Perin v. Megibben

• Decision Date: 18 November 1892
• Citation: 53 F. 86
• Parties: PERIN et al. v. MEGIBBEN et al.
• Court: U.S. Court of Appeals — Sixth Circuit

53 F. 86

PERIN et al. v. MEGIBBEN et al.

United States Court of Appeals, Sixth Circuit.

November 18, 1892

[Copyrighted Material Omitted]

Statement by TAFT, Circuit Judge:

James W. Megibben and Elizabeth Megibben, as administrators of the estate of Thomas J. Megibben, deceased, and James K Megibben, filed their bill in the court below for the specific performance of the following contract:

'In consideration of the sum of twenty-five dollars, the receipt of which is hereby acknowledged, said payment having been made by O. L. Perin upon behalf of himself and others unto James K. Megibben and the heirs of Thos. J. Megibben, deceased, and of the undertakings of said Perin for himself and others, as hereinafter set forth, it is agreed as follows: Said Megibben hereby agrees to sell and convey unto said Perin, for himself and others, the distilleries Excelsior and Sharpe, situated at Lair's Station, Kentucky, with all grounds connected therewith, being above sixteen acres, more or less, and all flour mills, warehouses, buildings, and outbuildings connected therewith, and all good will, brands, trade-marks, copyrights, patents, lately held by Thomas J. Megibben, deceased, and James K. Megibben, and used by him and J. K. Megibben in connection with their business in or about said distilleries and flour mill, or either of them, and the right to use all patents or processes used by him or them in distillation, and all appurtenances and appliances connected with said distilleries and premises. Said property to be conveyed by deed of general warranty, free of all incumbrances. Taxes now levied to be paid by vendor. Price to be paid for said property, $42,500, to be paid in cash on delivery of the deed, after examination and approval of title.'

'Cincinnati, July 9, 1890.

'It now appearing that the above properties are owned by two corporations, the agreement is that the entire stock of said corporations shall be transferred to Perin and associates upon the above considerations, said corporations being free from all indebtedness. The boarding-house property shall be conveyed to said Perin on said consideration.

'Jas. K. Megibben, 'James W. Megibben, 'James W. Megibben, 'Adm'r Estate of T. J. Megibben. 'O. L. Perin, 'For Himself and Associates.'

O. L. Perin, in signing this contract, acted for himself, Timothy Hayes, and George Hubbell, the appellants, and defendants below. It appeared that James K. Megibben agreed with Perin and his associates that he would take one fourth of the distilleries to be purchased under this contract, and would act as partner with them in the conduct of the distilleries, it being deemed important by the purchasers that the name of Megibben should be connected with the new business. The agreement with Megibben was made at the same time that the contract of purchase was entered into.

As the main question in the case turns on the title of the distillery companies to the real estate described in the contract, it is necessary to set out the history of that title in some detail.

Thomas J. Megibben, by deed of October 12, 1867, purchased 227 acres from the administrator of J. W. Lair, deceased. On the 28th day of October, 1868, he and James K. Megibben became associated as partners in the distilling of whiskies. Thomas J. Megibben set aside from this 227-acre tract a small lot containing about 5 acres, upon which the partners with partnership funds erected the distillery. In 1873 T. J. Megibben and his wife conveyed to James K. Megibben in fee an undivided third of said five acres for the consideration of $417.29, the deed containing this recital:

'It is understood that this conveyance is to operate as of date the 28th of October, 1868, at which date the said Thomas J. Megibben sold James K. Megibben the said undivided third part of the aforesaid tract of land with the view of forming a copartnership to erect a distillery, etc., on said tract, and to distill whisky thereon; and since said last-mentioned date said distillery and other buildings have been erected on said tract by Thos. J. Megibben and James K. Megibben, and the consideration aforesaid is only for the undivided third part of said tract of land, and not for said improvements thereon.'

The five acres so referred to is the tract upon which the Excelsior distillery stands. The partnership business was actively continued down to October, 1880, when the partners purchased a tract of about 10 acres, known as the 'Sharpe Distillery Tract,' together 'with the mill and distillery buildings, improvements, machinery, fixtures, and appurtenances of whatever nature or description thereunto belonging or appertaining. ' This land had on it a flour mill and distillery. In the conduct of the business of the Sharpe distillery the partners had equal shares. The firm continued the manufacture of whisky and the making of flour on both properties until the death of T. J. Megibben, in January, 1890. At that time the Excelsior distillery was in active operation. The firm had a large quantity of grain on hand, and were under contract to feed about 300 cattle, the fulfillment of which, if the distillery did not operate, would result in a loss of from $50 to $75 a day. The Sharpe distillery had just been refitted and improved, and its operation was about to begin. There was a mortgage of $2,700 on the Excelsior distillery and $7,000 on the Sharpe property. Under section 3262 of the Revised Statutes of the United States, before a bond of a distiller is approved, (which is a condition precedent to the operation of his distillery,) he is required to file with the collector of internal revenue the written consent of the owner of the fee, duly acknowledged, that the premises may be used for the purpose of distilling spirits.

Upon the death of the elder Megibben, the collector of internal revenue, in accordance with section 3262, Rev.St., required the consent of the owners of the fee, and thereupon, to obviate the difficulty, James K. Megibben, as surviving partner, organized and incorporated under the laws of Kentucky two distilling companies,-- one, the Megibben Excelsior Company, for the operation of what we have described as the Excelsior distillery, and the other, the Sharpe Distillery Company, for the operation of the Sharpe distillery, each with a capital stock of $75,000, divided into 750 shares of $100 each; and on January 30, 1890, he conveyed, as surviving partner of the firm of T. J. and J. K. Megibben, the two tracts to these companies respectively, in consideration of the entire capital stock of each. The collector of internal revenue still declined to approve the distiller's bond necessary to the operation of the distillery under the federal law, on the ground that the title to T. J. Mgibben's interest was in his widow and heirs, and that the surviving partner had not authority to convey that interest to the companies. Thereupon, in February, 1890, the widow and adult heirs of T. J. Megibben conveyed their interests in the two distillery tracts to the two companies respectively.

About the same time proceedings were also instituted in the Harrison county chancery court by Elizabeth Megibben, wife of T. J. Megibben, as guardian of her three minor children, and also in her own name and right, against the two distillery companies, J. K. Megibben, and the adult children and heirs of T. J. Megibben, five in number. There were two petitions filed, one in the case of each distillery. The petition with reference to the Sharpe distillery averred the appointment of Elizabeth Megibben as guardian of the minor heirs; her execution of the bond required by law; the partnership of T. J. and J. K. Megibben in the manufacture and sale of whisky; the purchase by them of the Sharpe tract, and the ownership by each of them of a one-half interest; and alleged that the property was all paid for with partnership funds, was used and occupied by them as partners in the distilling of Bourbon whiskies and the operation of a flour mill, and that the property was not useful for any other purpose, and could not be used for any other purpose, than that for which it was purchased by the firm. The petition further recited the sale by James K. Megibben, as surviving partner under a claim of right to make it, of the Sharpe distillery tract to the Sharpe Distillery Company; and averred that he had transferred and assigned one half of the stock to the heirs and widow of T. J. Megibben, and the other half thereof to himself. The petition continued: 'Plaintiff further states that the sale of said real estate with the distillery and other improvements thereon by the said James K. Megibben for the consideration above stated is an advantageous disposition of the property, and is beneficial to the interests of all parties concerned therein, and more especially to the wards of the plaintiff. In fact, the interest of her wards require that the said sale should be made, and that the sale as made by the surviving partner should be condoned and approved by the chancellor; and that the interests of said infants require that this court should order the commissioner of this court to make conveyances of the interests of the said infants in and to the said property to the defendant the G. R. Sharpe Co., and confirm said sale.'

The petition further stated that the adult heirs of T. J Megibben and his widow had already executed a deed of conveyance for whatever interest each of them had in the property to the said company, and 'that the incorporators of said company are James K. Megibben, J. M. Kimbrough, and J. W. Megibben, and that these, together with the other children and heirs of T. J. Megibben and his widow, are the owners of the same quantities of stock of the said company that they owned...