
    James L. Cheeseman, Plaintiff and Respondent, v. James H. Sturges, Andrew Thorp and Thomas S. Thorp, Defendants and Appellants.
    1. Whiere a person holding real and personal property in trust, to be used for the joint benefit of himself and another, in specified proportions as • copartners in a joint enterprise, and under agreement not to dispose thereof without mutual consent, has made advances for the joint account, he cannot . be compelled to convey to such other his share unless nor until such other repays him the like proportion of his advances.
    2. If the Trustee in such case sells and conveys all the property without the consent of his copartner, and receives therefor stock of an incorporated ...company, such copartner has an election to .affirm the sale and transfer — in which case he will be entitled to Ms said share in the stock on paying the like share of the advances—or he may dissent from the sale and charge the Trustee with the actual value of the property so sold, have an accounting with him upon that basis, and recover his share of the balance due from the Trustee after crediting the amount of the latter’s advances against siich value.
    3. But the copartner or cestui que trust cannot, in the case last stated, charge the Trustee with the stock at its nominal or par value in satisfaction of such advances, (the stock being worth less than par,) and claim his share of the residue of the stock, in stock. This would be repudiating the transfer by the Trustee, in part, and affirming it in part.
    4. In either case the Trustee is not bound to credit the stock at par in satisfaction of his advances; no fraud nor bad faith being shown on Ms part, but only an error, in supposing his copartner was willing that the transfer should be made, or in supposing that it was lawful and proper for Mm to make the transfer which he deemed for the interest of all parties.
    (Before Hoffman and Woodruff, J. J.)
    Heard, April 11th;
    decided, April 28th, 1860.
    Appeal by the defendants from a judgment entered upon the report of Edward P. Cowles, Esq., Referee.
    The complaint herein alleges, in substance, that on the 12th of September, 1855, the plaintiff was possessed of land at Athens, in the State of New York, and entered into certain agreements with the defendant, James H. Sturges and one Braisted, by which it was agreed to put up buildings, machinery, &c., for the gathering of ice for sale. That the lands were to be contributed to the joint enterprise, and Sturges and Braisted were to furnish the means to carry on the enterprise. That the lands were thereupon conveyed to Sturges, who executed an instrument annexed to the complaint, declaring that he held the lands for the joint and equal benefit of the three parties, to be used in the said enterprise, with covenant not to dispose of or encumber the property without the consent of the others. That the plaintiff erected the buildings, &c., and Sturges advanced about sixty thousand dollars. That the plaintiff filled the ice-houses, and Sturges sold ice and received the proceeds to the amount of thirty thousand dollars; and afterwards Sturges, without the consent of the plaintiff, sold and conveyed all of the said lands, buildings, machinery, &c., to an incorporated company, called The New York Ice Company, for the consideration of one hundred and fifty thousand dollars, and exchanged that one hundred and fifty thousand dollars with that Company and received in the place of money, six thousand shares of the capital stock of that Company of the nominal value of twenty-five dollars per share. That this apparent sale for money was a pretense, and in truth and in fact, the money was not received by Sturges to be kept by him as the consideration of the conveyance, but in order to defraud the plaintiff and hinder him in realizing his portion or interest in the property and the consideration of the sale, and by arrangement between Sturges and the other defendants, (who were all Trustees of the Company,) the six thousand shares were the actual consideration of the conveyance (the money being used and employed as a temporary cover). That in order further to defraud, &c., the defendants, Thorps, by some transfer from Sturges, but with knowledge of the plaintiff’s rights, have received the whole of the stock from Sturges on the pretense that he owes them for moneys they advanced to him to enable him to perform his agreement with the plaintiff. That the real value of the stock is one hundred and fifty thousand dollars. That Sturges has acquired all the interest of Braisted in the money and stock. That plaintiff has applied to Sturges for his portion of the moneys and stock received by him. That with knowledge that the plaintiff is entitled to have his share or interest in the said stock paid over and delivered to him, the defendants, Thorps, hold it adversely to him and to prevent his realizing anything out of the property aforesaid.
    That Sturges is of slender means, raised the money by borrowing, and, without an injunction to prevent the transfer of the stock, his rights, &c., are in danger.
    The plaintiff, therefore, prays an injunction, and that Sturges may be adjudged to account concerning the ■ moneys and stock received by him, and the defendants be adjudged to pay over and transfer to this plaintiff his just and equitable share or portion of the said moneys and stock.
    The only parts of the answers of the defendants it is material to state here are, that all bad faith is denied. The original purchase of the lands for the joint enterprise, and payment therefor out of the moneys advanced by Sturges, is alleged. The advances of Sturges are stated to be upwards of $90,000. The receipts by Sturges for ice sold, are stated to be $3,000 less than the amount he paid for transportation and expenses of the same and of the sale thereof: that, before the transfer to the New York Ice Company, the defendants Thorps were admitted to a share in the enterprise by an arrangement between the plaintiff and Sturges, Braisted and themselves, by which, in consideration of their advancing moneys, each of the five parties was to have one-fifth of the property, after refunding to each all advances: that the transfer of the property to the New York Ice Company, and the taking of the stock of the Ice Company for the consideration, was made on account and in behalf of the said plaintiff, Braisted and Thorps, and at their request: that the transfer included two barges belonging to Sturges alone, and only $130,000 was received as the consideration for the property, and $20,000 for the barges: that the stock so received was to be held in the same manner as the property had been, and to be sold, in their discretion, to reimburse their advances, and to divide the surplus among the parties: in the meantime it is deposited with the Thorps, to secure about $80,000 they have advanced to Sturges, that being a part of the $90,000 Sturges had advanced as aforesaid: And the defendants are, and always have been, ready and willing to deliver to him his one-fifth thereof, on his repaying one-fifth of the advances made by Sturges to the joint enterprise; but the plaintiff has never offered or tendered the same. And, finally, the defendants allege that the plaintiff has received of the aforesaid moneys advanced by Sturges large sums, and also large sums for sales of ice, and has not accounted therefor, of which an account is prayed.
    The testimony given on the trial, as it appears in the Case on the appeal, is voluminous and conflicting. Numerous exceptions were taken to the admission and rejection of testimony; but, in addition to the above abstract of the pleadings, it will sufficiently explain the points decided at the General Term if the findings of the Referee be given, which were (omitting some details) as follows:
    “Decisions of Law and Findings of Fact, as settled bt the Referee.
    “ First. The instruments set forth in the pleadings, and bearing date respectively the 21st August and 25th September, 1855,, were executed by the parties to them respectively, as in the pleadings alleged.
    “ Second. At the time of the execution of said instrument the plaintiff was the owner in fee of the real estate named and referred to in such agreements, situate at Athens, Greene county.
    
      “ Third. Under the aforesaid agreement between plaintiff, the defendants Sturges & Braisted, the said Sturges proceeded to make advances in money under such agreement, and Oheeseman to fill the ice-houses at Athens with ice.
    “ Fourth. After the making of the aforesaid agreements, Braisted sold out his entire interest under such contracts to the defendant Sturges, after which Oheeseman was entitled to the one-third and Sturges to the two-third parts of the profits of the enterprise, provided for in and by such agreements.
    
      “ Fifth. The whole amount of the moneys advanced by Sturges, and which he was entitled to have refunded to him under said agreements, was the sum of $93,899.26. The whole amount of moneys received by Sturges from sales of ice, was the sum of $14,840.75.
    “ Of the moneys so as aforesaid advanced by Sturges, the sum of $41,540.74, went into the hands of plaintiff Oheeseman, of which the said Oheeseman has accounted for the sum of $40,088.30, expended by him in the joint business, making the balance of the advances, which Sturges is entitled to have refunded to him, as follows, viz.:
    The whole advances,..................................... $93,899 26
    Received from sales of ice,................................ 14,840 57
    $79,058 75
    Oheeseman has received as above from Sturges,---- $41,540 74
    Oheeseman accounts for,....................... 40,088 30
    Leaves in Oheeseman’s hands unaccounted for,... $1,452 44
    “ Sixth. While the filling of the ice-houses was going on, Sturges and the two defendants Thorps made an arrangement, by which the Thorps were to advance money to Sturges, and share with Sturges his portion of the profits of his agreement with Oheeseman, but Oheeseman was not a party to such agreement. Upon this agreement being made, the Thorps did make advances to Sturges of a portion of the moneys, which are above found to have been advanced by Sturges.
    “ Seventh. The defendants Thorps knew of the agreements and all of them, to which Cheeseman and Sturges were parties, and of the facts and circumstances, and all of them, under which the deed of the Athens property had been made by Cheeseman to Sturges.
    
      “Eighth. After the expenditure of the moneys as above set forth, the defendant Sturges, and the two Messrs. Thorps made an arrangement with certain other parties, by which it was agreed that the ice-house property, and all its ice, mentioned in the two foregoing agreements of 21st August and 25th September, and the deed from Cheeseman to Sturges, should be sold to a corporation to be created and called the ‘ Hew York Ice Company,’ and in accordance with such arrangement, such property, and all of it, together with certain other individual property of the defendant Sturges, of the value of $10,000, was conveyed to the Hew York Ice Company by said Sturges.
    “The Company paid in cash for the whole property so transferred the sum of $150,000, with which cash the said Sturges immediately bought 6,000 shares of the capital stock of the said Hew York Ice Company, which, at its nominal par value, amounted to $150,000.
    “The taking of the money for such conveyance was only an indirect mode of obtaining such stock, by a conversion of such property into such stock the agreement between Sturges, the Messrs. Thorps, and the said Company, being that such money should be paid out forthwith for such stock, and the transaction of receiving such $150,000 in cash, and disbursing it as aforesaid for said stock, took place at one and the same time. Cheeseman was not a party to such sale nor had he consented to it when made, nor did he subsequently ratify it.
    
      “Ninth. The capital stock of the Hew York Ice Company at the time of such sale and conveyance to it as last aforesaid, was $350,000, divided into shares of $25 each.
    “ Tenth. The $150,000 of the stock of the Hew York Ice Company was all received by the said Thorps, and no part of the same has been transferred to the said Cheeseman
    
      “Upon these facts, the Referee determines, as matter of law, that the plaintiff Cheeseman is entitled to judgment, that the said. defendants Sturges and Andrew Thorp and Thomas S. Thorp, do forthwith transfer to and vest in the said plaintiff Cheeseman, as his own individual property, discharged of all liens and incumbrances, 754 of the said, shares of the said capital stock of the aforesaid New York Ice Company; of full paid up stock of such Company upon which no assessments are remaining unpaid, and amounting, at its nominal par value, to the sum of $18,850, which amount is arrived at as follows:
    Amount of stock of New York Ice Company received on conveyance of
    property,.......................................... $150,000 00
    Deduct value of Sturges’ barges,........................ 10,000 00
    $140,000 00
    Credit balance of Sturges" money, advanced as above,........ 79,058 .75
    Leaves profits in enterprise, (in stock,).................... $60,941 25
    One-third of this is,..................................... 20,3.13 75
    Deduct from this the balance of moneys which Cheeseman has had, unaccounted for,.................................. 1,452 44
    Leaves the sum of............................... $18,861 31
    and is equal to 754 shares and a fraction over of stock of the New York Ice Company at $25 per share. Such judgment further to provide that the said defendants also pay to said plaintiff any dividends (if any) which may have been paid on such 754 shares stock up to the date of this report, the amount of such dividends, if necessary, to be ascertained by a reference to be made at the foot of the judgment to be entered herein, and that defendants also pay to said plaintiff the costs of this action.”
    Judgment being entered in conformity to this decision, the defendants appealed to the General Term.
    
      William M. Evarts, for the defendants (appellants).
    In addition to various points assailing the findings of the Referee on the facts.
    V. Upon the findings of the Referee, the only judgment to which the plaintiff was entitled, was for a transfer to himself of one-third of the stock of the New York Ice Company, held by the defendants as the proceeds of the property of the joint enterprise, viz.: one-third of $140,000 of said stock, upon the payment by said plaintiff of one-third of the charge of $79,058.75 against it, if found correctly by the Eeferee, and the further payment of $1,452.44 due from Cheeseman to Sturges for moneys advanced by the latter to the former to be disbursed on account of the concern, and which he, Cheeseman, retained.
    . 1. The plaintiff, upon the claim of his complaint, and upon the view of the evidence most favorable to himself was entitled to this only. This was “his just and equitable share or portion of the moneys and stocks,” for which he prayed.
    2. This is the measure of his rights as a partner in the results of the joint enterprise in which he had participated.
    8. If he held the position of cestui que trust in the original property, and seeks to assert against the substituted property the enforcement of the trust, this alone is the measure of his right.
    4. He has elected to follow the stock as substituted for the property, and it therefore would stand exactly in the same position as the original property stood, viz.: first, as security for the repayment of the advances; and second, for division of the surplus after the repayment of these advances among the parties interested.
    5. Indeed there,appears to be no difficulty upon this point between the parties, as the complaint not only claims it, but the Eeferee distinctly determines it.
    In his opinion rendered, he states, of the original arrangement, “himself (Sturges) and Braisted to be repaid their advances, and the remainder of the money resulting from the enterprise to be equally divided among the three as the profits of the adventure.”
    And he refers to the relations of the parties after the stock was acquired by Sturges in exchange for the property and after Braisted released to him any interest he had in the stock.
    “Sturges, after Braisted’s retirement, still held the property or its proceeds in trust:
    
      11 First. To pay all the advances previously spoken of.
    “ Second. To divide the balance between himself and Cheese-man, Cheeseman taking one-third and himself two-thirds."
    
      6. In fact no difficulty arises between the parties or on the part of the Referee in the determination of the general relation of the parties to each other down to this point, the suggestions under this head being merely preparatory to the consideration of the great error in law on the part of the Referee in decreeing payment to Sturges of his advances in stock at par, when it is even proved by both sides not to be worth par.
    VI. The judgment of the Referee, which applied the stock in the hands of the defendants as if it were money to the satisfaction of the charges against it, and imposed upon the plaintiff an equality of condition with the defendants in the residue only, is manifestly erroneous.
    1. The charges constituted a money debt, binding the plaintiff personally for his contributory third part, and a burden upon the property of the partnership, or of the trust, in whichever light it may be regarded.
    2. If the property upon which this charge rested had remained of its original character and investment, the requirement from the creditor partner, or from the trustee holding a claim upon the property, to take his pay in the property at any assumed, or even at any proved valuation, would have been clearly erroneous in principle, and most oppressive practically.
    3. Even though the exchange of the Athens property for stock had been made by Sturges, without Cheeseman’s procuration, this would be no ground for punishing Sturges as a wrongdoer, by directing the repayment of his money in stock or any other commodity.
    In that event the plaintiff had his election of remedies against Sturges, either
    
      (a.) To charge him for a wrongful conversion, or
    (b.) As a simple contract debtor upon a breach of trust, or
    (c.) To adopt the transaction as his own contract, recognize Sturges as his agent in its accomplishment, and follow the proceeds for his share of the same.
    He has elected the last named by the form of his action and the prayer of his complaint.
    Having made such election, the whole transaction of Sturges, as matter of law, must be treated as a contract voluntarily entered into by Cheeseman, and all charges and suggestions as to wrongdoing must be lost sight of and dropped. (Story’s Eq. Jur., §§ 1262, 1263, 1285, 1286; Murray v. Lylburn, 2 J. Ch. R., 442; Murray v. Ballou, 1 id., 581; Pocock v. Reddington, 5 Ves. R., 800; Long v. Stewart, id., note; Harrison v. Harrison, 2 Atk. R., 121; Vernon v. Vawdry, 2 id., 119; Collyer on Partnership, § 182; Story on Agency, §§ 439, 214.)
    4. The division and distinction which the Referee, in his report, has made between the stock, to the amount of the debt, and the surplus over and above that amount, requiring the defendants to account for so much of the stock held by them as is nominally equivalent to the debt as money, and as to the residue requiring them to account for the plaintiff’s proportion of the stock only in kind, is supported by no reason or principle.
    The stock is not worth its nominal or par value.
    The plaintiff is entitled to but one-third of the stock. By his complaint he asks for such share only. He owes one-third of the advances, and his share of stock is burdened with its payment.
    The creditor, (whether to be considered partner or trustee,) is under no contract to take his payment otherwise than in money, nor to limit the lien to any less than the whole of the debtor’s stock.
    5. $1,452.44 of the amount found by the Referee against Oheeseman is for moneys of Sturges actually taken and retained by Oheeseman, and converted to his own use, and never repaid.
    Sturges gave him $41,540.74 to make payments for the concern. The Referee finds that he only paid out $40,088.54, and that he appropriated the balance.
    This, also, we are repaid in stock!
    VII. The interest of Oheeseman in the stock being incumbered by a lien, the judgment, as far as he had a right to pray for one, could be for the delivery of nothing. There is no pretense that he ever made tender of his share of the advances. He could, at any time, have arranged to sell his stock (one-third), and tendered the purchase-money, if equal to one-third of the advances, and he would have obtained his stock.
    No action thereupon was necessary on his part, as he had his rights, at all times, without the assistance of the Court.
    
      The only judgment which could be properly granted in the cause would be on application of the defendants, and for a foreclosure of their lien, and a sale of the stock to repay same.
    Costs, therefore, should be allowed the defendants upon a reversal of the judgment.
    The judgment should be reversed, with costs.
    
      James W. Gerard, for the plaintiff (respondent).
    Besides arguing other points relating to the weight of the evidence.
    II. The defendants have no reason to find fault with the judgment by which the plaintiff is compelled to take the stock at par for the balance found in his favor.
    The plaintiff claimed, that he was entitled to have the balance paid to him in cash, but as Sturges was insolvent, that he had a right to have enough of the stock to pay his judgment in full, and if the sale of the whole stock was necessary for that purpose. The proof shows a flagrant breach of trust on the part of Sturges in combination with the Thorps, who were Trustees of the Company. Sturges held the real estate in trust, one-third for plaintiff, one-third for Braisted, whose share he bought, and one-third for himself. By the terms of the agreement and declaration of trust annexed to the complaint, and answers, Sturges could not sell the property without the consent of Cheeseman.
    Without Cheeseman’s consent, written or verbal, he sold the property to the New York Ice Company for $140,000.
    The $140,000 he received in cash, and immediately and by a previous understanding and arrangement, without the knowledge or consent of Cheeseman, invested that $140,000 in the stock of the Company at par. He then immediately transferred the whole or the greater part of those shares to the Thorps as collateral security for his antecedent debt to them, who at the time, and long before, knew of the agreement and contracts existing between Cheeseman and Sturges, and the trusts upon which Sturges held the lands. The Thorps, therefore, had no greater rights in the stock than Sturges had, and the same judgment for a proportion of the stock should be rendered against the Thorps as would have been rendered against Sturges if thestockhad remained in his hands. As Trustee, Sturges had no right to sell for anything but cash (even if he had had power to sell,) without the express consent of Cheeseman, and in every, view of the case, Sturges is to take the stock at par for his advances, the same as Cheeseman for the balance in his favor, especially as there is no proof of the value of the stock other than par, and that Sturges invested the trust fund into stock at par, without the consent of Cheeseman, as well as sold the property without his consent. Sturges, therefore, should be compelled, upon every principle of equity, to take the stock at par for his advances, if Cheeseman is compelled to take it at par for his balance, and the Thorps not being (as found by the Referee) bona fide purchasers of the stock for present value without notice, they stand in the same footing with Sturges and no higher.
    That the Referee would have been authorized to have given a judgment in favor of the plaintiff, for the balance found in his favor, with an equitable lien and power to sell any amount of stock that might be necessary to pay that balance, we cite -the following authorities; (2 Story’s Eq. Jur., §§ 1265, 1232, 1257, 1258, 1259; Hovenden on Frauds, pp. 468, 470, 471; Wallace v. Duffield, 2 Serg. & Rawle, 521, 529; 17 Ves., Jr., 47, 57; Lewis v. Maddocks, 16 U. S. Digest, p. 626, citing, 9 Texas, 482; Willes on Trust, 64.)
   By the Court—Hoffman, J.

It seems to me that the claims of the plaintiff upon the defendant Sturges must be adjusted upon one of two principles: 1st. Upon the assumption that the plaintiff has ratified the sale to the New York Ice Company; or, 2d. That he repudiates it altogether. Certainly, he cannot reap an advantage from it in one particular, and reject it in every other.

It deserves notice, in this connection, that the Referee has nowhere impeached the honesty nor even the utility of the sale in question, and acceptance of the stock for the-property. He finds that Cheeseman did not concur in it; but he does not find that it was made with any fraudulent intent, nor even that it was not an advantageous arrangement for all concerned. The evidence does not show that it was not beneficial and advisable.

It is, also, to be noticed, that there is no ground to hold Sturges chargeable with $140,000 as cash. No money was, in truth, passed upon the transaction. This is alleged in the complaint, admitted in the answers, and found by the Referee. “ The taking money for the conveyance was only an indirect mode of obtaining the stock, by a conversion of the property into such stock.”

1. It follows, on the first assumption, (viz., that the plaintiff had ratified the sale to the Ice Company,) that Oheeseman was under a liability to pay Sturges his share of the balance of the advances of the latter, viz., one-third of $79,058.75, and also two-thirds of his own debit balance, viz., two-thirds of $1,452.44, and had a right to the one-third of the stock substituted for the original property. It follows, also, that, to treat the stock in Sturges hands as actual cash, so as to liquidate his money advance bjr its par value, is inadmissible.

2. On the second hypothesis, viz., that the plaintiff repudiated the sale, the sale was, as to Oheeseman, void. The property is to be deemed to remain in Sturges’ hands. Its value must be ascertained as it existed at the time of such sale. Oheeseman has a right to be credited with his share of that value, to be offset against his proportion of the money advances, and must pay, or is entitled to receive, any balance which may be found.

Has the plaintiff elected his relief? I think it clear that he has. He expressly seeks “that Sturges shall pay over and transfer to him his equal joint share or portion of such money and stock so received by him as aforesaid.” He asks for an inj unction restraining Sturges and the other defendants from disposing of the said stock. He prays for an order restraining the defendants from transferring or incumbering said shares of the capital, stock, or property, or ¿hoses in action, which may have come into their hands as aforesaid, and any other stock, property or choses in action which may have come into their hands in exchange for, or in lieu of, said stock, received as aforesaid.”

It appears by the statement in the case, that an injunction was obtained, which was afterwards modified. The plaintiff sought to obtain his security and relief out of the stock of the New York Ice Company sold by the defendant. He has not proceeded upon a disaffirmance of the sale, and a demand for his share of the property sold according to its real value, to be adjudged against the defendant as a money demand, if a balance is found due to him. He follows the specific stock as a better indemnity and security for his rights.

He cannot then have more than his aliquot proportion of that stock, paying his due proportion of the money debt.

There is in the evidence, as stated by counsel, and known from motions and proceedings in the cause, to one of the Judges, that a change has been made in this stock upon a consolidation, as it is termed. It may be that the New York Ice Company stock really does not exist. We cannot say what, if any, changes may be made in the rights and obligations of the parties by such circumstances. They may perhaps be brought before the Referee, and .will receive from him what attention they deserve.

We think that there must be a n.ew trial. The defendant cannot be held responsible to take stock at par in discharge of his money demand.

In relation to the plaintiff ’s proportion, we do not find sufficient in the case to warrant the setting aside the conclusion of the Referee, that he did not consent to the introduction of the Thorps as partners. His share then remaining one-third.

There are several exceptions taken to the details of the accounts, which we have not examined, and upon the merits of which we are not to be considered as passing.

Judgment reversed, and new trial ordered, with costs to abide the event.  