McElroy v. Swope

• Decision Date: 07 September 1891
• Citation: 47 F. 380
• Parties: McELROY v. SWOPE.
• Court: U.S. District Court — Western District of Missouri

47 F. 380

McELROY v. SWOPE.

United States Circuit Court, W.D. Missouri, Western Division.

September 7, 1891

Syllabus by the Court

Although the master's report may be inaccurate in some statements of fact, or some fact may be omitted therefrom, yet, unless it appears that such defects are of substance, such as to work some material prejudice to the party excepting, whereby an unjust result is reached, a re-reference or vacation of the report should not be directed.

There may be a partnership between parties to deal in lands; and the existence and terms thereof, by the great weight of authority, may be established by parol testimony, where the proof is clear. An agreement between A. and B. to speculate in land-titles, and divide the profits, in no wise conflicts with the statute of frauds, as no estate or interest in land has been granted, assigned, or declared.

Where A. obtains for himself merely a proposition of sale of lands and induces B. to take his place on the understanding that B is to furnish the purchase money and take the title in his (B.'s) name, and afterwards let A. have a half interest on condition of A. paying or executing his note to B. for one-half the purchase money, it would be of the nature of a conditional sale, and within the statute of frauds.

Where title to real estate is taken in the name of A. there may be a resulting trust therein in favor of B., provable by parol testimony. But it is essential thereto that the trust must have arisen at the time the purchase was made, and the money or consideration must have been paid or secured to be paid by B. at or before the purchase.

Complainant and respondent entered into an arrangement to deal in lands affected with tax-titles, and neglected properties. The respondent was to furnish the purchase money, the titles to be taken either in the name of the complainant or a third person. The respondent was to pay for an abstractor to run chains of titles, etc. The complainant was to superintend the work, look up the owners of the property, conduct the negotiations for the purchase, and when the title was acquired, he was to have a half interest; the one-half of the purchase money to be secured by him giving his note therefor to respondent, with deed of trust on the half interest, the profits on resale to be equally divided. Held to constitute the parties partners in the lands so acquired.

Where during such partnership the complainant, in the absence from the state of the respondent, negotiated on his own account for the purchase of a valuable body of land, but before the contract of purchase was reduced to writing the respondent appeared and insisted that he be admitted to the speculation as a partner, on the terms of their said joint arrangement whereupon the contract of purchase was made in respondent's name, and the deed thereafter made to him and the purchase money was paid by him, on the understanding, had before the completion of the purchase, that complainant was to have a half interest, the respondent to be secured for the one-half of the purchase money by deed of trust on one-half of the land, with interest at 6 per cent., held not to be subject to plea of statute of frauds. And further, where there is a conflict of testimony between the parties as to whether or not this was a mere conditional sale or a purchase within the terms of the partnership agreement respecting other purchases, the court will look to the four corners of all the transactions, both prior and subsequent, of the parties, as well as their acts, conduct, and statements touching this purchase.

A court of equity should always refer the transaction to that construction, predicable upon evidence, which will prevent one of the parties from obtaining an unconscionable advantage of the other.

The respondent having sold part of the land, and having taken notes in his name for the deferred payments, in the accounting the court should, on the production of the note by the respondent, regard such note as a partnership asset, and direct a division of the proceeds realized out of it, rather than to treat the note as so much cash in the hands of the respondent.

Cunningham & Dolan, for complainant.

Brumback & Brumback, for defendant.

PHILIPS J.

This is a bill in equity, asserting a partnership between the parties in certain real estate, praying for a dissolution of the partnership, and for an accounting. The answer puts in issue the existence of the alleged partnership, particularly as to the lands constituting the principal matter of contention. As to these the defendant pleads the statute of frauds in bar of the alleged partnership agreement. The case was referred to George Fearons, Esq., special master in chancery, who has made report, finding the issue of partnership for the complainant, and rendering an accounting. To this report respondent has presented 95 exceptions, occupying 338 pages of type-writing, supplemented with a printed brief covering 114 pages. As the scope of these exceptions invited the court to a minute and careful perusal of about 900 pages of written evidence and about 85 exhibits, to say nothing of a very lengthy report by the master, it is unnecessary to suggest that the court's summer vacation has been most pleasantly occupied with this literary diversion. That the court should be expected, in justice to other public duties and a proper regard to human endurance, to pass in detail upon these exceptions, is quite unreasonable. That the master's report is not full in some material matters, and unnecessarily full in others, is not to be denied. It is also to be conceded that there are some inaccuracies of statement and errors of fact in it; but unless it can be made to appear that these defects have wrought some material prejudice to one of the parties, such as a conclusion drawn from misstated facts, or a conclusion of law predicated thereon, or there be some important fact not found which should have been reported, whereby a different result should be reached, it is not perceivable why there should be a re-reference or vacation of the report.

In view of the bitter assault made upon the conduct of the master, and the severe arraignment of his findings, the court has taken upon itself the no little task of carefully reading the mass of evidence, with the determination to satisfy itself on the facts. The master finds that in the month of February, 1888, the parties entered into an arrangement, having for its object the purchasing and selling of lands for a profit; and that the business was conducted at Kansas City, Mo., throughout the year 1888, and extended into the year 1889; during which time they acquired many titles, made some sales, and earned large profits; and that in the property so acquired known as the 'Campbell Lands' (the title to which was placed in the respondent) the respondent refuses to recognize the rights and interest of the complainant. It is found that the terms of his copartnership were, substantially, that Swope was to furnish the necessary money, on his consent, to effect the purchases and conduct the business; that complainant, McElroy, was to give the business his personal attention and services; that when a purchase was made on the money furnished by Swope, McElroy was to pay him current rate of interest, or 8 per cent., on the one-half thereof for an agreed period, giving to Swope a lien on his undivided half interest in the land as security.

We will review the evidence only so far as to discover whether or not the conclusion of the master is sustained by the weight of evidence. The complainant is a man 32 years of age. He possesses rare business qualifications, especially for the enterprise in question. He is shrewd, energetic, and pushing and possessed an aptitude for such an adventure. This the respondent bore testimony to, as on one or more occasions during their operations he stated that if he had had the services of complainant earlier they could have made many hundred thousand dollars. The respondent is 63 years of age and unmarried. He is a citizen of Kentucky, but has practically made his home in Kansas City for 30 years, where he has accumulated a large fortune. He is a gentleman of liberal education, wide business experience and sagacity, and somewhat learned in the elementary principles of the law. The ready cash of the one, and his ambition for an ever-increasing fortune, and the necessities and business traits of the other, only needed an introduction to bring them together in a business adventure. In the early part of 1888 they bought a lot of ground in Kansas City known as the 'Walnut-Street Property.' Of this it is sufficient to say that it was bought and sold on speculation, and the profit was divided between them. About the month of February, 1888, they got together, and formed a business arrangement, which I confess it were difficult to characterize in legal phrase if it were not a copartnership. The complainant's version of the preliminary negotiations is substantially as follows: During a conversation at Swope's private room, perhaps in January, or the forepart of February, 1888, Swope suggested that he believed a live firm could make a great deal of money by looking up neglected properties in and about the city; that in every large city there were more or less old bachelors, who lived alone, their relatives living elsewhere, and when they died their relatives did not learn of it for many years thereafter; in other instances parties who lived in Kansas City in early days had practically deserted their property about 1872-73, and they were sold for taxes, the parties not regarding the-, in the depressed condition of real estate, as worth the taxes; that by looking up such parties or their heirs their...