Thomas v. Hurst

Decision Date28 February 1896
Citation73 F. 372
PartiesTHOMAS et al. v. HURST et al.
CourtU.S. District Court — Western District of Missouri

Geo. M Wright and R. O. Boggess, for complainants.

C. O Tichenor, for defendants.

PHILIPS District Judge.

This is a bill in equity for discovery and accounting between partners. On preliminary hearing on pleadings and proofs, the court found that one Charles H. Gage and the defendant Hurst in 1872 were partners in equal interest in all mines, mining operations, purchases, and sales had, owned, and engaged in by them jointly and severally, and likewise in any quartz mills owned by them, or in which they or either of them were interested, in the territory of Montana; that in 1872, or shortly thereafter, Alden Gage, the brother of said Charles was, by mutual consent, evidenced by written correspondence between the parties, admitted into all equal share in the partnership; that this partnership extended to all such property rights and interests as pertained to the said Charles Gage and the defendant, existing in 1872, or subsequently acquired by them or either of them, and that said partnership affairs had never been settled or adjusted and that the defendant Hurst, the survivor of the said Charles and Alden Gage, was in default, in failing and refusing, after demand, to render to complainant Isabella Thomas, the surviving wife of said Alden Gage, an accounting. A reference was thereupon made by the court to the master in chancery to take an accounting. The master having filed his report, finding in favor of the complainant in a given sum, she has filed various exceptions thereto, complaining principally of the inadequacy of the sum found in her favor by the master.

The defendant, without filing any exceptions to the report, resists on this hearing the rendition of any decree against him, on the principal ground that the cause of action stated in the bill is barred by the statute of limitation, and because the complainant has been guilty of laches in demanding an accounting. As this objection, if valid, is fatal, it must be disposed of, as of prime importance. On the first consideration of this case the court expressed the opinion that the defendant was clothed with an express, continuing trust, and therefore the statute of limitation did not apply. I am satisfied, on further consideration, that this statement is too broad. As applied to an ordinary business co-partnership, commonly known as 'mercantile or trading partnership,' each partner is impressed with an implied trust, in dealing with the joint property and business of the concern; and, in case of dissolution of the partnership by the voluntary retirement or death of one or more of the co-partners, the cause of action for an accounting against the remaining partner is subject, in this state, to the five-years statute of limitation. But, even as to such a partnership, it does not necessarily follow that the statute of limitation begins to run from the instant of the retirement or death of one of the parties. It depends upon the peculiar facts and circumstances of each particular case. Such a partnership is of so peculiar a character that it affairs, devolving upon the surviving partner for adjustment and settlement, may be in such condition at the time of the retirement of one of the partners that its practical continuance for a greater or lesser period may be a necessity acted on and recognized by all the parties in interest. So where, from the necessities of the situation, or the consensus, expressed or implied, of such persons in interest, the surviving partner continues to conduct the business, manage and administer its affairs, courts of equity, ex aequo et bono, hold that a cause of action may not, in the particular circumstances arise, within the meaning of the statute, for an accounting, until the purpose of such recognized continued management and administration by the survivor has been accomplished, and equity will postpone the beginning of the running of the statute until that consummation. Massey v. Tingle, 29 Mo. 437; Coudrey v. Gilliam, 60 Mo. 86; Causler v. Wharton, 62 Ala. 358. So it is held in Riddle v. Whitehill, 135 U.S. 621, 10 Sup.Ct. 924, that where the affairs of a partnership are being wound up in due course, without antagonism between the parties, and assets are being realized and debts extinguished, and no settlement has been made between the partners, the statute of limitation has not begun to run, and that when the right of action accrues for an accounting, so as to put the statute of limitation in motion, 'depends upon the circumstances of each case, and cannot be held, as matter of law, to arise at the date of the dissolution, or to be carried back by relation to that date. ' But the partnership under review is what is known in our Western mining states and territories as a 'mining partnership.' Its purpose and business were the acquisition, by purchase or exploration, of mineral lands, their development and operation. The defendant was a practical and actual miner, who undertook, especially for Alden Gage, the former husband of the complainant, who resided in the state of Ohio, to manage and conduct in person the mines in Montana. Such associations are, in many important respects, sui generis. The delectus personae incident to an ordinary partnership has no place in mining associations. Hence such partnerships are not necessarily dissolved by the retirement of one of the partners, and a sale of his interest to a third party, even without the consent of the remaining partner. Nor is such partnership dissolved by the bankruptcy or death of one of the partners. Kahn v. Smelting Co., 102 U.S. 641; Bissell v. Foss, 114 U.S. 252, 5 Sup.Ct. 851; Skillman v. Lachman, 23 Cal. 198; Taylor v. Castle, 42 Cal. 367; Jones v. Clark, Id. 180; Blanch. & W. Lead. Cas. 129, 130. Mr. Justice Field, in Kahn v. Smelting Co., supra, said:

'Mining partnerships, as distinct associations, with different rights and liabilities attaching to their members from those attaching to members of ordinary trading partnerships, exist in all mining communities. Indeed, without them, successful mining would be attended with difficulties and embarrassments much greater than at present. * * * They form what is termed a 'mining partnership,' which is governed by many of the rules relating to ordinary partnerships, but also by some rules peculiar to itself, one of which is that one person may convey his interest in the mine and business without dissolving the partnership. * * * Associations for working mines are generally composed of a greater number of persons than ordinary trading partnerships, and it was early seen that the continuous working of a mine, which is essential to its successful development, would be impossible, or at least attended with great difficulties, if an association was to be dissolved by the death or bankruptcy of one of its members, or the assignment of his interest. A different rule from that which governs the relations of members of a trading partnership to each other was therefore recognized as applicable to the relations to each other of members of a mining association. The delectus personae which is essential to constitute an ordinary partnership has no place in these mining associations.'

Courts of equity are never more efficacious nor zealous in the exercise of their preservative and protective powers than when they intervene to enforce the obligations springing from fiduciary relations, and in denying to the trustee any shelter for withholding trust property to the injury of the cestui que trust; and, when he undertakes to escape accountability by taking refuge behind the statute of limitation, these courts will not only construe such statutes most strongly against him, but where, by his silence when he should speak, or his acts, he has lulled into repose his unsuspecting beneficiary, or the circumstances of the particular case induce special reliance on the part of the beneficiary upon his fidelity, so as to impose upon him the honorable obligation of keeping his beneficiary informed of the true condition of the estate and his dealings therewith, his derelictions will, in the interest of exact justice, be held to amount to a fraudulent concealment. And to this end the courts will postpone the inception of the limitation period until he has, by some overt act, thrown off his allegiance, and the knowledge of his infidelity is conveyed to his cestui que trust. Kilbourn v. Sunderland, 130 U.S. 505, 9 Sup.Ct. 594; authorities, supra. A striking illustration of the application of this rule is presented in the case of Bacon v. Rives, 106 U.S. 99, 1 Sup.Ct. 3. The defendant had been furnished by the plaintiff, during the late Civil War, in 1863, with a large sum of Confederate money, to be invested by the defendant, in the state of Texas, in lands, or other supposed profitable ventures. Defendant's character inspired the utmost confidence in his integrity and fidelity. No report was had from him until 1865, when he reported simply large investments in cotton. After that he persistently remained silent. No tidings were had of his whereabouts. In 1875 it was discovered that he had long prior thereto returned to the state of Virginia, where he had invested probably a part of the proceeds of his speculations in real estate. Thereupon plaintiff filed against him a bill in equity of discovery and for an accounting. To this the defendant interposed the plea of statute of limitation, which, under the lex loci contractus, was two years on a verbal contract, and four years under written contract, and, under the lex fori, was five years. The court said:

'We are not satisfied that the cause of action, as set out in the bill, was, at the
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