the vice chancellor in Loscombe v. Russell, 4 Sim. 8, in cases of interference by the courts where the partnership still continues its active existence cannot, by any possibility, arise. The suit is not brought to enforce contribution, or to collect a debt alleged to be due from a partner to the firm, but its purpose is to secure an accounting and a final settlement of the partnership affairs. 3 Kent Com., Lect. 43, p. 53; Story on Partnership, $280; Musier v. Trumpbour, 5 Wend. 274. Besides, the facts set forth show such a gross abuse of authority, and such misconduct on the part of the guilty partner, that a court of equity would be justified in decreeing a dissolution, if it were necessary to do so, and ordering the partnership affairs wound up. Story on Part., $231. It is very evident that, considered as a suit for an accounting and a settlement of the partnership affairs, the complaint stated facts sufficient to require an answer from the defendants and appellees.

(3) But under the circumstances set forth, the appellants were not only entitled to an accounting, but also to a distribution of the moneys of the firm in the hands of the appellee, Charles W. McLaughlin, and to a judgment against him for the amounts due to each of his copartners, respectively, upon a final adjustment of the partnership accounts. Dale v. Thomas, 67 Ind. 570; Moran v. LeBlanc,

Hanna v. McLaughlin.

6 La. Ann. 113; Shattuck v. Lawson, 10 Gray (Mass.), 405; Arnold v. Arnold, 90 N. Y. 580; Meredith v. Ewing 85 Ind. 410; Dehority v. Nelson, 56 Ind. 414; Kimble v Seal, 92 Ind. 276; Miller v. Rapp, 135 Ind. 614, 618.

The demurrers admit that the appellee, Charles W. Mc Laughlin, has, without the consent of his copartners, ap plied the partnership funds to the payment of his individual debt in the discharge of a mortgage lien on real estate conveyed to his wife with notice of the fraud. As between themselves, the appellee, Charles W. McLaughlin, must be regarded as a trustee of the firm for the partnership funds collected and held by him. Where a trustee has, in fact, converted trust funds to his own use, or has, without authority, invested them in property into which they can be distinctly traced, the cestui que trust has the right to follow the same into the new investment; and, where trust funds are invested in the hands of third persons having knowledge of their character, they still remain impressed with the obligation of the trust in the hands of the holders, and are subject to be reclaimed and restored to the trust fund. Pearce v. Dill, 149 Ind. 136; State v. Foster, 5 Wyo. 199, 38 Pac. 926, 29 L. R. A. 226, 63 Am. St. 47; Warren v. Union Bank, 157 N. Y. 259, 51 N. E. 1036, 43 L. R. A. 256, 68 Am. St. 777; Midland Nat. Banka v. Brightuell, 148 Mo. 358, 49 S. W. 994, 71 Am. St. 608, and note on p. 614. It must be held, on the pleadings as they now stand, that the real estate conveyed to Mrs. McLaughlin is subject to a trust in favor of the copartners to the extent of the shares of the appellants in the $400 of the funds used to discharge the mortgage debt.

For like reasons, we are of the opinion that the second paragraph, also, was sufficient in its statement of facts to entitle the appellants to an accounting, a personal judgment against Charles W. McLaughlin, and the enforcement of the trust against the real estate conveyed to the appellee, Vone McLaughlin; but we do not decide that any subroga

Mellott v. Messmore.

tion of the appellants to the rights of Hutchens in the mortgage took place. Under the second paragraph, as well as under the first, the trust may be enforced against the real estate conveyed to Mrs. McLaughlin to the extent hereinbefore indicated.

For the errors of the court in sustaining the demurrers of the appellee, Vone McLaughlin, to the first and second paragraphs of the complaint, the judgment is reversed, with instructions to the court to overrule the said demurrers, and for further proceedings in conformity to this opinion.


158 297 163 502

297 656

[No. 19,516. Filed April 4, 1902. ] APPEAL AND ERROR. Parties.-Dismissal.-An appeal from a judg.

ment setting aside a deed and for damages against the grantees and an alleged coparty to the fraud charged will not be consid. 163563 ered where the Supreme Court has no jurisdiction of the coparty, 158 althongh the assignments of error on which a reversal is sought are those in which the coparty is not interested. From Clinton Circuit Court; J. V. Kent, Judge.

Suit by Charles W. Messmore against William T. Mellott and others to set aside a deed and quiet title and for damages. From a judgment for plaintiff, defendants appeal. Transferred from Appellate Court, under $1337u Burns 1901. Appeal dismissed.

C. M. McCabe, for appellants.

V. E. Livengood, A. T. Livengood, M. E. Clodfelter and H. N. Fine, for appellee.

GILLETT, J.—The appellee commenced this action, in the court below against the appellants William T. Mellott and Oliver M. Gardner, and also against Mary E. Parsons, William E. Parsons, and William L. Messmore. The appellee moves to dismiss this appeal on the ground that “this court

Mellott v. Messmore.

has acquired no jurisdiction, by notice or otherwise, over the person of William E. Parsons, a coparty to the judg. ment from which this appeal is taken.”

Appellee's complaint is in three paragraphs. In these paragraphs appellee sought to set aside a deed made by appellee to appellants, on the ground of alleged fraudulent representations; to quiet appellee's title to the real estate described in the deed; and to recover damages against appellants and against said William E. Parsons, an alleged coparty to the fraud charged. The allegations of the complaint as against the other defendants below need not be discussed. William E. Parsons filed a demurrer to each paragraph of the complaint, but his demurrer was overruled, and he reserved an exception. On issues duly joined as to all of the parties, the cause was submitted to the court for trial. After trial had, the court, on the 6th day of February, 1900, rendered a decree in favor of appellee and against the appellants, setting aside the deed and quieting the title to the real estate described in the deed in appellee, and rendered a judgment in favor of appellee against appellants and said Parsons in the sum of $400 as damages, and also rendered judgment against said three parties, in appellee's favor, for his costs. On the same day appellants filed an appeal bond, which was approved. On the 25th day of February, 1900, appellants filed a motion for a new trial as of right, and also filed a bond in that behalf. The bond was approved, but their motion denied, and to the latter ruling they excepted. On the 1st day of November, 1900, appellants filed in the Appellate Court a transcript of the proceedings in this cause in the court below, and also filed joint and separate assignments of error.' Appellants' counsel admit that their term-time appeal was abandoned, and the record bears out the claim of appellee that this court has not acquired jurisdiction over the person of said Parsons. In their brief appellants' counsel waive all of their assignments of error except the assignments based on

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