Bank v. Carrollton Railroad - 78 U.S. 624 (1870)
U.S. Supreme Court
Bank v. Carrollton Railroad, 78 U.S. 11 Wall. 624 624 (1870)
Bank v. Carrollton Railroad
78 U.S. (11 Wall.) 624
1. A party coming into the right of a partner, whether by purchase from such partner (no matter how broad the language of the conveyance may be) or as his personal representative, or under an execution or commission of bankruptcy, comes into nothing more than an interest in the partnership, which cannot be tangible, made available, or be delivered but under an account between the partnership and the partner.
2. Where a complainant's right is thus only an equity to share in the surplus, if any, of the firm property, after settlement of the partnership accounts, the proper bill is a bill for such a settlement. Such bill will not lie unless all the partners are made parties defendant.
3. Although in general a bill in chancery will not be dismissed for want of proper parties, the rule resting as it does upon the supposition that the fault may be remedied and the necessary parties supplied, does not apply when this is impossible and whenever a decree cannot be made without prejudice to one not a party. In such a case, the bill must be dismissed. Hence, in a case where if all the partners were made parties to the bill, the court in which the bill was filed would, from the character of its jurisdiction (which was confined to persons resident within particular districts, which one of the partners here was not), be without any jurisdiction of the controversy, the bill must be dismissed.
4. A bill for a settlement of partnership accounts which, without charging fraudulent confederacy, shows that it is filed not against all the original partners, but against one of them (yet remaining in the administration of the firm concerns), and persons who have succeeded to the rights
(not to the obligations) of one or more of the others, presents not only a want of indispensable parties but a misjoinder of the defendants -- a misjoinder apparent upon the face of the bill. It must be dismissed.
The Fourth national Bank of New York filed a bill in December, 1867, in the court below against the New Orleans & Carrollton Railroad Company, Beauregard, Hernandez, Binder, and Bonneval. The court dismissed the bill and this case was an appeal by the bank. The case was thus:
The railroad company just mentioned was a corporation in Louisiana, which had made a railroad from New Orleans to Carrollton. On the 12th April, 1866, this corporation made a lease to the defendant, Beauregard, of the road for twenty-five years, from the 16th of that month, at a rent of $20,000 a year, under covenants to make large improvements and changes in its condition and operation. The lease contained this provision:
"The said lessee (Beauregard) shall not have the right of transferring this lease or of underletting the premises leased without the consent of the directors of the said railroad company."
A certain May and one Graham signed the lease as sureties for Beauregard, the lessee. Immediately after the execution of this lease -- that is to say on the 18th April, Beauregard, May, and Graham entered into an agreement for the equipment of the road for their common advantage. Beauregard was to have charge and direction of the road, appointing his own assistants, to have for himself an annual salary of $5,000. All was to be in his name, but for the common benefit. The arrangement was to continue for twenty-five years. The whole amount of the money necessary to carry out the enterprise was to be furnished by May and Graham -- $20,000 by each immediately after the lease was obtained and $20,000 by each every month after for
four months, and then $10,000 each per month for five months. The money advanced, with 8 percent interest, was to be repaid from the annual net profits and the remainder of the profits was to be divided between the partners, all losses being borne equally. Books were to be kept showing the moneys received and expended and the purchases made on account of the co-partnership, and monthly statements of the amounts received and expended were to be furnished by Beauregard to May and Graham. On the 8th May, 1867, Graham, in consideration of one dollar, assigned all his estate, right, and title to the lease which he derived from the partnership articles, and all his right and interest in any property and effects of the partnership, and all debts due to him by the said partnership or any partner, to the complainant, and it was in virtue of this assignment that the bill was filed. It will be observed that neither May nor Graham, the partners, were parties to the bill. The purpose of the bill, which did not charge any fraudulent confederacy, was to enforce the transfer made by Graham. The bill charged that the defendants had taken possession of the lease and partnership, and would not recognize the partnership or the interest of the plaintiff; that they claim under the co-partner, May, and claim independently of the plaintiff. In point of fact, they claimed two-thirds of the partnership in virtue of an assignment from May, made on the 14th and 16th of May, 1867, and denied that when Graham assigned to the bank he had any interest to assign, asserting that he was but a trustee for May. The prayer of the bill was that the defendants might be ordered to recognize the interest of the complainant, the bank, in the co-partnership and in the business carried on under the lease, and to pay them the capital advanced by Graham and his share of profits.
Issue being joined and evidence being taken, the question as to the true interest of Graham in the partnership, whether indeed he had any as against May, and how far he had a right to make the assignment which he did, to the bank, were matters to which testimony was largely directed.
The court below dismissed the bill, with leave to the complainant to bring a suit against Beauregard, Graham, and May, for a settlement of whatever partnership existed between them prior to the transfer of May, on the 14th and 16th of May, 1867.
Graham, at the time when the lease was made, was a resident of New Orleans, but in 1866 removed to New York, and was a citizen of that place when the bill was filed in 1867.