author: Church, Ch. J. Waite, J.

text:
    Lathrop against Atwood and another.
    On the dissolution of the partnership of A & B, in June, which was then insolvent, A and C, with whom A formed a new partnership, contracted with B to pay all the debts due from the late firm of A & B, amounting to 1,735 dollars, and also to saved B harmless from any cost, trouble or liability on account of such debts. These debts were all then due to the respective creditors of A & B; and A and C proceeded to pay them; but on the 24th of October following, there remained of such debts 635 dollars unpaid. B, not having paid any part thereof, nor been subjected to any trouble on account of them, brought his action against A and C for a breach of the contract. Held, 1, that though where the contract is one of indemnity merely, no action thereon will lie, for the liability or exposure to loss, until actual damage capable of appreciation, has been sustained by the plaintiff; yet where the contract is, to perform some act for the plaintiff's benefit, as well as to indemnify and save him harmless from the consequences of non-performance, the neglect to perform the act, being a breach of contract, will give an immediate right of action; consequently, in this case, the action brought by B was sustainable; 2. that it was the duty of A and C, under the contract, to pay the debts of A & B according

      to their tenor, which, as they were all then due, was immediately; 3. that if otherwise, they should be paid in a reasonable time, which had then elapsed; 4. that the rule of damages was, the amount of debts unpaid at the commencement of the action, with interest. [One judge dissenting.]
    Litchfield,
    June, 1851.
    This was an action of assumpsit on a written contract. The parties agreed upon a statement of facts, which was as follows.
    On the 21st of June, 1848, George Lathrop, the plaintiff, sold out his interest in the property of the firm of Atwood & Lathrop; which firm was, that day, dissolved, and Levi Crouch, jun., one of the defendants, took his place, and formed, with Atwood, a new partnership, under the name of Atwood & Crouch, for carrying on the spectacle trade.
    At the time of this change in the partnership, the old firm of Atwood & Lathrop was insolvent; the debts outstanding, against it, being 1,735 dollars, and the entire value of the partnership effects being 1,300 dollars. Crouch put in 350 dollars; and this, with the company property transferred to the new firm, was all that the new firm was worth. At the time of said change in the partnership, the plaintiff and the defendants entered into the following contract in writing, viz.

      “Know all men by these presents, that we, Edward W. Atwood and Levi Crouch, jun., for the consideration of a valuable sum received by us, to our full satisfaction, of George Lathrop, do hereby contract, promise and agree with said Lathrop, to make and deliver to him, at our shop in Woodbury, two hundred and twenty-five dozen of German silver spectacles, of good materials and workmanship, (one pair only in each dozen to be plain glass,) to be put up in gilt boxes, and labelled, and to be furnished and delivered to said Lathrop, in the following times, at our shop, viz. fifty dozen within the first week of July next; fifty dozen within the first week of August next; fifty dozen within the first week of September next; and seventy-five dozen within the first week of October next.
    “And it is a further consideration to this contract, that we, the said Atwood & Crouch, hereby agree to take all the books and accounts of the late firm of Atwood & Lathrop, both debts and credits; we to have all credits due to said firm, so far as we can collect the same, and to pay all debts from said firm; and to save said Lathrop harmless from any cost, trouble or liability, on account of the same.”
    After the date of this agreement, and previous to the 24th of October 1848, the defendants had delivered all the spectacles mentioned in the agreement, but sixty-two dozens, and had taken up and liquidated 1,100 dollars of the debts out-standing against the firm of Atwood & Lathrop, in pursuance of their agreement, leaving debts against the firm of Atwood & Lathrop, at that date, to the amount of 635 dollars. And the defendants had so far fulfilled the contract on their part, that to the 24th day of October, said Lathrop had not paid any of the debts of the firm of Atwood & Lathrop, nor had been called upon, by any creditor, in any instance, to do the same, nor been put to any trouble.
    On the 24th day of October, 1848, Lathrop prayed out a writ of attachment in assumpsit on the foregoing agreement, for the remainder of the spectacles due, and for an alleged breach of the contract, in not having, previous to said date, paid all the debts against the firm of Atwood & Lathrop mentioned in said contract, and attached all the property of Atwood & Crouch, the defendants; upon which suit, now pending, this agreement of facts was made.
    Immediately after the attaching of all Atwood & Crouch's property, and in consequence thereof, several of the creditors of the firm of Atwood & Lathrop commenced suits against that firm, attaching said Lathrop's property; and he has actually paid, since such suit, the sum of 200 dollars. He is still under attachment for 235 dollars, and is liable, as a member of said firm, for 200 dollars more.
    At the August term of the superior court, 1849, the defendants filed their offer to the plaintiff to take judgment for full damages for not delivering said sixty-two dozens of spectacles, according to the agreement; and the question now remains, whether there was a breach of the contract, in not having paid all the debts of the firm of Atwood & Lathrop, previous to this suit. Said debts were debts on book, in the ordinary transaction of business, in different amounts, to forty-two different persons; all of which were due, and some were over-due, at the time of making the contract.
    The questions arising in the case were reserved for the advice of this court.

      C. B. Phelps, for the plaintiff,
    remarked, in limine, that the question raised in this case is one of construction of the contract of the parties, which embraces two distinct stipulations; 1. to pay all the debts from the firm; 2. to save Lathrop harmless from any cost or liability, on account of the same.
    He then contended, 1. That an agreement to pay a debt of another, is not an indemnity, and an action accrues immediately on non-payment. Crofut v. Moor, 4 Verm. R. 309. Where the obligor was to pay the debt and discharge the obligee, upon the debt’s coming due, and no payment is made, or discharge given; this is a breach. St. Albans v. Curtis, 1 Chip. 164. 168. An agreement to indemnify one against a demand, is of the same legal import as an agreement to indemnify against his liability for the demand. Churchill v. Hunt, 3 Denio, 321.
    In the absence of any stipulated time for performance, a promise to pay the partnership debts, is a promise to pay them according to their tenor. The debts alleged to be unpaid, were on demand and overdue. But if a reasonable time is to be given, it had, in this case, elapsed. The contract is dated June 21st; the suit was commenced October 24th; when no payments had been made. The whole stock could have been worked and sent to market. The bankruptcy of the obligor does not extend the time of performance of his obligations.
    2. That if the plaintiff’s claim is a general indemnity, he is still entitled to recover. The obligee may sue thereon, as soon as the condition is broken, and is not bound to wait until he is compelled to fulfil the obligations he has incurred. Rockfeller v. Donnelly, 8 Cowen, 639. In re Negus, 7 Wend. 499. Chace, admr. v. Hinman, 8 Wend. 452. Kip v. Brigham, 6 Johns. R. 158. There was a breach on the 24th of October. The defendants have not saved us from our liability.

    But it is said, there is no damnification. There is a technical breach; and the payment by Lathrop of a debt of the firm, made after suit, may be given in evidence to enhance damages. The estate of A is attached; B signs with A a receipt to the sheriff, promising to redeliver the property and indemnify the sheriff. The sheriff sues B, on the receipt; can he answer, “you have paid no money in this matter, and you are not damnified?”

      Cothren, for the defendants,
    contended, 1. That the agreement in question is a simple contract to indemnify and save the plaintiff harmless from an existing, liability against himself; and the manifest intention of the parties must govern, which intention is to be found in the facts agreed, Gunnison v. Bancroft, 11 Verm. R. 490. 493. The situation of the parties, the object had in view, and the subject matter, are all to be considered, in determining the meaning of the contract. Wilson v. Troup, 2 Cowen, 195. Sumner v. Williams, 8 Mass. R. 214. Fowle v. Bigelow, 10 Mass. R. 379. Hopkins v. Young, 11 Mass. R. 302. Howland v. Leach, 10 Pick. 154. Hollingsworth v. Fry, 4 Dall. 345. 1 Sw. Dig. 182. 226. The construction of a contract must be reasonable and favourable, such as shall not be absurd, or render it inconvenient and nugatory. 1 Sw. Dig. 221. 222. 230. What then was the situation and intention of the parties? The plaintiff was in company with one of the defendants. The company was insolvent; and the other defendant comes in, takes his place, and the new firm then agrees to take the books and effects; collect, as far as they can; pay the debts, as soon as they reasonably can; and at all events, save the plaintiff from paying any of them, and from any cost or trouble in regard to them. It would be utter folly to contend, that the parties intended, that this bankrupt concern should pay, on the spot, the amount of the debts stated: and therefore we claim,
    2. That the defendants were to have a reasonable time to collect credits, and pay the debts in question. The debts were all due, or overdue; but Lathrop did not expect, whether he remained in, or went out of, the company, that they would be paid that day. He knew there were no funds. If they had intended immediate payment, they would have said so in the contract. The question of reasonable time, when the contract is silent on the subject, is a question of law, and to be determined by a view of all the circumstances of the case. Chitt. Cont. 110. and note—730. and note.
    3. That the undertaking by this agreement, was not to indemnify against a mere liability, Lathrop being liable already; but an actual damnification upon the debts agreed to be paid; and the plaintiff should have waited a reasonable time, and until damage was sustained, before he brought a suit on the contract. Lathrop incurred no new liability, by the agreement; and consequently, could not be damnified till he was obliged to pay the debts, or was put to some expense or trouble.
    But if it were granted, that the plaintiff incurred a new liability by the agreement, it furnished no cause of action, till he had, in some way, been actually damnified; because it did not appear, at the commencement of this action, but that the defendants, who had, in a short time, paid three-fourths of the debts, would pay the remainder, and save the plaintiff harmless. Hart v. Bull, Kirby, 396. Filly v. Brace, 1 Root, 508. 509. Booth v. Starr, 1 Conn. R. 249 to 252. 1 Sw. Dig. 412. 413. Hotchkiss v. Downs, 2 Conn. R. 136. 138. A surety, even in a bond of future liability, has no right of action against his principal, merely because the debt is not paid, as soon as it is due; nor until he has either paid it, or procured the discharge of the principal, by assuming the payment himself. Ingalls v. Dennett, 6 Greenl. 79. Hunt v. Amidon, 1 Hill, 147. Webb v. Pond, 19 Wend. 423.
    4. That whatever the doctrine may be in other states, it is certainly well settled in Connecticut, that the “mere liability to pay money for another, he continuing liable to pay the money himself, can never be the cause of action, on the contract of indemnity. 1 Conn. R. 249. In a bond with a day stated, the condition is, that the surety shall never be liable, and when a liability arises, the condition is broken—a case far different from a contract to save harmless from an existing liability. 1 Conn. R. 251. The contract of indemnity and saving harmless, is not that the plaintiff shall never be liable. “The existence of the liability is the ground of the contract; and the object of it is, to reimburse to the plaintiff any damage he may suffer, by reason of it. The liability against the consequences of which, the contract is to indemnify, cannot be a breach of the contract itself. There must be actual damage arising from it, to constitute a breach according to the terms of it. If liability, without damage, be a cause of action, then the contract is broken the moment it is made; and the defendant may be sued. The law will not countenance such absurdity and injustice.” 1 Conn. R. 251. 252. In all cases of contract to indemnify and save harmless, the defendant may plead non damnificatus; and the plaintiff must reply, and show damage, not liability, to entitle him to recover. 1 Conn. R. 252.
    5. That in this case, the plaintiff has not been damnified, and there was no breach on the 24th of October. In the short space of four months, this bankrupt company had paid three-fourths of the debts; and Lathrop had no cost, or trouble, till he made some for himself, by sueing.
    In the case referred to of an officer’s receipt, the condition is to redeliver, or forfeit a certain sum; and there is a breach of contract, when there is a refusal to redeliver.

   Church, Ch. J.

The agreement upon which this action is founded, so far as it is necessary for us to consider it, is one whereby the defendants contracted with the plaintiff to pay all the debts due from the late firm of Atwood & Lathrop, which consists of the plaintiff and one of the defendants, and also to save the said Lathrop harmless from any cost, trouble or liability, on account of said debts.

These debts were all then due to the respective creditors of Atwood & Lathrop, and the defendants proceeded to pay the same; but on the 24th day of October, when this suit was brought, there remained due and unpaid the sum of 635 dollars. This was four months after the defendants had assumed the payment; but the plaintiff had not been compelled to pay, nor had he paid, any of these claims, nor had he been subjected to any cost on account of them, at that time. And the questions now put to us, are, whether the defendants are liable, in this action, for the non-payment of the balance of the debts unpaid? The cases in which this question is discussed, are not free from some confusion; and yet the principles deducible from them, or explicitly decided by them, are clear enough. The confusion seems to have arisen from the want of a clear discrimination between mere contracts of indemnity, and contracts for the performance of some act in which the plaintiff has an interest, from which indemnity, either expressly or by implication, is to result.

We think an examination of the cases will show these reasonable doctrines; that, if a condition, covenant or promise be only to indemnify and save harmless a party from some consequence, no action can be sustained for the liability or exposure to loss, nor until actual damage, capable of appreciation and estimate, has been sustained, by the plaintiff. But if the covenant or promise be, to perform some act for the plaintiff’s benefit, as well as to indemnify and save him harmless from the consequences of non-performance, the neglect to perform the act, being a breach of contract, will give an immediate right of action.

In this case, it will be remembered, that the plaintiff was one of the copartners of the former firm of Atwood & Lathrop, and had an immediate interest in the payment of the debts due from them; and that the defendants, for a valuable consideration, expressly promised to pay them, and also to save harmless and indemnify the plaintiff against them.

In the case of Cutler v. Southern, 1 Sound. 116. it was decided, that, when a condition was to discharge or acquit the plaintiff from a bond or other particular thing, non damnificatus was not a good plea, but the defendant should set forth affirmatively the special matter of performance; but if the condition be to acquit from damage merely, such plea is good. The doctrine is sustained, more or less clearly, in the following cases. Toussaint v. Martinant, 2 Term R. 100. Martin v. Court, Id. 640. Farquar v. Morris, 7 Term R. 124. Hodgson v. Bell, 7 Term R. 97. Holmes v. Rhodes, 1 Bos. & Pull. 638. Norwich v. Bradshaw, Cro. Eliz. 53. Abbots v. Johnson, 3 Bulst. 233.

The case of Port v. Jackson, 17 Johns. R. 239. 479. is very similar to the present, and the principle involved, well considered. It is there said: “The covenant is not, that the defendant shall indemnify the plaintiff against his own covenant, or against any damage he may sustain; but it is express and positive, that the defendant will pay the rent for which the plaintiff continued to be liable. The sum to be paid is certain and liquidated, and the breach of the covenant consists in not paying it. A plea of non damnificatus would be no answer to the declaration. And the very reason for inserting this covenant, was, to guard against the necessity of the plaintiff’s paying the rent.” In that case, there was no express covenant to indemnify and save harmless, as here; but the obligation to save harmless was necessarily implied.

Ex parte Negus, 7 Wend. 499. furnishes another clear exposition of the doctrine we advance. In that case, the court says: “Whether an action lies or not, depends upon the true intent and meaning of the covenant; if it is simply to indemnify, and nothing more, then damage must be shewn before the plaintiff can recover; but if there is an affirmative covenant to do a certain act, or pay certain sums of money, then it is no defence, in such an action, to say, that the plaintiff has not been damnified. Here, Negus assumes the debts of the copartnership; he makes them his own individual debts; he is the person to pay, &c. Where indemnity alone is expressed, it has always been held, that damage must be sustained before a recovery can be had; but where there is a positive agreement to do the act which is to prevent damage to the plaintiff; then action lies, if the defendant neglects or refuses to do such act.” Chace v. Hinman, 8 Wend. 452.

On the same principle it is, that a sheriff may recover on a bond for the jail limits, in which the condition is, that the party imprisoned shall remain a true and lawful prisoner, as well as to indemnify the sheriff for a breach of this condition. And in conformity with it, recoveries are had every day, in our courts, by officers against receipts-men, who promise to redeliver property levied on and to save harmless, &c. Blaisdale v. Babcock, 1 Johns. R. 518. Kipp v. Brigham, 6 Id. 158. Hamilton v. Cutts & al. exrs., 4 Mass. R. 349. Booth v. Starr & al. 1 Conn. R. 244. Bender v. Fromberger, 4 Dall. 436.

In the case of Thomas v. Allen, 1 Hill, 145. the court remarks: “The case then comes to this; the defendant agrees, that he will pay a sum of money when it becomes due, for which the plaintiff is bound to some third person, and that he will save the plaintiff harmless. This is more than a bond of indemnity, and the breach is well assigned, by showing that the debt to Johnson was not paid at the day.”

Aberdeen v. Blackman, 5 Hill, 324. is a case of indemnity merely, and in which the defendant made no other promise, and the plaintiff had paid nothing, nor been put to expense; and the court, recognizing the principles of the case cited, held, that the action could not be sustained. It was like a promise to indemnify a surety, indorser, &c. Griffith v. Hanison, 1 Salk. 197.

The doctrine of the case of Booth v. Starr, in this court, 1 Conn. R. 244. fully sustains our views, and would be sufficient authority alone for our present decision. Other cases also sustain us. Gilbert v. Wiman, 1 Comstock, 550. Barry v. Mandell, 10 Johns. R. 563. Kipp v. Brigham, Id. 563. Churchill v. Hart, 3 Denio, 321. Crofut v. Moore, 4 Verm. R 204. - v. Richardson, 10 Mees. v. Wels. 284. Ward v. Henry, 5 Conn. R. 595. Hotchkiss v. Downs, 2 Conn. R. 136. 1 Sw. Dig. 411. Crippen v. Thompson, 6 Barb. 282.

But, by the contract now in question, no time was definitely fixed, within which, the defendants should pay these debts. We think the duty of the defendants was, to pay them according to their tenor; and as they were all then due, they should have been paid immediately. The plaintiff was every moment subject to suits, and the defendants to insolvency, and they assumed the risk, and substituted themselves as the debtors; and we do not see how they can say to the plaintiff, any more than to the creditors themselves, “we must have further time for payment.” At any rate, a reasonable time was all they could ask, and all the law could give. The creditors of Atwood & Lathrop resided within the reach of one or two days. The amount of their respective claims was known to the defendants, from the beginning, and they had actually paid upon them about 75 per cent. Surely, four months was a very liberal and extended time for the payment of these debts. A reasonable time had elapsed, before the institution of this suit.

Notwithstanding all, the defendants insist, that although they have violated their engagement, and have thus given to the plaintiff a right of action against them, they are liable only for nominal damages, because the plaintiff has neither paid any of these debts before suit, nor been subjected to actual loss or damage, by reason of the defendants’ neglect; and the defendants, or Lathrop, one of them, remains still liable, and may be subjected at the suit of the creditors to the payment of the claims, and thus subjected twice. All this may be; but by whose fault? Not the plaintiff’s. The very reason why the plaintiff required, and the defendants agreed to pay these debts, was, to exonerate and relieve the plaintiff from any preparation or pains-taking for the payment of them. The defendants received, and have put into their pockets, the means of paying; and holding on to these, they now say, we will neither pay to the creditors, nor to the plaintiff! A judgment for nominal damages would give the sanction of the law to this unjustifiable claim. The cases we have referred to, as sustaining this action, all, impliedly at least, oppose this claim of the defendants, and several of them very explicitly. Port v. Jackson, 11 Johns. R. 239. Ex parte Negus, 7 Wend. 499. Crofut v. Moore, 4 Verm. R. 204. Atkinson’s ex’rs. v. Coatsworth, 8 Mod. 33.

Upon the facts agreed and submitted to us, in this case, we shall advise the superior court, that the plaintiff is entitled to a judgment for the amount of the balance of the debts due from the firm of Lathrop & Atwood, when this suit was commenced, and the interest thereon.

Waite, J.

This action is founded upon a contract made by the defendants, by which they, among other matters, agreed to pay all the debts of the firm of Atwood & Lathrop, and save the plaintiff harmless from all liability on account of the same. That firm was composed of the plaintiff and Atwood, one of the defendants, but Crouch, the other defendant, was not a member.

It is admitted, that for other reasons, there has been a breach of the contract; and the only question submitted to us, is, to what extent the defendants are liable in the present suit, by reason of their omission to pay the debts according to their contract. At the time the action was commenced, the defendants had paid the greater part of them, but the plaintiff had neither paid, nor been called upon to pay, any portion. Since that time, he has paid about two hundred dollars, and there remains about four hundred dollars of those debts still unpaid.

The court is of opinion, that the plaintiff is entitled to recover, not only the amount which he has paid, but also the balance still remaining unpaid. In this opinion, I should, without hesitation, concur, had the contract been made by Crouch alone, who is no otherwise liable for these debts, than by virtue of his contract. Having bound himself to pay the debts, it would be immaterial to him, whether he paid them to the plaintiff, or the creditors. Carr, admr. v. Roberts, 5 Bar. & Adol. 78. (27 E. C. L. 39.)

Not so with Atwood, the other defendant. He is one of the original debtors; and the creditors have a right to look to him, as well as the plaintiff, for the payment of their debts; and their rights remain unaffected, by any arrangement between them, or any payment made to the plaintiff.

Suppose the contract had been made with Atwood alone, by which he agreed to pay their joint debts, and save the plaintiff harmless. Such an agreement would have no effect upon their joint liability to their creditors; but, as between themselves, would change their relation from that of joint debtors to that of principal and surety.

Now, a surety, on account of his mere liability as such, can never recover of his principal, damages beyond the amount sustained by him. It was indeed once holden otherwise, by the supreme court of errors in this state. Filley v. Brace, 1 Root, 507. But that decision was afterwards, upon mature deliberation, overruled. Booth v. Starr, 1 Conn. R. 244. 1 Sw. Dig. 413. In the latter case, the court said, “it would seem to be a clear dictate of reason, that the mere liability to pay money for another, he continuing liable to pay the money himself, can never be a cause of action on the contract of indemnity; for it is uncertain, whether the surety will ever be compelled to pay, and the principal may pay himself. Such uncertainty can be no ground of action.”

The same principle was again recognised in a subsequent case, in which the court say, “the mere liability to pay money, is no ground of action.” Hotchkiss v. Downs, 2 Conn. R. 138. And the rule, which is founded upon the plainest principles of justice, may now be considered as fully established. Colleridge v. Heywood, 9 Adol. & Ellis, 633. (26 E. C. L. 233.) Reynolds v. Doyle, 1 Man. & Gran. 753. (39 E. C. L. 640.) Ingalls v. Dennet, 6 Greenl. R. 79.

I am aware, that in the contract under consideration, the defendants promised, not only to indemnify the plaintiff, but also to pay the very debts for which he is liable. And it is upon the latter ground only, that Crouch could be made liable for the full amount of the debts. For a mere promise to indemnify would not have that effect, unless the plaintiff had been subjected to the payment.

But as he is sued jointly with Atwood, no recovery can be had, in the present suit, beyond the amount which the plaintiff is entitled to recover of Atwood. And, as already remarked, the effect of the contract, as between Atwood and the plaintiff, was, to place them in the position of principal and surety, in relation to the joint debts which they then owed.

Atwood indeed agreed to pay the debts; but he never agreed to pay them twice; once to the plaintiff, and then afterwards to the creditors; a result which may happen, if he is compelled to pay the full amount of the debts to the plaintiff in the present suit. For, as already stated, a judgment in the present suit, and even payment to the plaintiff, can have no effect upon the claims of the unpaid creditors against him, or in the least, exonerate him from his liability to them.

All the arguments against the claim of a surety to recover the amount of a joint debt, due from him and his principal, so long as the principal continues liable to the creditor, apply, with equal force, to the present case, so far as Atwood is concerned.

For these reasons, I find myself unable to concur in the opinion that the plaintiff is entitled to recover the amount of outstanding and unpaid debts due from him and the defendant Atwood.

Judgment for plaintiff.


source: Caselaw Access Project

author: Church, Ch. J.

license: Public Domain

text:
    Allen and another against The Center Valley Company and others.
    Litchfield,
    June, 1851.
    Though the creditors of a partnership are entitled to a priority of payment, as between them and creditors of an individual partner, out of the partnership funds, so long as they continue partnership funds; yet they have no specific lien thereon; and while the partnership remains and its business is going on, whether it be in fact solvent or not, there is no legal objection to a bona fide distribution of the partnership funds among the members of the firm, or a bona fide change of them from joint to separate estate.
    Therefore, where the partnership of H & S, while pursuing its partnership business, though in fact insolvent, sold and conveyed, bona fide, to a manufacturing company, sundry articles, being partnership property, and received in payment the stock of the latter company, to be held by H and S individually, as separate estate; on a bill in chancery, brought by creditors of the partnership against the purchasers of such articles and attaching creditors of H and S individually, claiming the application of the estate in question, or the avails thereof, to the satisfaction of the plaintiffs’ claims, it was held, that they were not entitled to the relief sought.
    But where there has been no such transmutation of joint into separate estate, the effects of a partnership, on its dissolution, or its open insolvency and the winding up of its concerns, may be considered and treated as a trust fund for its joint creditors; and a court of chancery will apply such effects in satisfaction of their claims, thus working out their equity through the lien which the partners have inter se.

    This was a bill in chancery, praying for a discovery and an injunction against further proceedings at law.
    On the hearing before the superior court, at Litchfield, February term, 1851, the controuling facts from which arise the questions in the case, were found to be these.

      Thomas W. Hodges and Byron Sage were copartners in the city of Middletown,

    engaged in making and disposing of cabinet furniture, and, among other articles of copartnership property, used and owned by them, was a steam engine, boiler and apparatus, of considerable value. The debts of these plaintiffs were contracted by Hodges & Sage, while engaged in this business, and were copartnership debts.
    Sometime before the 1st of September, 1849, Hodges and Sage had, individually, become indebted to Josiah H. Sage; and, on or about that time, they sold and delivered to the Center Valley Company, bona fide, said steam engine, boiler, &c., and in payment, received eighty shares of the stock of said company, viz., each forty shares, which were transferred to them individually, and as their separate estate. At this time, Hodges & Sage were still doing business, as copartners, at Middletown, although their whole assets, including said steam engine, &c., or the avails thereof, were not worth more than sufficient to pay their entire debts and liabilities. They became openly insolvent and stopped business, on the 11th day of September, 1849. The Center Valley Company, or the members thereof, as well as the other defendants, all knew that said steam engine, &c., when sold and delivered, was the copartnership property of Hodges & Sage; but the arrangement for the sale and delivery, and the subscription for said stock and the transfer thereof, were all made in good faith; and the members of the Center Valley Company did not then know, that Hodges & Sage were embarrassed. On the 11th of September, 1849, Josiah H. Sage levied several writs of attachment upon joint estate of Hodges & Sage to secure copartnership debts due to him; and on the same day, Byron Sage transferred to said Josiah, in part payment of separate and individual debts due from him to said Josiah all the several shares of the stock of said company standing in his individual name. On the 12th day of said September, Josiah H. Sage, to secure individual and separate debts due from Hodges, levied writs of attachment upon the lands and buildings of the Center Valley Company, and also upon said steam engine, boiler, &c., and also upon said forty shares of the stock of said company standing in the name of said Hodges. On the 11th day of September, 1849, Hodges mortgaged to George W. Merills said steam engine, boiler, &c., and the land on which the buildings of said company were situated, to secure an individual note due from him to Merills.

    On the 19th day of September, 1849, David Allen & Son levied their attachments for copartnership debts of Hodges & Sage upon said forty shares of the stock of said company originally subscribed for by Hodges, and also upon the shares subscribed for by Byron Sage; and also upon all the property claimed to belong to Hodges & Sage, including said steam engine, boiler, &c. And on the 12th day of October, 1849, Otis Fish attached the same property, in suits against Hodges & Sage, to secure copartnership debts due him.
    The case, embracing these facts, was reserved for the advice of this court as what decree should be passed thereon.
    J. H. Hubbard and C. Whittlesey, for the plaintiffs,
    contended, 1. That partnership property is a fund primarily liable to the payment of partnership debts. Brewster v. Hammet, 4 Conn. R. 540. Barber v. Hartford Bank, 9 Conn. R. 407. 410. Witter v. Richards, 10 Conn. R. 37. Filley v. Phelps, 18 Conn. R. 294. United States v. Hack, 8 Pet. R. 275. 3 Kent's Com. 54.
    2. That upon the insolvency of a partnership, the partnership creditors have a lien or equity upon partnership effects for payment of partnership debts. 2 Sto. Eq. p. 500. § 1253. Story on Partn. p. 511. § 360, 1. p. 137. § 97. 3 Kent's Com. 65. Deveau v. Fowler, 2 Paige, 400. Here, the partnership of Hodges & Sage, at the time of the appropriation of this property to the Center Valley Company, was insolvent, and also at the time that J. H. Sage attached and received this stock.
    3. That the plaintiffs’ attachment, being in aid of their equity as creditors, holds the specific property against the Center Valley Company; because, first, the partnership of Hodges & Sage being insolvent, at the time the property was appropriated, could not make such a disposition of it; secondly, such a disposition of it, in payment of the individual subscriptions, so far as the partnership or partnership creditors, are concerned, was voluntary and upon no consideration; and thirdly, the Center Valley Company, knowing that it was partnership property, had constructive notice of its liability for the debts of the partnership, and took it subject to those liabilities.
    4. That the Center Valley Company are not injured, by our holding the specific property; they having paid nothing for it.
    5. That stock received and attached by J. H. Sage, is, in equity to be considered as partnership property, at the time he attached and received the same, and primarily liable to our attachment, because it is partnership property in another form. Equity regards as partnership property whatsoever is purchased with partnership funds, or comes in lieu of them, so long as they can be distinguished; and any one receiving it, with knowledge, takes it cum onere. 2 Sto. Eq. p. 452. § 1207. Story on Part. p. 137. § 97. And that too, without regard to whose name it stands in.
    6. That this stock, being the fruit of partnership property, the partnership being insolvent, at the time it was received and attached by J. H. Sage, and standing in their individual names, constitutes a resulting trust for the partnership; on the principle, that when a purchase is made, and the title taken in the name of a third person, he holds it in trust for the person paying the money. 2 Sto. Eq. p. 443. § 1201. p. 440. § 1197. In case of insolvency, equity considers the partnership funds as a trust fund, and the partners as trustees of it, for payment of partnership debts, and the creditors as the ultimate cestuis que trust. 2 Sto. Eq. p. 500. § 1253, p. 451. § 1207. Bisset on Part. 72. 3 Kent's Com. 59. The members of an insolvent partnership cannot divide partnership property, and apply it in payment of antecedent individual debts. Burtus v. Tisdall, 4 Barb. Sup. Ct. Rep. 571. 3 Kent's Com. 64.
    7. That J. H. Sage, before and at the time he received this stock, knowing that it was the product of partnership effects, and that the partnership was then insolvent, took it and attached it, subject to the equitable right of the creditors. A purchaser with notice of the equitable rights or title of others, takes subject to those equitable rights. 2 Sto. Eq. p. 503. § 1258, 9. p. 241. § 977. 1 Sto. Eq. 393. 398. 2 Fonb. Eq. 146, 7.
    It does not alter the case, that this property was not appropriated to the Center Valley Company and attached and received by J. H. Sage, with design to defraud partnership creditors. It was a constructive fraud on them, and done with knowledge. The equities are with the plaintiffs.

      Seymour and H. Goodwin, for the defendants,
    contended, 1. That while the partnership is going on, the creditors of the partnership have no equity in the partnership property. Story on Part. 505. § 358. Gow on Part. 235. Ex parte Williams, 11 Ves. 5, 6.
    2. That partners may sell to one member of the firm, or they may sell to any one else, the copartnership property (if bona fide,) and the sale will be good, and free from the claims of partnership creditors. Story on Part. 509. § 358. Bisset on Part. 71, 2. 2 Sto. Eq. 500. § 1253. An appropriation of the partnership property in payment oí the individual debts of the partners, is valid, if done with the consent of all the partners. 12 Pet. Rep. 221.
    3. That if partnership property is disposed of, in the manner in which the superior court have found this to have been, and while the partnership was going on, the property will be held to possess the character impressed upon it, at the time of the open bankruptcy of the partnership. Bisset on Part. 72.
    4. That if Hodges & Sage, by their mutual act, have sold the partnership property, which has in effect been, in good faith, converted into the separate property of the several partners, it then immediately becomes a fund to which the separate creditors of each partner may resort. Coll. Part. 90.
    5. That the partnership creditors of Hodges & Sage, before their failure, had no superior right to the partnership property. They could have sued the company, and perhaps created a demand, which might reach the partnership effects. But they had no lien, in law or equity. Bisset, 70. § 1.
   Church, Ch. J.

These plaintiffs have similar interests, but not a joint one, in the object of their application.

The controversy here is between the plaintiffs, as copartnership creditors of the firm of Hodges & Sage, and the defendants, as the separate creditors of, or claimants under, Hodges and Sage, individually. The plaintiffs go especially for the steam engine, boiler, &c., which were, confessedly, joint copartnership estate, when their debts were contracted, and prior to the sale and delivery of them to the Center Valley Company; or they claim the stock, which was the avails thereof, notwithstanding the manner in which it was subscribed for and taken.

The claim of the plaintiffs is based upon what they supposed to be the true doctrine of courts of equity on this subject—that the creditors of a copartnership have a lien, or such an equitable claim, upon its assets, that upon its insolvency, they can make them applicable to the payment of their joint debts in preference to any claims which the separate and individual creditors of the respective copartners can make to them.

There certainly is very strong language found in the books in support of this general claim of the plaintiffs. Thus, it is said, in Brewster v. Hammett, 4 Conn. R. 540. that “the equitable property in the goods attached is vested in the creditors of the copartnership;" and in Witter v. Richards, 10 Conn. R. 37. the court says, “that the partnership creditors generally have a right to the partnership effects, in preference to the creditors of an individual partner, has not been disputed.” And in Filley v. Phelps, 18 Conn. R. 296. the doctrine is declared to be, “that partnership debts are to be paid out of partnership funds, in preference to debts against any individual member of the company.” In the case of Burtus v. Tisdale, 4 Barb. Sup. Ct. Rep. 588. Strong, J. says, “It is clearly settled, that the joint creditors have then the first equitable claim upon the whole for the satisfaction of their debts.” Sometimes the copartnership property is called a trust fund for the benefit of creditors, and sometimes it has been said, that the copartnership creditors have a lien, or a quasi lien, upon it. But whatever may be the exact nature and extent of their rights, we think it certain, that they have at least a claim of priority of payment out of the joint funds, so long as they continue to be joint, 2 Sto. Eq. § 1253.

That copartnership creditors have no specific lien, legal or equitable, a priori, upon the joint funds, we consider to be well settled ; no more than any individual creditor has a lien upon the private estate of his debtor. In either case, the lien is created by the levy of the writ of attachment or of execution upon the property of the debtor. The partners have the lien, and especially the solvent ones, and have a right to insist, that the joint funds shall pay the joint debts, and in this way and by enforcing the equities or lien of the partners, the creditors of the copartnership come to their rights, whatever they are, and thus these rights are worked out, as the authorities say. This has been the received doctrine on this subject ever since the case of ex parte Ruffin, 6 Ves. 119. decided by Lord Eldon, in 1801. Campbell v. Mullett, 2 Swanst. Ch. R. 550. Bissett on Part. 106. Gow on Part. 296. Collyer on Part. 337. Story on Part. § 326. 2 Sto. Eq. § 1253. If therefore, the partners have the lien, the creditors cannot have it.

As the plaintiffs had no specific lien on the steam engine, &c., on the 1st day of September, 1849, when it was sold and delivered to the Center Valley Company, their attachments not having been levied until several weeks after this, why are not this sale and its consequences to be approved and sustained? The plaintiffs say, because, at that time, Hodges & Sage were in fact insolvent, and had no right to withdraw the company assets from the reach of the copartnership creditors, and convert the avails into separate estate, to the prejudice of the joint creditors, as they have done, by the sale of the joint property, and by their separate and individual subscriptions for the stock received in payment. If this had been done fraudulently, in contemplation of actual and open insolvency, and with a design to defeat the claims of the plaintiffs or other copartnership creditors, and with the knowledge and assent of the Center Valley Company, or these defendants, this claim of the plaintiffs could not be resisted—it would be sustained by the general and conservative principle, that the fraud of the parties would have destroyed the legality of the sale.

But here no fraud is proved. It is found only, that at the time of the sale, the company assets did not exceed in value the amount of the company liabilities; but Hodges & Sage were prosecuting their business, in the usual manner, and perhaps without a knowledge of their exact condition; and, as in other cases of declared insolvency, which have been preceded, by a length of time, and sometimes, by years, wherein a comparison of assets with liabilities, would shew an insolvent condition. And whatever Hodges & Sage might have suspected or even known, it is not found, that these defendants had any knowledge of their pecuniary state: they knew only, that, when the steam engine, &c., was purchased, it was copartnership property.

While the business of a copartnership is going on, and no dissolution by death, bankruptcy, insolvency, &c., requiring the marshalling of assets, there is no legal objection to a bona fide distribution of the copartnership funds among the members of the firm, or a change of them from joint to separate estate. Indeed, it is the purpose of all business operations, whether copartnership transactions or otherwise, to benefit individuals. And copartners always act for the ultimate advantage of themselves individually, and with the intent that the property and its avails shall, at some day, become separate estate.

The leading case of Ex parte Ruffin, before cited, fully recognises the right of copartners to convert joint into separate property, even to the very time and by the very act of dissolution. Lord Eldon says, “Therefore a bona fide transmutation of the property, is understood to be the act of men, acting fairly, winding up the concern, and binds the creditors.” And again, “To say this, seems to me a monstrous proposition, that, which, at any time during the partnership, has been part of the partnership effects, shall, in all future time, remain part of the partnership effects, notwithstanding a bona fide act.” Considerations of public policy were strongly urged, by Sir Samuel Romily, in that case, in opposition to this view of the Lord Chancellor; but he resisted them, and expressed the opinion, that a contrary doctrine would, in the absence of fraud, put a stop to all commercial transactions. Bisset, a respectable writer on the law of Partnership, says, in view of all the authorities on the subject, “ that notwithstanding the rights of the joint creditors, the partners may convert the joint property into separate property; for having no lien on the property, the joint creditors, when notice of dissolution is given, cannot prevent the partners from effectually transferring it, by bona fide alienation,” &c. And again, he says, “The partners may, during the partnership, convert joint into separate property, or separate into joint, and the property will, at the dissolution, be held to possess that character which is then impressed upon it.” Bisset on Part. 108. 111. Gow on Part. 296. Collyer on Part. 334. 511. Story on Part. 527. Kimball v. Thompson, 13 Metc. 283.

Let these principles be applied here. Hodges & Sage, about the 1st day of September, 1849, while pursuing the copartnership business, sold and delivered to the Center Valley Company the steam engine, boiler, &c., in question, and received in payment the stock of the company, as separate estate, which has since been transferred to and attached by Josiah H. Sage, a separate creditor ; and all this, some time before the actual failure and open insolvency of the copartners, and several weeks before the plaintiffs had any of lien upon it, by their attachments.

It must follow, we think, that there was no trust attached to this property in the hands of these defendants. To hold otherwise, would defeat the operation of the principles we have recognised, and be equivalent to the doctrine, that, what has been, must ever be, copartnership property, until all joint debts are paid, and thus obstruct ordinary copartnership dealings.

Had fraud been proved, and the rights of these creditors recognised, a further question suggested in the argument, would have claimed more of our attention : whether these plaintiffs, as copartnership creditors, could have enforced their prior rights in this way ?

The language of the books is, that the rights and equities of the joint creditors are to be worked out only through the lien or equities of the partners.

That this is generally true, we admit; and especially, where there is to be a settlement of a partnership concern, either by the partners themselves, or by a solvent partner, or a surviving one, or by an administrator, assignee, or receiver, &c. But there are cases of a different character; and this is one of them; and so were the cases of Brewster v. Hammett, 4 Conn. R. 540. and Witter v. Richards, 10 Conn. R. 37. Here, the partners, Hodges and Sage, are both insolvent, and take no interest in the settlement of their former business, but leave the creditors of the copartnership to take care of themselves; and here have been no proceedings, by any body, in the way of making distribution or marshalling assets. In the case of Brewster v. Hammett, this court refused to take the copartnership effects out of the hands of a separate attaching creditor, and place them back again into the hands of insolvent partners, because that would defeat the rights of joint creditors; and in such a case, it was supposed, that the copartnership creditors had an equitable property in the goods attached by a separate creditor, which they could themselves enforce, independently of the insolvent partners. And in the case of Witter v. Richards, the court recognized and enforced the preferable claim of copartnership creditors to the joint effects against a prior attaching creditor of one of the copartners upon

their own application, where both partners were insolvent. In such cases of insolvency, it may well be said, we think, that the joint effects, then remaining, may be treated as a trust fund for joint creditors, who will be substituted in equity to the rights of the partners, and be permitted to pursue the proper remedies to enforce their prior rights, as was done in the above cited case of Witter v. Richards, 10 Conn. R. 37. 2 Sto. Eq. 500. § 1253. But, as we have seen, the facts of this case do not call for the application of such a principle, inasmuch as the plaintiffs have not clearly established a prior or preferable right: so that we must advise, that their bill be dismissed.

In this opinion the other Judges concurred.

Bill dismissed.


author: Waite, J.

text:
    Stedwell and others against Anderson.
    Where property has been conveyed, through mistake, by deed, which the parties never intended should be conveyed, which the grantor was under no legal or moral obligation to convey, and which the grantee could not, in good conscience, retain, a court of chancery will interfere and correct that mistake, whether it arose from a misapprehension of the facts, or of the legal operation of the deed. But where the conveyance was such as the parties intended it should be, and the grantee may, in good conscience, retain the property, although the grantor may have been mistaken as to the extent of his title, a court of chancery will generally refuse its interference.
    Four sisters being the joint owners of a tract of land, they and their husbands mutually agreed, that it should be aparted to them in severalty. To carry this agreement into effect, one of the husbands undertook to prepare deeds for that purpose; and by mistake, misapprehension and ignorance of the form in which they should be drawn, the name of each husband, as grantee with his wife, was inserted; and in this state, they were executed. There was no intention, in any of them, to convey to the husbands a greater interest than they would be entitled to, as husbands of the owners in fee; but under the deeds thus mistakenly drawn and executed, each husband took an estate in fee in the land intended to be conveyed to his wife. One of the sisters died, without having had issue; and upon a bill in chancery, brought by her heirs at law, against her husband, who was in possession, claiming title under one of the deeds; it was held, that as the defendant was concerned in making and carrying out the mistake, as he had paid nothing for the land, and as he was now holding it contrary to the intention and agreement of the parties, the plaintiffs were entitled to a decree in their favour, establishing the title in them.
    Fairfield,
    June, 1851.
    Where it appeared, in such case, that more than twenty years had elapsed between the execution of the deeds, and the commencement of the suit; during which time, the defendant was in possession, and his wife never called upon him to rectify the mistake, or complained of it to him; yet as he was, unquestionably, entitled to the use of the property, and there was nothing in the manner of that use adapted to awaken suspicion that the deed was not as it should be, and neither she, nor any of her sisters, had knowledge of the mistake, until about a year and an half before her death, and when it was communicated to them, they were troubled about it; it was held, that under these circumstances there was nothing in the lapse of time, which varied the rights of the parties.
    Where it further appeared, in such case, that while the defendant was in the possession and occupation of the land, he made improvements upon it, to the amount of 300 dollars; it was held, that when the plaintiffs called upon him to give up to them his share of the property, it was no more than equitable, that they should allow his proportional share of such improvements.
    This was a bill in chancery, brought to correct a mistake in a conveyance of certain real estate. The material facts in the case, as found by a committee, are the following.

      Susan Carhart, the wife of Hachaliah Carhart, Elizabeth Anderson, the wife of the defendant, Mary Sherwood, the wife of John C. Sherwood, and Sally Ann Stedwell, were sisters, and the owners in fee-simple, in equal proportions, as tenants in common, of a certain tract of land, situated in the town of Greenwich, containing about fifty-nine acres; and, being desirous of making a division of the same, on the 4th day of April, 1825, mutually agreed with each other, that the land should be divided, and that each one should have her share aparted and set out to her in severalty. In making the division, a part of said tract, containing about 14 acres and 3 roods, was aparted to the defendant’s wife, and a similar portion was set to each of the other sisters. It was then agreed, that the division should be perfected, by deeds of quit-claim, to be so drawn as to carry into effect their agreement.

      For this purpose, Hachaliah Carhart drew and prepared four deeds. Those to the three married sisters were so drawn as to convey the share of each sister to her and her husband jointly. When the parties met for the purpose of executing the deeds, a discussion arose, whether the names of the husbands should be in the deeds, or not. Some were of opinion that they ought to be inserted; but all of them were ignorant of the legal effect of the deeds as prepared; and were of opinion, that the insertion of the husbands’ names would do no hurt; and that the deeds, as prepared, would carry out the agreement of the parties. The defendant insisted, that unless the names of the husbands were inserted, the deeds would be good for nothing. When this discussion was had, it did not appear, that any distinction was made between the insertion of the names of the husbands as grantees, or grantors; but the married sisters were desirous of having the deeds carry into effect their agreement, and so expressed themselves; and they all executed the deeds, believing that they merely carried into effect the partition among the sisters.
    It did not appear, that either of the sisters or the husbands, at any time, prior to the execution of the deeds, ever made any enquiry as to the manner in which they should be drawn to carry into effect the agreement, or as to the legal effect of those that were drawn. But the deeds were drawn by Hachaliah Carhart and executed by the parties, through mistake, misapprehension and ignorance of the law, as to the operation of the same; and neither of them, at the time, supposed or expected, that the husbands acquired, by virtue of the deeds, any estate in fee.
    The defendant and his wife, immediately after the execution of the deed to them, went into possession of the land thereby conveyed, and continued in possession, during her life; and since her decease, he has continued in possession. Until a year or two before her death, his conduct, acts, and declarations were entirely consistent with the claim, that the legal title to the whole tract was in her. About a year and an half before her death, she was made acquainted, by the defendant, with the fact that he had acquired a title to the land described in the deed, which information she communicated to her sister Mary; and they were troubled about it. It did not appear, that any of the other parties to the deeds ever had any knowledge of their legal operation, during her life.
    During the life-time of the defendant’s wife, he made sundry improvements upon the land, principally, by bringing on to it, a small house, by means of which the premises are enhanced in value to the amount of three hundred dollars.
    The defendant’s wife died, without ever having had issue; and the plaintiffs are her heirs at law.
    Before the commencement of the suit, the plaintiffs demanded of the defendant a conveyance of the title, held by him, under the deed to him and his wife; but he neglected and refused to comply with their request.
    The case was reserved for the advice of this court, as to the decree to be made.

      Hawley, for the plaintiffs,
    contended, That the plaintiff was entitled to the relief sought, on the following grounds.
    1. That the conveyance made was the result of misrepresentation, by the husbands, to the wives. On this ground alone, had the parties borne no such relation, had they been mere strangers, chancery would relieve.
    2. That chancery will relieve, where there is no fraud, but where the parties act unadvisedly; especially, where others, upon whom they rely, controul or influence them. These are cases where they misunderstand the effect of their own acts; where, through misapprehension of the law, they adopt an instrument not adapted to the accomplishment of their intent; where there is a mutual misapprehension or mistake of law. 1 Sto. Eq. 121, 3, 4, 5, 8. 133, 4, 5, 6. 142, 5., and cases cited. 2 Sw. Dig. 92. Newl. 432. 1 Fonb. b. 1. ch. 1. § 7. More especially will relief be granted, where the husband misleads the wife, who relies upon him, and indeed, cannot be said to be competent to act independently of him, especially, not to do a binding act.
    3. That the lapse of time constitutes no objection. There has been no laches in fact, in Mrs. Anderson; she never having discovered or suspected the mistake, until shortly before her death. No limitation runs against an equitable right, until the party is apprised of his right. 1 Fonb. b. 1. c. 4. § 27. & n. Phalen & al. v. Clark & al. 19 Conn. R. 421. 2 Sw. Dig. 233, 4. Mistake and fraud stand, in this respect, on the same ground. Besides, no laches is imputable to married women, especially as between them and their husbands. Lynde v. Denison, 3 Conn. R. 387. In this case, Mrs. Anderson could not, at any time, have instituted proceedings against her husband.
    4. That the defendant can have no allowance for improvements. They were made by him, merely as husband, while (if he was guiltless of fraud) he believed the whole title to be in his wife. The husband can have no allowance for improvements thus made; no principle can be found to warrant it. He must have made the improvements, either as husband, or as claiming to be owner in common with her. In the first case, he could have no allowance, for the reason above stated; and the finding shews, that he did not consider himself owner, when they were made. If he did, he would not have acted bona fide; for if he regarded himself as owner, he knew that he became so, through the mistake and misapprehension of his wife, caused by himself—by his own advice and assertion. He, of course, knew, that his title was inequitable; and no one making improvements in land, thus obtained, by fraud or mistake, and held wrongfully, can be allowed for improvements. This would be so, even against a stranger, and one sui juris. Here, the wife, during all this time, was not only ignorant of the mistake, but incapable of acting. No right could have been acquired against her, even by a stranger; certainly not, by her husband. This is not at all like those cases, where one, believing he has title, and acting bona fide, makes improvements, which the owner, knowing his rights, with power to prevent, stands by, and suffers him to go on, without disclosing his title.

      Dutton and Ferris, for the defendant,
    contended, 1. That the mistake was merely a mistake of law, where there was no fraud, or want of good faith. Such a mistake will not be corrected, by a court of equity. 1 Sto. Eq. 111. Wheaton v. Wheaton, 9 Conn. R. 96.
    2. That the parties deliberately executed this instrument, knowing what the terms of it were. In such a case, equity will not relieve. Hunt v. Rousmanier’s admrs, 1 Peters, 13 to 17. 1 Sto. Eq. 126.

      3. That equity will not relieve, in any case of mistake—where such mistake is the consequence of neglect. 2 Spence, 754. 756. 757.
    4. That the defendant has done all he agreed to do. He was merely passive in receiving the conveyance. It is not, therefore, a case, where the instruments do not carry into effect the agreement, so far as he is concerned.
    5. That the defendant can hold the property in good faith, as a gift from his wife. The relationship of husband is as good and equitable consideration as the relationship of brothers and sisters.
    6. That the defendant informed his wife, a year and a half before her death. She made no objection to him; and her assent may be implied.
    7. That he cannot be placed in as good a situation as before. He made improvements on the land.
    8. That the claim is lost, by lapse of time She might have sued, at any time, in equity.
    9. That the defendant is, at all events, entitled to the 300 dollars, which he has put upon the land.
   Waite, J.

The rule that money paid or property conveyed, under a mistake as to the law, cannot be recovered back, although often repeated, is one not of universal or unqualified application. Exceptions to it, as a general rule, have often been made, and have received the sanction of courts of justice; but the distinctions have not always been clearly defined, nor the reasons, in all cases, satisfactorily explained.

In a very recent case, we had occasion to enquire, under what circumstances, a party paying money through a mistake, as to his legal liability, might recover it back. Northrop v. Graves, 19 Conn. R. 548. And after a careful examination of the leading cases upon that subject, we held, that a party, who had paid money under a mistake, as to his rights and duty, which he was under no legal or moral obligation to pay, and which the party receiving it, had no right, in good conscience, to retain, might recover it back, in an action at law, whether the mistake was one of fact or of law.

Subsequent reflection has not led us to doubt the correctness of that rule. The same principle may be applied to the conveyance of property, as to the payment of money, although the mode of redress in the one case, may be different from that in the other.

Perhaps the rule more immediately applicable to the case under consideration, may be better stated in this manner. When property has been conveyed, through mistake, by deed, which the parties never intended should be conveyed, which the grantor was under no legal or moral obligation to convey, and which the grantee, in good conscience, has no right to retain, a court of chancery will interfere and correct that mistake, whether it arose from a misapprehension of the facts, or of the legal operation of the deed.

A party may be as much injured, by a mistake of the scrivener, in the language of the deed, arising from his want of skill in the law, as from a misdescription of the property conveyed, arising from his want of knowledge upon that subject. And a person unskilled in the technical language of conveyances, might be as readily misled, in the one case, as in the other.

But where the conveyance was such as the parties intended it should be, and the grantee may, in good conscience, retain the property, although the grantor may have been mistaken as to the extent of his title, a court of chancery will generally refuse its interference.

It was upon a distinction of this kind, that the late case of Wooden & al. v. Haviland, proceeded. 18 Conn. R. 101. There, the scrivener, by mistake in drawing a mortgage deed, omitted a description of the notes in the condition, and the omission was not discovered, by the mortgagees, until some time after the execution of the deed; we held, that that mistake might be corrected.

But the mortgagor, in her cross-bill, set up a mistake, on her part, as to the extent of her title to the mortgaged premises, and prayed to be relieved from the mortgage. But as the mortgagees had done no act tending to mislead her, and had given up their debts against her father, and assumed and paid others, relying for their security upon the mortgage given by her, it was held not to be inequitable in them to retain their security; and that, consequently, she was not entitled to relief.

What are the facts, in the present case? Four sisters were the joint owners of a tract of land, which they and the husbands were desirous of having aparted to them in severalty. A division was mutually agreed upon, and one of the husbands undertook to prepare the deeds to carry that division into effect. By mistake, misapprehension and ignorance of the law, he inserted the name of each husband, as grantee with his wife, in the deed to her. The effect was, to give him an estate in fee in an undivided portion of the share to be conveyed to his wife.

It is found, that these deeds were, by mistake, misapprehension, and ignorance of the form in which they should be drawn, executed by the parties. There was no intention, on the part of any one of them, to convey to the husbands a greater interest than they were entitled to, by virtue of their marital rights.

Under a deed thus mistakenly drawn, and executed, the defendant took an estate in fee in an undivided share of the land intended to be conveyed to his wife. Had the deed been drawn in conformity to the intention of the parties, his whole interest in the property would have terminated upon her death, as she died without ever having had issue.

Upon what principle of justice or equity can he now retain the interest in the property thus conveyed to him? He has never paid any thing for the property, nor was it ever intended, by the parties to the conveyance, that he should take more than he would have had, if the deed had been made to her alone.

It was natural, that these married women should rely upon their husbands for directions as to the proper mode of carrying the partition into effect. One of the husbands prepared the deeds; and it is found, that when the discussion arose as to the propriety of inserting the names of the husbands, the defendant insisted, that without such insertion, the deeds would be good for nothing.

It is true, no distinction was made between the insertion of the names, as grantees or grantors; but it is obvious, that the enquiry must have been, whether it was proper to insert them, in the manner in which they were inserted in the deeds then prepared.

Now, if the defendant, in the claim which he made, intentionally misled his wife and her sisters in relation to the deeds, it operated as a fraud upon her, and he cannot stand, for a moment, in a court of equity, upon his defence. On the other hand, if he laboured under the same mistake with the others, as it is found that he did, then his attempt to avail himself of that mistake, comes with a peculiarly ill grace from him.

It is however said, that the parties have slept over their rights, for a period of more than twenty years; and that the defendant’s wife never called upon him to rectify the mistake. But during the coverture, he was entitled to the use of the property, and there was nothing in the manner of that use, calculated to awaken suspicion that the deed was not as it should be; and it is found, that neither she, nor any of her sisters, had knowledge of the mistake, until about a year and an half before her decease, when the fact was communicated to her, by the defendant. It does not appear, that she ever complained to him; but it is found, that she and the sister to whom she communicated the information, were troubled about it.

We do not therefore think, there is any thing in the lapse of time, which varies the rights of the parties.

It is further claimed, that if the plaintiffs are entitled to the estate, the defendant is entitled to an allowance on account of the improvements which he has made. It is very clear, that if they had been made upon property wholly owned by her, he could sustain no suit to recover on that account. But as under the deed, he took an undivided portion of the estate in fee, when the plaintiffs call upon him to give up to them his share of the property, it seems to be no more than equitable, that they should allow his proportional share of the improvements, upon the principle that he who seeks equity, must himself do that which is equitable.

We therefore advise the superior court to decree in favour of the plaintiffs, as to the title to the property; and also to allow the defendant his proportional share of the improvements.

In this opinion the other Judges concurred.

Decree for plaintiffs;

Defendant allowed for improvements.