1. Where the surviving partner of an insolvent firm assigned
certain lots of ground belonging to the firm for the benefit of its
creditors, the heirs of the deceased partner cannot be made parties
to a suit involving the title to the lots on the ground of any
relation of trust or confidence subsisting between them and the
assignee.
2. Where a party purchases property under the direction of or on
behalf of another, the purchase must be held to be in trust for the
benefit of the principal on repayment of the money advanced by the
agent.
3. Where two devisees or tenants in common hold under an
imperfect title, and one of them buys in the outstanding title,
such purchase will enure to their common benefit upon contribution
made to repay the purchase money.
4. This rule is based upon a community of interest in a common
title, creating such a relation of trust and confidence between
Page 67 U. S. 614
the parties that it would be inequitable to permit one of them
to do anything to the prejudice of the other in reference to the
property so situated.
5. The reason of this rule applies as forcibly to the husband of
a tenant in common as to one of the immediate co-partners.
MR. JUSTICE MILLER.
The appellees in this case, who were the defendants in the
circuit court, hold the real estate which is the subject of this
controversy by inheritance from their father, William Dewees. The
title of Dewees was a deed from the Corporation of Washington City
made August 29, 1836, on a sale for taxes. It seems to be admitted
on all sides that this deed vested the legal title in Dewees and
that it is valid in his heirs unless the plaintiffs shall be
permitted to redeem from said sale and have the deed set aside for
reasons set forth by them in their bill.
The property in question was conveyed by Robert Morris in 1796
to Joseph Ball and Standish Forde. Forde was then doing business in
Philadelphia as a merchant in partnership with one John Reed, and
died about the year 1806 or 1807, leaving the mercantile firm
insolvent. Shortly after Forde's death, Reed, the surviving
partner, conveyed all the partnership property to William Paige of
Philadelphia by deed of assignment for the benefit of creditors,
and in the schedule attached to the instrument of assignment is
included the property thus conveyed by Morris to Ball & Forde.
This instrument is dated December 12, 1807.
On the 18th of September, 1833, William Paige, as assignee of
Reed, surviving partner of Reed & Forde, entered into a written
agreement with William Dewees, the defendants' ancestor, in
reference to this property, the substance of which is briefly
this:
Page 67 U. S. 615
Dewees was to take charge of the property and redeem it from any
tax sales which had already been made and for which the time of
redemption had not expired. He was to pay all future taxes and all
the expenses incident to sales of lots to be made by himself, for
which he was furnished with a power of attorney by Paige. The money
for all these taxes and expenses he was to advance, except a sum of
about two or three hundred dollars, which was supposed to be in the
hands of the Treasurer of Washington City, belonging to Reed &
Forde, arising in some way out of sales for taxes already made. His
compensation for all this was that after deducting his advances and
interest from the proceeds of sales made by him, he was to have
one-third of the remainder of such proceeds.
It appears that Dewees acted fairly under this arrangement for
about three years, making advances to redeem the property where it
had been sold for taxes and paying the accruing taxes, until he had
advanced about $900. He then not having sold any of the property
nor realized anything from it in any other way, permitted it to be
sold for taxes and bought it in himself, and took the corporation
deed already mentioned of the 29th of August, 1836. He died on the
3d of September following. On the 10th of April, 1837, Paige, the
assignee, by regular power of attorney, appointed Andrew Rothwell,
one of the complainants, his agent, with authority to sell lots, to
procure partition and to make settlement with the heirs and
representatives of Dewees. In 1841, Robert Smith was, by a decree
of court, appointed assignee in place of Paige, who had died, and
in 1846 said Smith quitclaimed and released to Rothwell all the
right, title, and interest which he had as such assignee in the
property now in dispute. The complainant, Rothwell, also procured
deeds of conveyance to himself and his co-plaintiffs, Naylor and
Smith, from several persons describing themselves as heirs of
Standish Forde, of their interest in the same property.
Rothwell Smith, and Naylor then filed their bill in chancery
against the defendants, one of whom is Rothwell's wife, praying to
be permitted to pay the sum with interest which William
Page 67 U. S. 616
Dewees had paid for his tax deed, and to have said deed set
aside.
After the suit had progressed for some time, the other
appellant, Robert S. Forde, filed a petition to be admitted as a
party plaintiff on the ground that he was a grandson and an
heir-at-law of Standish Forde, and entitled to redeem for his
share.
The court dismissed or overruled the petition of Robert S. Forde
to be made a party, and on final hearing it dismissed the bill as
to complainants Naylor and Smith and decreed that Rothwell, in his
purchase from Robert H. Smith, the assignee of John Reed, should be
held to be trustee for himself and wife and the other defendants,
heirs of Dewees, and that the defendants should make contribution
to him in payment of the sum so paid by him to Smith, and for taxes
afterward paid by him on the property.
From this decree Robert S. Forde and the original complainants
appeal.
The first question to be considered arises from the action of
the court in dismissing Forde's petition. It is clear that if Forde
had any title or interest in the property, it was a legal title,
and no obstruction is seen to the assertion of that legal title
against the defendants in a court of law.
That court is the appropriate one to settle the conflict growing
out of the legal title derived by Robert S. Forde from his ancestor
and the title claimed by defendants under the tax deed from the
City of Washington. If he has any right to redeem from the sale for
taxes, it must be a legal right, which he can exercise without the
aid of a court of chancery. In his petition asking to be made a
party, he claims that Dewees must be considered as the agent of
Forde's heirs as well as the agent of Reed's assignee, under his
agreement with Paige. This claim, however, cannot be sustained. The
partnership of Reed & Forde was insolvent. The assignment was
made for the benefit of creditors, and the claim of the assignee to
the lots in question was adverse to the claim of Forde's heirs. The
assignee had thus claimed them for nearly thirty years, when Dewees
became the agent of Paige.
Page 67 U. S. 617
There can be no pretense then that Dewees was agent for Forde's
heirs or occupied towards them any relation of trust or confidence.
No ground of equitable jurisdiction is perceived on which Robert S.
Forde could assert his title in a court of chancery against the
defendants, and his petition was properly overruled.
The next objection to the decree, namely, the dismissal of the
bill as to complainants, Naylor and Smith, is based upon almost the
same ground as that just considered. These parties have conveyances
from individuals, who describe themselves in the deeds as heirs of
Standish Forde, and in addition to this the bill alleges that they
were partners in the purchase made by Rothwell from the assignee of
Reed. If it be admitted that the parties who made the conveyance to
Naylor and Smith were the heirs of Standish Forde, it would not
place those complainants in any other or better position than that
of Robert S. Forde. But Naylor and Smith, being original
plaintiffs, had an opportunity to prove their case at the final
hearing, and failed to produce any evidence that their grantors
were the heirs of Forde. It cannot be pretended that the recital of
that fact in their deeds can be evidence against parties not
claiming under them, and we have failed to discover any other
evidence of it in the record.
Nor is there any evidence that these parties were interested in
the purchase made by Rothwell from Smith, the assignee. If that
fact, however, were established, we do not see that they could
claim to occupy any better position than Rothwell, since they
permitted him to take the conveyance to himself, without any
mention of their rights in the purchase.
We come now to consider that portion of the decree which
concerns Rothwell and the defendants. This must be supported, if at
all, upon the two-fold operation of the principle that a purchase
of an outstanding title or interest in property by a person
sustaining certain relations to others interested in the same
property should, at the option of the latter, enure to their
benefit, the application being in this case made first to the
purchase of the tax title by Dewees, agent for Paige the assignee,
and
Page 67 U. S. 618
secondly to the purchase made by Rothwell from the assignee, he
being the husband of one of the tenants in common who held the
property as heirs of Dewees.
So far as the tax title acquired by Dewees is concerned, there
can be no doubt that the principle is correctly applied. As the
agent of Paige it was his duty to pay these taxes and to prevent
the sale of the lots. In violation of this duty, he permitted the
lots to be sold and himself became the purchaser. Besides his
general duty as agent, he had expressly covenanted in writing that
he would, out of his own funds, advance the money and pay these
taxes. There is nothing in law or morality plainer than that his
purchase must be held to be in trust for the benefit of his
principal on repayment of the sum advanced by him. 1 Story Eq.
sections 315, 1211, 1211a; Story on Agency, sections 210, 211; 8
Ves. 337. The defendants, who are his heirs, can stand in no better
condition than he would if he were alive.
In regard to the application of the principle to the purchase of
Rothwell from Smith, the successor of Paige in the assignment, it
is claimed by defendants that Rothwell is to be treated as having a
common interest with them in the title derived from Dewees, and
that his purchase of the outstanding equity of Reed's assignee must
enure to the common benefit of the cotenants of that title.
In the case of
Van Horne v. Fonda, 5 Johns.Ch. 407, the
rule is very fully laid down by Chancellor Kent that where two
devisees or tenants in common hold under an imperfect title and one
of them buys in the outstanding title, such purchase will enure to
their common benefit upon contribution made to repay the purchase
money. The same point is also decided in
Farmer and Arnold v.
Samuels, 4 Littell 187. The soundness of the principle is not
denied by counsel for plaintiff, as applicable to persons strictly
tenants in common, or joint tenants, or others having an equality
of interest or estate, but it is said that the complainant in this
case is not tenant in common, but that his interest is, at most,
only tenant by the courtesy of his wife's interest, and that even
that is doubtful, and that there is no
Page 67 U. S. 619
equality of interest as between him and the defendants. In this
connection, much stress is laid by counsel upon the language of the
court in
Van Horne v. Fonda to the effect that in that
case there was an equality of estate between the co-devisees. It
does not appear to us, however, that any particular force was given
to that fact by the learned judge, but rather that the rule was
based on a community of interest in a common title, which created
such a relation of trust and confidence between the parties, that
it would be inequitable to permit one of them to do anything to the
prejudice of the other, in reference to the property so situated.
It seems to us that the true reason of the rule applies as forcibly
to the husband of a tenant in common, as to one of the immediate
co-tenants. This seems also to have been the opinion of the Court
of Appeals of Kentucky in the case of
Lee and Graham v.
Fox, 6 Dana 176. It was decided in that case that the husband
of a co-heiress, who had purchased an outstanding encumbrance on
the lands of the heirs should be held to have purchased for the
benefit of all the tenants, upon condition only that they should
contribute their respective proportion of the consideration
actually paid for the encumbrance.
We are quite satisfied with this as a rule of equity, sustained
as it is by authority and sound principles of morality, and as the
decree of the circuit court was in conformity to it, it must be
Affirmed.