1. If the executor of a deceased partner consents to the
surviving partners' continuing the business with the assets of the
firm, his lien on property thereafter acquired will be postponed to
that of creditors, when a case arises for an equitable marshalling
of assets, as where the surviving partners make a general
assignment for the benefit of creditors.
2. In such case, the beneficiaries of the deceased partner's
estate cannot have priority over the claims of creditors upon the
partnership assets.
3. The property of minors, equally with that of adults, is
subject to the
lex rei sitae, though the minors reside in
another state or country. The local law may provide for the
guardianship of such property, and for its administration and
investment. By comity only will anything be conceded to the claims
of the guardian of the domicile, although it is usual, by comity,
to appoint, if due application be made for that purpose, the same
person guardian who was appointed by the domiciliary court.
4. In the absence of constitutional restraint, the legislature
may pass special laws for the sale or investment of the estates of
infants or other persons who are not
sui juris.
5. Where an executor and guardian in Rhode Island, by virtue of
such a special law and by order of the probate court, conveyed the
property of infants to a manufacturing corporation, by way of
investment in its capital stock,
held that the conveyance
and investment were protected by the law, and that no account could
be demanded except for the stock and its dividends.
6. Where minors were interested in a manufacturing
establishment, as beneficiaries under a deceased partner, and the
administrator, who was also their guardian, without any fraud, but
with entire good faith, allowed the business to be continued by the
surviving partners for several years without filing any inventory
or account, and the property suffered no deterioration, but
increased in value, and was then, by virtue of a special law,
transferred to a corporation created for the purpose, and the
beneficiaries, after that, for more than seven years subsequently
to coming of age, received dividends on their share of the stock
and annual stated accounts,
held that by reason of such
acquiescence, they could not sustain a bill in equity for an
account of the estate.
Page 103 U. S. 614
The facts are stated in the opinion of the Court.
MR. JUSTICE BRADLEY delivered the opinion of the Court.
These cases come up on appeal from the decrees of the Circuit
Court for the District of Rhode Island dismissing the complainants'
bills. One of the bills was filed by William S. Hoyt and the other
by Charles G. Francklyn and Susan his wife, against Amasa Sprague,
William Sprague, individually, and as guardian of the said Hoyt and
said Susan; Fanny Sprague, widow and administratrix of Amasa
Sprague, Sen.; Mary Sprague, widow and administratrix of William
Sprague, Sen., and formerly guardian of said Hoyt and said Susan;
The A. & W. Sprague Manufacturing Company, and Zechariah
Chafee, assignee of said company for the benefit of creditors
&c. The general object of the bills is to establish a lien and
trust in favor of the complainants, as grandchildren of William
Sprague, Sen., against the property of the A. & W. Sprague
Manufacturing Company, now in the hands of Chafee, the assignee,
each to the extent of one twenty-fourth part of the whole property,
that being the amount of their interest in the property of the
former firm of A. & W. Sprague, which was transferred to the
corporation in 1865, whilst the complainants were infants, in
fraud, as they allege, of their rights.
Many charges of fraud are made in the bills against the
defendants Amasa Sprague and William Sprague, who carried on the
business of the firm after the death of William Sprague, Sen., in
1856, in connection with Byron Sprague, until 1862, and after that
by themselves. The cases are substantially the same in all
respects, and will be considered together.
In order properly to understand the questions raised, it will be
necessary to take a summary view of the facts.
Amasa Sprague and William Sprague, brothers, under the
Page 103 U. S. 615
name of A. & W. Sprague, carried on the manufacturing
business in Rhode Island until 1843, when Amasa died, leaving a
widow, Fanny Sprague, and four children, two sons and two
daughters. The widow took out letters of administration on her
husband's estate. The value of the partnership property at that
time was estimated at $100,000. William continued to carry on the
business with the joint capital, under the same firm name, for the
benefit of himself and his brother's family, for thirteen years,
when, on the 19th of October, 1856, he died, leaving a widow, Mary
Sprague, a son, Byron Sprague, and four grandchildren, who were the
children of a deceased daughter, Susan, and her husband Edwin Hoyt,
of the City of New York. These children were at that time under
fourteen years of age. Their names were Sarah, Susan S., William
S., and Edwin Hoyt, Jr. Sarah was twelve, Susan eleven, and William
S. was nine years old at the time of their grandfather's death.
William S. Hoyt is the complainant in one of the cases now under
consideration, and Susan S. Hoyt, now wife of Charles G. Francklyn,
with her husband, is complainant in the other case.
William Sprague largely extended the business of the firm, so
that when he died, the property, real and personal, was estimated
at about $3,000,000. Shortly before his death and during his last
illness, he took into partnership with him, evidently for the
purpose of continuing the business and keeping it together, his own
son, Byron, and his two nephews, Amasa and William, the sons of his
deceased brother Amasa. The terms of this partnership and the
interest which the young men were to have in it do not appear. They
continued, after William Sprague, Sen.'s, death, to carry on the
business, as it had previously been carried on under the name of A.
& W. Sprague, without making a settlement with the
representatives or beneficiaries of either Amasa Sprague's or
William Sprague's estate.
William Sprague, Sen., left no will, and his widow, Mary
Sprague, took out letters of administration on his estate. Whilst,
therefore, the three young men, Byron Sprague, Amasa Sprague, and
William Sprague, as surviving partners of William Sprague, Sen.,
carried on the business of the firm of A. &
Page 103 U. S. 616
W. Sprague, the persons really interested were first the two
widows and administratrixes, Fanny Sprague and Mary Sprague, who
were legally entitled respectively, by right of administration, to
the several interests of Amasa Sprague, Sen., and William Sprague,
Sen., and secondly the beneficiaries or distributees of the estates
of Amasa and William, respectively, namely, the widow and four
children of Amasa Sprague, Sen., and the widow and two children of
William Sprague, Sen. -- one of the latter, Mrs. Hoyt, being
deceased and being represented by her four children.
One of the daughters of Amasa Sprague had been settled with
before William's death, and the other shortly afterwards, by her
brothers' purchasing her interest. This left the beneficial
interest of the property divisible into six equal parts, belonging
respectively to Fanny Sprague, widow of Amasa, and her two sons,
Amasa and William, and Mary Sprague, widow of William, her son
Byron, and the children of her daughter, Susan Hoyt. These persons
were all of age and otherwise
sui juris except the Hoyt
children, and were all able to consent, and did consent, that the
entire partnership estate should be continued in the business of
the firm as it had been before. The Hoyt children, of course, could
not give any such consent. They resided with their father, Edwin
Hoyt, in New York, who was at the head of a commission house in
that city by the name of Hoyt, Spragues, & Co., which sold on
commission a large portion of the goods manufactured by A. & W.
Sprague. The partners of the firm were associated with him. Of
course he must have been well acquainted with the business of the
manufacturing establishment, and the large interest which his
children had in the concern must have insured his attention to its
management. Mr. Hoyt consented to and approved of the continuance
of his children's portion in the business of the partnership, and
his natural regard for their interests, in connection with his
opportunities for observation, preclude the presumption that such
continuance was the result of any fraudulent scheme. Had any such
scheme been in contemplation, he must have detected and would have
thwarted it.
In addition to the consent and acquiescence of their father
Page 103 U. S. 617
was that of their property guardian in Rhode Island. On the 9th
of February, 1857, shortly after William Sprague, Sen.'s, decease,
letters of guardianship were issued by the Probate Court of the
Town of Warwick, R.I., to Mary Sprague, grandmother of the Hoyt
children, on the property of said children. Mrs. Sprague consented
that both her own interest in the estate and that of her
grandchildren and wards should be continued in the partnership
business. At that time (1857), this business was no doubt regarded
by most persons who had any acquaintance with it as highly
prosperous, and an investment in it advantageous and safe. And
whilst, according to the strict rules of law, Mary Sprague should
have drawn out the children's share, and should not have left it to
the hazards of trade, it may be said in her excuse that she was
following out the plan of her husband, who had for thirteen years
induced his brother's widow to continue the interest of her
children in the concern, and had thereby greatly increased their
inheritance. At all events, we have no evidence that Mary Sprague
was actuated by any other than the most worthy motives in
permitting everything to remain in the business. Any charge of
fraud against her cannot be entertained for a moment.
The business was conducted without change until 1862, when Byron
Sprague sold out his interest to Amasa and William, and upon an
account taken at that time said interest was valued at $605,722.78,
which amount was accordingly paid to him. No other change in the
situation of the parties interested took place until 1865, when it
was proposed to place the property of A. & W. Sprague in a
corporation or corporations, charters having been obtained from the
Legislature of Rhode Island for that purpose. One of these charters
was passed in May, 1862, and constituted Byron Sprague, William
Sprague, and Amasa Sprague, and their associates, successors, and
assigns, a body corporate and politic by the name of A. & W.
Sprague Manufacturing Company, with a capital stock of $1,000,000,
to be divided into shares of $100 each.
In view of such proposed corporate organization, Mary Sprague,
as guardian of her grandchildren, and Edwin Hoyt, their father, in
January, 1863, presented a petition to the Legislature
Page 103 U. S. 618
of Rhode Island in which, after stating the appointment of Mary
Sprague as the guardian of the estate of said minors and their
interest in the property of A. & W. Sprague, they stated that
they deemed it advisable to invest the same in such corporations as
should be organized under the charters previously granted, and they
asked that the said Mary, as such guardian, might be authorized to
make such conveyance as would be necessary to that end. On the 9th
of March, 1863, a joint resolution of the legislature was passed
granting said petition, which resolution was in the following
terms:
"Resolution authorizing Mary Sprague, of Warwick, guardian, to
make conveyance of the interest of minors in and to the property of
the firm of A. & W. Sprague."
"Upon the petition of Mary Sprague, of Warwick, widow of William
Sprague, late of Warwick, deceased, and of Edwin Hoyt, of the City
and State of New York, representing that the said Mary is guardian
of the estates; and the said Edwin, father of Edwin Hoyt, Jr.,
Susan S. Hoyt, Sarah Hoyt, and William S. Hoyt, minor children and
heirs-at-law of Susan Hoyt deceased, and praying for certain
reasons that the said Mary may be authorized and empowered to make
conveyance in her said capacity of all the right, title, and
interest of said minor children, as heirs-at-law of their said
mother, in and to all the estate and property, real, personal, and
mixed, now held, owned, and managed by the firm of A. & W.
Sprague of Providence:"
"
Voted and resolved that the prayer of said petition be
and the same is hereby granted, and the said Mary Sprague, in her
capacity as guardian of the estate of Edwin Hoyt, Jr., Susan S.
Hoyt, Sarah Hoyt, and William S. Hoyt, is hereby authorized and
fully empowered, whenever any corporation or corporations shall be
organized under either or any of the charters heretofore granted by
the General Assembly of this state, and conveyance or conveyances
shall become necessary to vest the title of the parties interested
in any of said property so held, owned, or managed by the firm of
A. & W. Sprague in any such corporation or corporations, to
make, execute, seal, acknowledge, stamp, and deliver all and any
such conveyance and conveyances to any such corporation or
corporations as shall be necessary to vest the right, title, and
interest of the said minors in and to said property, or any portion
thereof, in any such
Page 103 U. S. 619
corporation or corporations, and that any such conveyance or
conveyances so executed, acknowledged, stamped, and delivered shall
be deemed and held as valid and effectual in law and in equity to
vest the title of said minors in any such corporation or
corporations as though the same were executed, acknowledged,
stamped, and delivered by said minors after attaining their
majority."
"
Provided that before the delivery of any such
conveyance or conveyances, the said Mary shall have executed and
delivered to the Court of Probate of Warwick every such bond or
bonds with herself in her said capacity, and said Edwin Hoyt, as
principals, in such penal sum or sums and with such sureties as
said probate court shall require, conditioned for the investment of
the amount of the full value of the interests of said minors, which
she shall then be about to convey in the capital stock of any such
corporation or corporations to which the same shall be conveyed, in
the names and for the use and benefit of said minors."
Further, in view of the proposed corporate organization, steps
were taken by the parties in interest to ascertain the value of the
partnership assets, and the relative interest of each shareholder.
For this purpose, an agreement was entered into on the first day of
April, 1865, between all the parties, Fanny Sprague signing
individually and as administratrix of Amasa Sprague; Mary Sprague
signing individually and as administratrix of William Sprague and
as guardian of her grandchildren, and the other parties signing in
their own behalf, by which it was agreed that John A. Gardner and
Benjamin F. Thurston, the former of whom had been counsel for Amasa
Sprague and William Sprague and the latter counsel of Mary and
Byron Sprague, should be, and they were, appointed referees to
examine into the entire assets and property of the firm and to
ascertain the value thereof, and each party's interest therein, and
should make report of the result. The referees accordingly made
such examination and made their report on the first day of July,
1865, by which they reported and found that the cash value of the
entire estate, exclusive of the Quidnick factory (which was
estimated by itself, and was transferred to a separate
corporation), was $6,732,906 69; that there were liabilities to
amount of $2,871,921.79, leaving the net value of the estate equal
to $3,860,984.90.
Page 103 U. S. 620
And after adjusting the accounts of the parties they found:
Mary Sprague's interest was . . . . . . . . . $ 624,984.69
Fanny Sprague's interest. . . . . . . . . . . 625,511.69
William Sprague's interest. . . . . . . . . . 978,867.42
Amasa Sprague's interest. . . . . . . . . . . 978,867.42
Mary Sprague, guardian of the children of
Susan Hoyt. . . . . . . . . . . . . . . . . 652,753.68
Due to Mary Sprague, as administratrix of her
husband, on account of a dividend . . . . . 164,250.26
------------
Making a total of . . . . . . . . . . . . $4,025,235.16
This amount formed the capital stock of the corporation
subsequently organized, and was represented by the nominal capital
of $1,000,000, making each share equal to over $402. The
proportions of William and Amasa were larger than the others,
because they had purchased the share of Byron.
The referees also found due from the firm to Mary Sprague, as
guardian of the Hoyt children, the sum of $188,333.33, explained to
have been a balance credited to them to equal what the two families
in Rhode Island had drawn out of the concern for current
expenses.
The Quidnick property, which, as before stated, was kept
separate from the rest on account of other persons being interested
therein, was appraised in the same way as the A. & W. Sprague
property for the purpose of being transferred to a distinct
corporation. The interest of the Hoyt children therein was
appraised at $63,353.23.
The appraisement having been completed, Mary Sprague, as
guardian of the Hoyt children, on the 5th of August, 1865, after
advertising her intent so to do, presented her bond to the Probate
Court of Warwick for approval, as required by the joint resolution
of March 9, 1863, and prayed authority from the court to transfer
the interest of her wards to the A. & W. Sprague Manufacturing
Company, as authorized by said resolution, and also prayed like
authority to transfer the interest of the minors in the Quidnick
property to the Quidnick Manufacturing Company.
A decree was made granting the prayers of the petition and
conferring the powers desired.
Page 103 U. S. 621
Thereupon, on the ninth day of August, 1865, all the parties in
interest joined in a conveyance of the entire partnership property
of the firm of A. & W. Sprague to the A. & W. Sprague
Manufacturing Company, and the property of the Quidnick firm to the
Quidnick Manufacturing Company, and each party became entitled to
their several proportions of the shares of capital stock in those
companies respectively. In executing the deed of conveyance, Mary
Sprague signed in her individual capacity as administratrix of her
husband's estate and as guardian of the Hoyt children.
In the August Term, 1866, of the Probate Court of Warwick,
appraisers were appointed to take an inventory and appraisement of
the property of the several wards of Mary Sprague in her hands, and
they performed their duty, and said inventories, verified by the
oath of Mary Sprague, were filed and recorded after being passed
upon by the court. They amounted to the sum of $251,447.08 each.
That of William S. Hoyt was composed of the following items,
namely:
122 shares Nat. B'k of Commerce . . . . . . . . $ 6,222.00
1 U.S. 6 percent bond . . . . . . . . . . . . . 108.09
2 N.Y., Prov., & Boston R.R. bond, $950 . . . . 1,900.00
439 shares A. & W. Sprague Mfg. Co., 402, 5,225
176,707.82
123 shares Quidnick Co. stock, 155, 213 . . . . 19,091.20
Cash. . . . . . . . . . . . . . . . . . . . . . 334.23
-----------
$204,363.75
Dividend due from A. & W. Sprague as cash,
Marsh 31, 1865, with interest from that date 47,083.33
-----------
$251,447.08
The others were nearly identical with this.
The dividend of $47,083.33 was William S. Hoyt's one-fourth part
of the sum of $188,333.33 awarded to the Hoyt children as an offset
to the sums drawn out by the Rhode Island families for current
expenses.
At the same term, Mary Sprague presented an account as guardian
of each ward, which being verified and due notice having been
published, was received and allowed by the court and ordered to be
recorded.
Page 103 U. S. 622
Sarah Hoyt, having now arrived at full age, received the amount
of her interest and gave and acquittance for the same.
At the same term of the court, on the petition of Mary Sprague
and her resignation of the guardianship of the three remaining
minors, and on the written application of Edwin Hoyt and due notice
given, Mary, Sprague was discharged from the guardianship, and
William Sprague was appointed guardian in her stead. The same
appraisers were appointed to make an inventory and appraisement of
the property of each ward in the hands of William Sprague,
guardian, and such inventory and appraisement were duly made,
filed, and recorded, showing that the estate of William S. Hoyt
amounted, on the first day of September, 1866, to the sum of
$255,885.04, consisting of the items before mentioned, with the
addition of another dividend of the companies.
The estate of Susan S. Hoyt amounted to about the same sum.
Susan S. Hoyt came of age in October, 1866, and William S. Hoyt
in January, 1868; and Susan married Charles G. Francklyn in
1869.
The evidence in the case exhibits several annual accounts
rendered by William Sprague, as guardian to the complainant W. S.
Hoyt, after he came of age, in 1870, 1871, 1872, and 1873. These
accounts show on the credit side the money due and accruing to the
complainant, including the sum of $47,083.33 before mentioned, and
the dividends made from time to time on the stocks of the A. &
W. Sprague Manufacturing Company, the Quidnick Manufacturing
Company, and on the bank and other stocks in the guardian's hands.
On the debit side, they show the moneys drawn by and paid to the
complainant, amounting, from the date of Mr. Sprague's appointment
as guardian in 1866, to Oct. 31, 1870, to the sum of $5,282.45
--
thence to Oct., 1871 . . . . . . . . $ 8,606.72
to Oct., 1872 . . . . . . . . 18,500.00
to Oct., 1873 . . . . . . . . 5,000.00
Leaving a balance still in the guardian's hands of $63,905.18,
besides the stocks and bonds forming the corpus of the estate in
ward.
Page 103 U. S. 623
William S. Hoyt, sometime in 1873, received his stocks and
interest in the Quidnick Company, and makes no complaint in regard
to the same.
A number of letters of the complainant asking for and
acknowledging the receipt of money from his guardian after coming
of age were put in evidence. One of these, dated Nov. 9, 1870, was
directed to Mr. Greene, bookkeeper of the A. & W. Sprague
Manufacturing Company, asking for a memorandum of the bank stock,
shares, and whatever there might be belonging to him. In his
testimony, the complainant states that this information was
furnished to him. A similar statement had been furnished to Mrs.
Francklyn in March of the same year; and annual accounts were
rendered to her from October, 1869, to October, 1873.
In the fall of 1873, Hoyt, Spragues, & Co. and the A. &
W. Sprague Manufacturing Company suspended payment, and the latter,
by deed of assignment dated Nov. 1, 1873, assigned to Zechariah
Chafee all its property, in trust for the benefit of creditors, in
which deed Amasa and William Sprague, and Fanny and Mary Sprague
also joined. In April, 1874, a more full assignment was made.
The bills in this case were filed in June and July, 1875, and
their general object has already been stated. They respectively
state most of the facts of which the foregoing is an outline, but
interlarded with reiterated charges of fraudulent design and
concealment on the part of the Spragues whereby, as is alleged, the
complainants were kept in ignorance of their rights and of the
state of their property, and the transformations under which it
went, until shortly before the filing of the bill.
The defendants severally answered the bills, denying all
fraudulent motives and any intentional concealment, averring that
they acted according to their best judgment as to what was for the
interest of all the parties interested in the estate, insisting
upon the legal validity of their proceedings respectively, and
especially of the transfer of the minors' interest to the
corporations, setting up the laches and acquiescence of the
complainants, and pleading the statute of limitations to the relief
sought by the bill.
The first question to be determined is the nature of the
Page 103 U. S. 624
complainant's rights with regard to the partnership effects of
A. & W. Sprague in 1865, at the time when the property was
transferred to the A. & W. Sprague Manufacturing Company.
At the death of William Sprague, Sen., in 1856, there is no
doubt that each party in interest was entitled to call for a
liquidation and settlement of the partnership affairs and a
division of the surplus property, and had a lien on the entire
property and effects for that purpose. In the real estate and
corporal chattels they were tenants in common with the surviving
partners, and over the entire property including the credits and
other assets they had the lien referred to, which they had a right
to enforce at once if the surviving partners refused to make a
settlement. These partners had the right of possession, and, in the
choses in action, the right of property, to enable them to settle
up the concern. But these rights of survivorship were subordinate
to the lien of those beneficially interested, who thereby had a
right to enforce the due appropriation of the partnership
effects.
But who were the parties beneficially interested in this case?
Primarily, the personal representatives of Amasa Sprague, Sen., and
William Sprague, Sen. -- namely, the two widows, Fanny Sprague and
Mary Sprague, administratrixes respectively of the estates of Amasa
and William. The ultimate beneficiaries could only reach the
property through them. If they abused their trust, they would be
liable to their respective
cestuis que trust. They had the
power, if they saw fit, unless restrained by their beneficiaries,
to allow the estates of their deceased intestates to be continued
in the business of the partnership, and if it was continued by
their allowance and consent, the property became liable to the
partnership debts subsequently incurred as well as to prior debts;
but with this qualification, that the property which remained
unchanged was still subject to the partnership lien in preference
to after-incurred debts, whilst new property which, in the course
of business, took the place of the old, was not subject to said
lien in preference to such debts.
This seems to be the result of the cases, though they are
apparently somewhat in conflict. A cursory reading of the opinion
in
Skipp v. Harwood (1747), 2 Swans. 586, and Lord
Page 103 U. S. 625
Hardwicke's opinion in the same case on appeal,
West v.
Skipp, 1 Ves.Sen. 239, and the opinions in
Stocken v.
Dawson, 9 Beav. 239, and same case on appeal, 17 Law J.Ch.
282, would lead to the conclusion that the executor's lien in such
cases attaches to the whole property, as well that newly acquired
as that which remains of what was in existence at the testator's or
intestate's decease. But this is inconsistent with the decisions in
Nerot v. Burnand, 4 Russ. 247, and
Payne v.
Hornby, 25 Beav. 280;
S.C. 4 Jur.N.S. 446, which hold
that where the business is carried on with the consent of the
outgoing partner or the representative of the deceased partner,
debts incurred during that period have a preference over the
partnership lien upon all newly acquired property. A comparison of
the cases will show that the rule laid down by Lords Hardwicke and
Cottenham in
West v. Skipp and
Stocken v. Dawson
was applied by them to cases in which the property of the retiring
or deceased partner was used in the business against the will, or
without the consent, of the persons entitled thereto. The law is
laid down with much accuracy in the last edition of Lindley on
Partnership, pp. 700-702, where it is said:
"Whilst the partnership lasts, the lien attaches to everything
that can be considered partnership property, and is not therefore
lost by the substitution of new stock for old. Further, on the
death or bankruptcy of a partner, his lien continues in favor of
his representatives or assignees, and does not terminate until his
share has been ascertained and provided for by the other partners.
But after the partnership is dissolved, the lien is confined to
what was partnership property at the time of the dissolution, and
does not extend to what may have been subsequently acquired by the
persons who continue to carry on the business."
Sir John Romilly, in giving judgment in
Payne v.
Hornby, cited above, after admitting that, by a mortgage of
his stock in trade, a man might bind after-acquired property (as to
which
see Holroyd v. Marshall, 10 H.L.Cas. 191), said:
"But on the death of a partner, the case is altogether
different. There is, as Lord Eldon very accurately expresses it, 'a
quasi lien;' there is in point of fact only a right to the
specific property. The executors of the deceased partner are joint
tenants with
Page 103 U. S. 626
the surviving partners, and accordingly they are entitled to
require the surviving partners to do one of two things -- either to
wind up the partnership business at once or to fix the value of the
testator's property and secure payment of the amount. . . . If the
executors do not apply for a receiver, but simply file a bill for
the winding up of the partnership, I apprehend that the new stock
which has been acquired during the time that the business has been
carried on by the surviving partner belongs, in the first place, to
the creditors who have been created by such subsequent dealings,
and not to the creditors of the old partnership, and that it is the
duty of the executors, if they wish to prevent any dealings with
the stock, to come at once to this court for the appointment of a
receiver; otherwise they in fact sanction the commission of a fraud
by leading the subsequent creditors to believe that they are
dealing with a person who is liable out of his stock in trade to
discharge their debts."
4 Jur.N.S. 446.
These remarks of the Master of the Rolls have respect to the
rights of creditors. As between the surviving partners themselves
and the representatives of the deceased partner, the lien of the
latter will extend to after-acquired property resulting from the
employment of the partnership stock, so as to entitle them, at
their option, either to demand a share of the profits, or interests
on the value of the decedent's share at the time of his death;
unless the transactions between them have been such as to indicate
a sale of the deceased partner's share to the survivors. A sale,
however, can hardly be inferred where no steps have been taken to
ascertain the value of the share.
Recurring now to the circumstances of the case before us and the
proceedings of the parties, we find that the legal representatives
of the deceased partners, and all the beneficiaries of the two
estates who were in law capable of acting, entirely acquiesced in
and consented to the continued employment of the partnership
property in the business of the partnership subsequently carried on
by the surviving partners, and this state of things continued for
the eight or nine years that intervened between the death of
William Sprague, Sen., and the transfer of the property to the
corporations. And as to the share of the Hoyt children, it was not
only consented
Page 103 U. S. 627
to by Mary Sprague as administratrix of her deceased husband's
estate, but as guardian of the property of the said children.
It seems to have been an understood thing between all the
parties from the beginning that, without any formal settlement of
the estates of Amasa and William Sprague, Sen., the several
beneficiaries entitled to distribution should be and were
considered as interested in the common partnership property in the
proportional amount of their beneficial interest. The active
partners represented their own respective shares. Mary Sprague as
administratrix and as guardian of the Hoyt children represented her
own share and theirs. It is objected to her that she omitted to
file any inventory or account, but as there was no difficulty or
dispute between the parties in interest as to the extent of the
several shares, there was no imperative necessity of presenting
accounts to the probate court as long as it was deemed expedient to
continue all the property in the joint business. An inventory could
settle nothing, because the property in which all were equally
interested was constantly changing, and an account would have had
no practical value, because no immediate settlement of the estate
was proposed. The cardinal question so far as these cases are
concerned was that which related to continuing the shares of the
minors in the concern, and keeping the property together. Conceding
that to have been the proper course to take, the omission on the
part of Mary Sprague to exhibit the accounts prescribed by statute
cannot be regarded in the same light as it would have been if she
had had possession of the property and was devoting it to her own
use. It may have been unwise, but, under the circumstances, it can
furnish no evidence of want of good faith or a desire to do other
than the best that could be done for the interests of her
grandchildren and wards.
And as to the question of fraud, we may at once state that we
entirely agree with the court below that the case furnishes no
evidence to sustain that charge either as against Mary Sprague or
any of the other parties concerned. They may have judged unwisely,
but we see no ground for believing that they were actuated by any
desire to cheat or defraud the children of Susan Hoyt out of
anything that justly belonged to them.
Page 103 U. S. 628
We are sure that such a thought could not be attributed to their
grandmother, and we have no evidence to believe that it was ever
entertained by Amasa Sprague or William Sprague. We must regard the
decision of Mrs. Sprague and of Edwin Hoyt, the father, to keep the
property of the children in the concern as an error of judgment
only, rather than as the result of any design or intent to defraud.
We may well conceive that the supposed wishes of William Sprague,
Sen., who by his energy and talent had created the estate, and who
had persistently kept it together as a common property for the
equal benefit of his brother's family and himself, had great weight
with Mrs. Sprague and her son-in-law, as well as with the surviving
partners, in leading them to adopt the conclusion they did. And for
many years the result seemed to justify the conclusion to which
they came.
But whatever may have been the responsibility which Mary Sprague
as administratrix and guardian assumed, it cannot be doubted that
she had the power to keep the property in the business, for it was
subject to her disposal. And as it was kept in the business by her
consent and allowance, she ceased to have a lien upon the property
as against subsequent creditors of the concern. And, as she in her
representative capacity ceased to have such lien, it is difficult
to see how the minors themselves, when they arrived at full age,
could have any such lien, whatever remedy they may have had against
Mary Sprague. If the ultimate beneficiaries of a deceased partner's
estate could thus revive a lien which has become extinguished as
against creditors, there would be little safety in dealing with
commercial partnerships in which any partner has ever died.
This consideration is conclusive against the claim made by the
bills to be paid out of the assets in the hands of Chafee, the
trustee, in preference to or even
pari passu with the
creditors of the corporation. For where the representative of a
deceased partner allows the interest of his decedent to be used in
the business by the surviving partner, and thereby loses his lien
upon the partnership property, he does not thereby become a
creditor of the new firm, and cannot come into concourse with the
creditors thereof; but the property of the firm is first subject to
the claims of such creditors, and after they are satisfied,
Page 103 U. S. 629
the representative's right to have an account against the
surviving partner remains as before.
But whilst the rights of creditors are thus protected against
the lien of a deceased partner's representatives, who have
consented to the continuance of the business without a settlement,
the beneficiaries standing behind those representatives are
entitled to call them to an account for the manner in which they
have dealt with the estate. And where, as in this case, they depart
from the ordinary mode prescribed by law and expose the property to
the hazards of trade, they run the risk of making themselves
answerable for any loss that may occur. In the present case,
however, we have no evidence that loss occurred during the period
under consideration. The estimated cash value of the minors' share
of the property on the 31st of March, 1865, as appeared by the
appraisement then made,
was . . . . . . . . . . . . . . . . . . . . . . . .
$652,753.68
Allowance to offset family expenses of the other
parties . . . . . . . . . . . . . . . . . . . . . 188,333.33
Interest in Quidnick property, including E.
Hoyt's curtesy. . . . . . . . . . . . . . . . . . 116,112.93
-----------
Total . . . . . . . . . . . . . . . . . . . . $957,206.94
As gold was then 150, the specie value of this total would be
$638,137.96. No satisfactory proof has been adduced to show that
this amount was not fully equal to what the interest of the minors
ought to have been in view of the value of the estate in 1856, at
the time of William Sprague, Sen.'s decease.
Up to the time of organizing the corporations, therefore, and
the transfer of the property thereto, we have no evidence that any
loss or diminution of value had occurred.
Still, if the matter stood there, the defendants, or at least
Mary Sprague, might be called upon to render an account and to show
by affirmative proof that all the property which came into her
hands as administratrix or guardian for the use and benefit of her
daughter Susan's children was forthcoming and ready to be paid over
to them. It is necessary, therefore, to take into view what
occurred in 1865 and afterwards in relation to the disposition made
of the property to the corporations before referred to, and to the
conduct of the complainants after
Page 103 U. S. 630
coming of age, in order to determine whether they are entitled
to any portion of the relief sought by the bills.
It is contended by the defendants that the authority given to
Mary Sprague, as guardian of the Hoyt children, by the joint
resolution of 1863, to transfer all the property of her wards to
the corporations indicated, was a complete justification for her
acts in that behalf, and releases her from all further obligation
except that of accounting for the shares of capital stock received
therefor and any dividends accruing thereon whilst in her
possession.
It is contended by the defendants, secondly, that the
complainants, after coming of age, had so long acquiesced in the
arrangements made in 1865, before bringing suit or taking any steps
to set them aside, that they are now precluded by their own laches
and by the lapse of time from having the relief which they
seek.
As to the first point, it seems to be beyond doubt that if the
legislature had the power to pass the resolution referred to, it
was a complete authority and justification for the conveyance by
Mrs. Sprague of the interests of her wards to the corporations
mentioned. The resolution itself is sufficiently broad to give the
requisite authority. The question is as to the legislative
power.
With regard to the general legislative power of a state to act
upon persons and property within the limits of its own territory
there can be no doubt. Mr. Justice Story lays down three
fundamental rules on the subject of private international law, the
first of which is expressed thus:
"I. The first and most general maxim or proposition is that
which has been already adverted to, that every nation possesses an
exclusive sovereignty and jurisdiction within its own
territory."
And he adds,
"The direct consequence of this rule is that the laws of every
state affect and bind directly all property, whether real or
personal, within its territory, and all persons who are resident
within it, whether natural-born subjects or aliens, and also all
contracts made and acts done within it."
The second rule declares that no state or nation can, by its
laws, directly affect or bind property out of its own territory, or
persons not resident therein. The third is that whatever force and
obligation
Page 103 U. S. 631
the laws of one country have in another depend solely upon the
laws of the latter -- that is, upon the comity exercised by it.
Story, Conflict of Laws, secs. 18-23.
One of the ordinary rules of comity exercised by some European
states is to acknowledge the authority and power of foreign
guardians -- that is, guardians of minors and others appointed
under the laws of their domicile in other states. But this rule of
comity does not prevail to the same extent in England and the
United states. In regard to real estate, it is entirely disallowed,
and is rarely admitted in regard to personal property. Justice
Story, speaking of a decision which favored the exterritorial power
of a guardian in reference to personal property, says:
"It has certainly not received any sanction in America in the
states acting under the jurisprudence of the common law. The rights
and powers of guardians are considered as strictly local, and not
as entitling them to exercise any authority over the person or
personal property of their wards in other states, upon the same
general reasoning and policy which have circumscribed the rights
and authorities of executors and administrators."
Story, Confl.Laws, secs. 499, 504, 504a.
And see
Wharton, Confl.Laws, secs. 259-268, 2d ed.; 3 Burge, Colon. and
For. Laws, 1011. And some of those foreign jurists who contend most
strongly for the general application of the ward's
lex
domicilii admit that, when it comes to the alienation of
foreign assets, an exception is to be made in favor of the
jurisdiction within which the property is situate, for the reason
that this concerns the ward's property, and not his person.
Wharton, secs. 267, 268.
But whilst the English and American law require a guardianship
where the property is situated, it is conceded that in the due
exercise of comity, preference would ordinarily be given to the
person already clothed with the authority of guardian in the
minor's own country. Phillimore, vol. iv. 381; Wharton, sec. 266.
In the case before us, it does not appear that the minors had any
other guardian in New York than their natural guardian, Edwin Hoyt,
who applied for the appointment of Mary Sprague as guardian of
their estate in Rhode Island.
As the question before us is one of power and not of comity,
Page 103 U. S. 632
we think there can be no doubt that the Legislature of Rhode
Island, where the property was situate, had power first to pass
laws for the appointment of guardians of the property of
nonresident infants situate in that state, and secondly it had
power to prescribe the manner in which such guardians shall perform
their duties as regards the care, management, investment, and
disposal of such property, and that this power is as full and
complete as where the minors are domiciled in the state.
Not only did the power exist, but we find that it was exercised.
The laws of Rhode Island gave explicit power to the probate court
to appoint a guardian of the property of nonresident infants. The
Act of Oct. 31, 1844, declared that
"The courts of probate of the several towns are hereby
authorized and empowered to appoint guardians, when occasion shall
require, over the property or estate of persons who reside out of
the state and possess property therein."
The previous Act of Jan. 6, 1837, had authorized the same
courts, in case of incapacity of parents of any minors or for other
sufficient cause, to appoint a guardian of the property of such
minors without connecting therewith the guardianship of such
minors' persons.
There is no force in the objection made to these laws that they
give chancery powers to the probate court contrary, as contended,
to sec. 2 of art. 10 of the Constitution of Rhode Island adopted in
1843, which says: "Chancery powers may be conferred on the supreme
court, but on no other court to any greater extent than is now
provided by law." The answer to this objection is obvious. The
appointment of guardians is not, and never has been, peculiarly a
chancery power. Guardians at common law became such by their
relation to the minor, without any judicial appointment. Guardians
were also appointed by testament by the father of any minor from
time immemorial in the Province of York, and on failure to thus
appoint, the ordinary had the power of appointment. Swinburne on
Wills 282. In this country, the power to appoint guardians and to
pass upon their accounts has generally by statute been conferred
upon the probate courts. In Rhode Island, the power was exercised
by these courts long before the Constitution of 1843 was
adopted.
Page 103 U. S. 633
Assuming, then, that the probate court had the power to make the
appointment, we have been unable to see anything informal or
improper in the appointment of Mary Sprague as the guardian of her
infant grandchildren. The petition for her appointment was made by
the most suitable persons in the world -- their father, Edwin Hoyt,
and Byron Sprague, their mother's only brother.
It is true, as suggested, that the duties of Mary Sprague as
administratrix might clash with her duties as guardian; but this
was not a necessary consequence. The same person is often appointed
executor of a will and guardian of the testator's children. It is
seldom that any practical difficulty arises from the joinder of the
two capacities. We do not perceive that their joinder in the
present case had, or was likely to have, any deleterious effect
upon the interests of the infants concerned. At all events, it did
not avoid or vitiate the appointment.
The guardian having been duly appointed and no deterioration of
the estate being shown prior to the conveyance to the corporations,
the next inquiry relates to the authority for making such
conveyance, given by the joint resolution of 1863. As already
intimated, it cannot be doubted that the legislative power extends
to the regulation of the investments and the management of minor's
estates by their guardians. The legislature certainly might, if it
saw fit, pass a general law authorizing a guardian to invest the
property of his ward in the capital stock of a corporation engaged
in manufacturing, trading, or financial operations, or in a
particular class of operations, as banking, insurance, or any other
that might be specified. Usually such authority, if given would be
required to be exercised under the allowance and supervision of a
court, but that would be a matter of legislative discretion. That
such an authority could be conferred by law there can be no doubt.
Analogous powers have been conferred from time immemorial.
But it is objected that the resolution of March 9, 1863, under
which the guardian in this case derived her authority to make the
investment under consideration, was not a legislative but a
judicial act, and beyond the legislative power.
The only provision in the Constitution of Rhode Island which
Page 103 U. S. 634
bears upon this question is the usual one which distributes the
powers of government into three departments, legislative,
executive, and judicial, and assigns to each the powers appropriate
to it. Thus, "The legislative power shall be vested in two Houses,"
&c. "The judicial power shall be vested in one Supreme Court,
and in such inferior courts as the General Assembly may, from time
to time, ordain and establish."
The question of the power of a legislature, when not restrained
by a specific constitutional provision, to pass special laws has
been much mooted in the courts of this country, and it would
subserve no useful purpose to go over the whole ground of
controversy on this occasion. Suffice it to say, that laws of this
character, for the purpose of healing defects, giving relief, aid,
and authority in cases beyond the force of existing law, have been
frequently passed in almost every state in the Union and have
received the sanction not only of this Court but of other courts of
high authority. The exercise of this power has been most
conspicuous in that class of cases in which the legislature has
been called upon to act as
parens patriae on behalf of
lunatics, minors, and other incapacitated persons. Laws authorizing
the sale of the estates of such persons have frequently been
passed, and have been upheld as fairly within the legislative
power. The passage of such laws is not the exercise of judicial
power, although by general laws the discretion to pass upon such
cases might be confided to the courts. But when it is not confided
to the courts, the power exercised is of a legislative character,
the legislature making a law for the particular case. In some
modern constitutions, the exercise of this power has been
prohibited to the legislative department. But where not so
prohibited, and where it has never been authoritatively condemned
in the jurisprudence of the state, we cannot deny to the
legislature the right to exercise it in those cases in which it has
been accustomed to be exercised, amongst which we think the present
case may be fairly reckoned. Such laws are not judgments upon any
person's rights, but they confer powers upon the exercise of which
judgment may afterwards be given.
The only cases in Rhode Island decided since the adoption of the
Constitution of 1843 which have been cited as having a
Page 103 U. S. 635
bearing on the subject are
Taylor v. Place, 4 R.I. 324,
and
Thurston v. Thurston, 6
id. 296. The general
conclusion to be derived from these cases is favorable to the view
we have taken.
In the first of these cases, the legislature, having passed a
vote for opening a judgment, allowing new affidavits to be filed on
the ground of accident and mistake, setting aside a verdict and
granting a new trial, the court very properly held this to be an
exercise of judicial power, and declared the vote to be void. But
they distinguished the case from those laws passed to confer
special powers upon executors, &c., as in
Watkins v.
Holman, 16 Pet. 25, where an act authorizing an
administratrix residing in another state to sell land in Alabama
for the purpose of paying debts was held by this Court to be within
the legislative power and valid. In the other case cited,
Thurston v. Thurston, the court held that it was beyond
the power of the court of chancery in that particular case to
decree a sale of infants' lands; that the power, if possessed by
any court, was vested by statute in the probate court, but
added:
"If a case should arise within the spirit, though not within the
letter, of such or a similar statute, a special authority to a
trustee to convert the real estate of his infant, lunatic, or
otherwise incapable
cestui would seem to partake, as
intimated by this court in
Taylor v. Place, more of a
legislative than of a judicial character, and would be, having been
long exercised and not prohibited by the constitution, within the
constitutional competence of the General Assembly.
Watkins v.
Holman, 16 Pet. 25;
Davis v. Johnnot, 7
Met. 388;
Snowhill v. Snowhill, 2 Green Ch. 20;
Norris
v. Clymer, 2 Barr 277;
Spotswood v. Pendleton, 4 Call
514;
Dorsey v. Gilbert, 11 Gill & Johns. 87."
This is certainly a very clear intimation of the
constitutionality of the class of laws to which that now under
consideration belongs.
But another objection made to the validity of the joint
resolution is that it was not in proper form in not being preceded
by the proper enacting clause. The constitution declares that the
style of the laws shall be: "It is enacted by the General Assembly
as follows." If this requirement is anything more than directory,
it cannot be decreed to apply to that species of
Page 103 U. S. 636
enactments which are usually denominated joint resolutions, and
which are often used to express the legislative will in cases not
requiring a general law. The practice of the Congress of the United
States, and of almost every legislative body in the country, may be
adduced to show that a resolution of the nature now under
consideration could not have been within the intent of the
provision referred to.
It is unnecessary to enter upon a particular review of the
proceedings taken by the parties to effect a transfer of the
partnership estate to the corporations chartered for that purpose.
We have given them our careful attention, and are satisfied that
they were substantially regular. We have no doubt of the guardian's
power to submit to referees the ascertainment of the value of the
minors' interest in the property, nor of the binding effect of the
award made by the referees. Our conclusion is that the guardian,
Mrs. Mary Sprague, had full power and authority to invest the said
interest in the capital stocks of the corporations referred to, and
that, having done so, she was no further answerable therefor, but
only answerable for the shares of capital stock and the dividends
realized thereon, respecting which we do not understand that any
complaint is made.
But aside from the legality and binding effect of the
proceedings for investing the minors' interest as here stated, the
acquiescence of the complainants, after they came of age,
effectually precludes them from obtaining the relief sought by
their respective bills. The bills were not filed until June and
July, 1875, in the one case nearly nine years, and in the other
more than seven years after the minors became
sui juris,
and could have known, if they did not know, the exact position and
history of their property. Notwithstanding all the asseverations to
the contrary, the evidence fails to show that they were not allowed
every opportunity of which they chose to avail themselves of
obtaining this knowledge. And the fact is clearly demonstrated that
they did have sufficient knowledge to leave them without any excuse
for lying by and giving no sign of dissatisfaction. For several
years they received regular annual accounts. These accounts showed
the character of the property and in what it consisted. It further
appears that in 1870,
Page 103 U. S. 637
each of the complainants received from the bookkeeper in Rhode
Island a list of all the stocks and securities in which they were
respectively interested. It also appears that they accepted the
stock of the Quidnick Company, and they make no complaint of that
part of the settlement.
Without further discussion, it suffices to say that the
complainants came into the court too late to obtain relief, even if
when they came of age they could have justly complained of the
conversion of their property into the stock of the corporations. In
such cases, it is not merely a question as to what information
respecting their rights parties do actually obtain, but as to what
information they might have obtained had they used the means and
opportunities directly at their command. Others, acting in good
faith, also have rights; the world must move, and it is the
interest of the community that controversies should have an
end.
Decrees affirmed.