Hobbs v. Lean

• Decision Date: 29 March 1886
• Parties: HOBBS, Assignee, etc., v. McLEAN and another. Filed
• Court: U.S. Supreme Court

6 S.Ct. 870

29 L.Ed. 940

117 U.S. 567

HOBBS, Assignee, etc., v. McLEAN and another.

Filed March 29, 1886.

The appellees were the plaintiffs in the circuit court. The record showed the following facts: On August 19, 1876, Major Card, a quartermaster in the army of the United States, advertised for bids for furnishing 6,000 cords of wood and 800 tons of hay at the Tongue River military station, in Montana territory. Campbell K. Peck, whose assignee in bankruptcy is the appellant, put in a bid, and, believing that the contract would be awarded to him, on Auguat 19, 1876, entered into articles of copartnership with the plaintiffs, McLean and Harmon, for the purpose of carrying out the contract with the United States which he expected to make. These articles provided that Peck should furnish one-half the capital necessary to carry on the partnership business, and McLean and Harmon each one-fourth, and that the profits and losses of the partnership should be divided in like proportions. Harmon agreed to take charge of the office of this partnership, which was to be at Fort Lincoln, and superintend the business at that place, and McLean agreed to go to the place of delivery on the Yellowstone, and superintend the business there, but neither was to make any charges for his services. The articles of partnership further provided that, when the contract with the government was completed, a settlement of profits and losses should be made 'on the basis of the above terms of partnership,' and, 'if a dissolution is decided on, first all debts shall be paid, and then all profits divided in the proportions heretofore mentioned.' After the signing of these partnership articles the bid of Peck was accepted, and on August 25th the contract between him and the United States was signed and delivered. The partners did not deliver the hay required by the contract, because, as they claimed, they were prevented from so doing by the officers of the army of the United States, but did cut and deliver the wood. McLean and Harmon did all the work that was done, and advanced all the money that was expected in performing the contract, except about $100, which was furnished by Peck. The word delivered under the contract amounted in value at the contract price to $51,900, but the United States refused to pay that sum, claiming damages for the failure to deliver the hay, but consented to pay, and did pay, $10,919.37. McLean and Harmon received $10,000 of this sum, and Peck $919,37, which was over $800 more than he advanced for the performance of the contract. The parties interested being dissatisfied with the action of the government in refusing payment in full for the wood delivered, Peck, who was the only person to whom the government was bound, filed, on November 7, 1877, his petition in the court of claims against the United States, demanding $55,003.63 damages for the breach of the contract. The United States traversed the petition, and, upon final hearing in the court of claims, judgment was rendered for Peck, the claimant, for $43,113.63. From this judgment both parties appealed to this court, which, in February, 1880, affirmed the judgment of the court of claims, and allowed the claimant, in addition to the amount already awarded him, the further sum of $2,660, making the entire judgment in favor of the claimant $45,773.63.

While the case was pending in the court of claims, to-wit, on August 31, 1878, Peck was on his own petition adjudicated a bankrupt in the district court of the United States for the district of Iowa, and Hobbs, the appellant in the present case, was appointed assignee. While the case was pending in this court, Peck, on December 2, 1879, died, and his widow, Helen A. Peck, was afterwards appointed his administratrix, and in January, 1880, was substituted in the place of her intestate as the plaintiff in the cause. The case still being in this court, and after Mrs. Peck had, as administratrix, been made party plaintiff, Hobbs, as assignee, moved the court to be substituted as plaintiff in her stead, which motion was denied. The cause having been remanded to the court of claims, Hobbs, the assignee in bankruptcy, moved that court to substitute him as plaintiff in place of the administratrix, which motion was, on May 10, 1880, granted, and the money recovered from the United States was, after deducting about $10,000 attorney's fees, paid over to Hobbs, the assignee.

McLean and Harmon, fearing that Hobbs would distribute the fund thus recovered among the general creditors of Peck, and believing that the fund belonged to them, filed in the circuit court for the Southern district of Iowa the bill in the present case, to which they made Hobbs, as assignee in bankruptcy of Peck, and John B. Sanborn and Charles King, lately partners as Sanborn & King, and Edward F. Brownell, defendants, and in which they set out in detail the facts above recited, set up their claim to the fund as surviving partners, and prayed that the balance found due them from the partnership on an accounting might be paid them out of the fund, so far as it should be sufficient to pay the same. The defendant Hobbs, as assignee, answered the bill, and the plaintiffs filed the general replication. Upon final hearing upon pleadings and proofs the circuit court adjudged and decreed as follows: After reciting the making of the partnership between the plaintiffs and Peck, and the performance by the partnership of the contract made by Peck with the United States, it found that, after charging to the partners all the moneys received by them respectively, it appeared that Peck had received more money than he had paid out in performing the contract, and that the plaintiffs had expended for the same purpose $41,032.31 more than they had received; that Hobbs, the assignee, had collected and received on the judgment against the United States recovered by Peck's administratrix $35,773.63; and it was therefore adjudged and decreed that said sum was the money and property of the plaintiffs, and that they recover it of the defendant, Hobbs, who was ordered to pay it to the plaintiffs, with interest on the investment thereof, and that the plaintiffs also recover of Hobbs, as assignee, their costs and disbursements in the suit, to be paid by him out of any money in his hands as assignee. The appeal of Hobbs, as assignee, brings this decree under review.

James Hagerman, Frank Hagerman, and John H. Craig, for appellant.

C. E. Flandrau and W. H. Sanborn, for appellee.

[Argument of Counsel from pages 571-573 intentionally omitted] Mr. Charles E. Flandrau and Mr. Walter H. Sanborn for appellees.

WOODS, J.

The findings of fact made by the circuit court in its final decree are, in our opinion, amply sustained by the evidence. These findings, and other facts not disputed, establish prima facie the justice and equity of the decree. Upon the facts of the case, the decree of the court is simply to this effect, that where three persons form a partnership, and agree to bear the losses and share the profits of the partnership venture in proportion to their contributions to its capital, and two of the partners furnish all the money and do all the work, they are entitled to be repaid their advances out of its assets before payment of the individual creditors of the partner who paid nothing and did nothing to promote the partnership business. The decree may stand on even stronger grounds. There is no evidence in the record to show that there were any unpaid debts outstanding against the partnership of which Peck and the plaintiffs were the members. The decree of the court is based on the assumption that there were no such debts. The money, therefore, collected on the judgment recovered by Peck's administratrix was assets of the partnership, to which the partners were entitled in proportion to the amount paid in by them, and the record clearly shows that the money so collected was the only assets of the partnership. As McLean and Harmon had paid in all the money, they were entitled to all the money collected on the judgment, not by reason of any right to priority of payment, nor by reason of any lien, but because it was their property, and no other person had any claim to it. The plaintiffs' right to the fund was not at all impaired by the bankruptcy or death of Peck. Their claim was just as strong as if Peck were still living, and had received and collected the judgment in his own name, and the money had been taken from his hands and impounded in the registry of the court. The decree might, therefore, stand on the ground, which it in fact asserts, that the money in controversy was the absolute property of the plaintiffs.

The defendant, however, assails the decree on several grounds, which we shall proceed to notice.

It was shown by the evidence that on July 20, 1877, Peck executed and delivered to Harmon a paper, of which the following is a copy:

'FORT ABRAHAM LINCOLN, July 20, 1877.

'For value received, I promise to pay to William Harmon, or order, twenty-three thousand dollars, out of moneys I may hereafter receive on account of my claim against the United States government, for contract for wood, at Tongue River cantonment, on the Yellowstone river.

'C. K. PECK.'

On the same day be executed and delivered to McLean a paper, similar in terms, for the payment to him of $17,000 out of the same fund. The appellant insists that the contract of partnership between Peck and the plaintiffs, and the promises of Peck above mentioned, were forbidden by the statutes of the United States, and were therefore illegal and void, and gave no rights to the plaintiffs to the fund in controversy. The statutes relied on are sections 3477 and 3737 of the Revised Statutes, which read as follows:

'Sec. 3477. All transfers and assignments made of any claim upon the United States, or of any part or share thereof, or interest therein, whether absolute or conditional, and whatever may be the...