McCormick's Appeal , 57 Pa. 54 ( 1868 )

The opinion of the court was delivered, by

Strong, J.

The principal part of the fund for distribution arose from the sale, made by direction of the Orphans’ Court, of the real estate of Martin Billmyer, deceased. Under that sale nothing but the interests of which Billmyer died seised could possibly pass. The Orphans’ Court had no power to order the administrator to sell anything which was not assets for the payment of the decedent’s debts. The Act of February 24th 1834, confers no jurisdiction over any other lands, or estates in land, than such as belong to a decedent at his death. Hence, under an order to sell the 13 acres and 4 perches in Turbut township, for the payment of the debts of Billmyer, nothing could pass to the purchaser but Billmyer’s interest. Whatever estates in the property others may have had, either as tenants in common, or partners, or holders of equitable estates, remained unaffected by the sale, unless they were estates or interests of which the purchasers had no notice; and, consequently, the purchase-money was wholly the proceeds of the land of the decedent, chargeable in the hands of the administrator with the liens which had attached in the decedent’s lifetime. It was a radical mistake, therefore, of the auditor .and of the Orphans’ Court to distribute that fund, as if not only the estate of Billmyer, but that of the other members of the firm of Billmyer, Follmer & Co. had been sold. If it be assumed, as found by the auditor (though only as a legal conclusion), that the land in equity belonged to the partnership, and that only the legal title was in Billmyer, then only that legal title was sold, disencumbered of secret equities, and the price paid must go first to .discharge the liens upon it.

But we are of opinion that the facts found by the auditor dp not justify his conclusion, that the land was partnership property. The facts themselves are wholly deduced from the testimony of Moses Chamberlain, who was an interested witness, and whose testimony should not have been.considered. Treating it, however, as competent evidence, it is insufficient to establish any such ownership of the firm. Confessedly, the entire interest in the 13 acres and 4 perches belonged to Martin Billmyer on the 1st of January 1854. The auditor finds that in the winter of that year Billmyer, who was then in possession, agreed to sell one undivided half to Jacob M. and W. H. Eollmer, for the sum of $6700; and the three agreed to become partners in the lumber business and in the property. It was agreed that of the purchase-money $2000 should be paid in cash, and the balance out of the profits of the business. The agreement was not in writing. On the 20th of February following, the Follmers paid $2000, to be credited as part-payment on the property. The balance does not appear ever to have been paid. In the spring of that year, precisely at what date. is not shown, they went into possession with Billmyer, and the three continued the lumbering business in the firm name of Billmyer, Follmer & Co. Afterwards the firm built a saw-mill on the tract with partnership funds; and made other improvements. These are the facts substantially as found; quite as strongly stated, as they were proved by Chamberlain, the witness. Do they show a divestiture of the title of Martin Billmyer, and an effective transfer of it to the firm of Billmyer, Follmer & Co.? And do they show such a transfer before the lien of .the judgments of Porter for the use of McCormick, the appellant attachéd ? These judgments were recovered on the 29th day of March 1854. Most clearly, they do not. The contract to sell the land, or to put it into the partnership stock, is as much within the operation of the Statute of Frauds as any other parol contract of sale would have been. If the title passed out of Billmyer, when was it ? Not when the parol agreement was made, in the winter of 1854 ; nor when the $2000 were paid on account, Feb. 20th 1854. This is not claimed. It must have been then in the spring, when the Follmers went into possession jointly with Billmyer. But that such a taking possession does not withdraw a parol contract from the operation of the Statute of Frauds, is too clearly settled to admit of denial. The possession taken under such a contract must not only be notorious and distinct, but it must be exclusive of the vendor. Receiving a parol vendee into joint possession with his vendor is not equivalent to the ancient feudal investiture, for which the Statute of Frauds intended to declare a writing should be the only substitute. The notoriety and significance of an entry into common possession, is much less than when an owner leaves and another person takes the sole and exclusive enjoyment. Hence, it has been held that’ a tenant in common in possession, cannot pass his title to his co-tenant in possession by parol, because there cannot be in such a case that distinct transfer of possession which equity regards equivalent to a written contract: Hill v. Meyers, 7 Wright 170; Workman v. Guthrie, 5 Casey 495. In Frye v. Shepler, 7 Barr 91, it was said that “ to constitute a valid parol sale under the Statute of Frauds, the possession must be exclusive of the donor.” The same doctrine was asserted in Haslet v. Haslet, 6 Watts 464; so, also, in Chadwick v. Felt, 11 Casey 305. There is in the present case an additional reason for holding that the entry of the Follmers into joint possession with Billmyer did not take their purchase out of the Statute of Frauds. It is found in the fact that they became partners with him to prosecute the lumbering business. This business was to be conducted on the property. There was, therefore, a reason for their entry apart from any purchase. To the neighborhood the partnership was quite sufficient to account for the possession. The court below thought these doctrines were inapplicable to the case, because there was no tenancy in common here. But the mischief against which the statute was designed as a guard, is greater in cases of parol transfers to partnerships than in any other cases. In Hale v. Henrie, 2 Watts 143, Judge Sergeant expressed the opinion, “ that when partners intend to bring real estate into the partnership stock, their intention must be manifested by deed or writing placed on record, that purchasers and creditors may not be deceived.” He added, “ that to permit a person, apparently owning property as an individual, to aver a different right in himself as a partner, by which his relation to creditors and others would be affected, would defeat the Statute of Frauds and Perjuries, by which no interests in real estate can vest, or be transferred without deed or writing.” And in Bddgway, Budd & Co.’s Appeal, 3 Harris 177, it was said, that “ when partners intend to bring real estate into partnership, their intention must be manifested by deed or writing placed on record; and it is not competent to show by parol evidence that real estate, conveyed to two persons as tenants in common, was purchased and paid for by them as partners, and was partnership property.” See, also, Lancaster Bank v. Myley, 1 Harris 544. From these cases it appears that proof by writing, and even record, is more rigidly required in conveyances to partnerships, than in other sale's.

Undoubtedly a partnership may hold real estate and they may have a resulting trust, where the partnership funds have paid for land. Such was the case of Erwin’s Appeal, 3 Wright 535. So, there may be a constructive trust in favor of a firm, as was held in Lacy v. Hall, 1 Wright -360, but these come within the exceptions to the Statute of Frauds. In both these cases the lands were acquired after the partnerships had been formed, and while the joint business was in progress. But here there is no resulting or constructive trust. The agreement, if there was any, to put the land into the joint stock was made before the firm had any being, and the partnership funds did not pay for it. A parol agreement to put land ■ into a firm, or to consider it as firm property, made before the firm exists, is wholly ineffectual to pass any title either in law or in equity.

Holding these opinions, we think the court and the auditor erred in holding the tract of 13 acres and 4 perches to be partnership property. The title, neither the legal nor equitable ownership, ever passed from Martin Billmyer, and, of course, the judgments of Porter for the use of McCormick, the appellant, were liens upon it, superior to all others except the mortgage to Philip Billmyer, and they were entitled to payment out of the fund in the hands of the administrator.

• This really disposes of the whole-case. But the auditor assigned several reasons for excluding the judgments from participation in the distribution of the proceeds of the land (the saw-mill property), and these we will briefly notice. Martin .Billmyer, the debtor, had, beside the saw-mill tract, a house and lot in Milton, upon which these judgments were a lien, as well as upon the 13 acre tract. In 1857 he sold the house and lot to McCormick, who paid the entire consideration. But the person who held the Porter judgments continued to revive them and preserve their lien upon both properties until Billmyer’s death. These facts led the auditor to conclude that the holder of the judgments was bound to look first to the house and lot for payment, the other creditors having no lien upon that property, upon the principle 'that where a creditor has a lien upon two funds of the same debtor he may be compelled by a creditor who has a lien but upon one of them to levy his debt out of the fund to which the other creditor cannot resort. The principle is sound, but it is inapplicable to the facts of this case. Here are no two funds or properties belonging to the same debtor. Billmyer has no interest in the Milton house and lot. The owner of that property has not only a legal right, but he has an equity of earlier date than any equity of creditors of the firm of Billmyer, Eollmer & Co. When he bought he had a right to insist that the judgments of Porter, for use, &c., should be levied first out of the remaining property of his vendor, that is, out of the 13 acre tract, and that right has not been lost. If there was, as we have seen, no divestiture of Billmyer’s estate, in that, prior to the sale of the house and lot in Milton, it is the fund which is primarily liable for the payment of the judgments: Nailer v. Stanley, 10 S. & R. 450; Mevey’s Appeal, 4 Barr 80; Lloyd v. Galbraith, 8 Casey 103. The appellees rely upon this rule, assuming that the saw-mill tract was first sold, an assumption which the law and the evidence do not sustain.

In the report of the auditor, and on the argument in this court, some importance was attached to the fact that the judgments were revived by writs of scire facias in 1858, and again in 1863, that the writs were served upon McCormick, who was then the owner of- the Milton house, and that he suffered judgments to go by default. This, it is argued, concludes him from asserting now any defence he could then have set up. Undoubtedly it does. But against the writs of scire facias he had no defence. He could not deny that the creditor was entitled to a continued lien upon all the lands that belonged to Billmyer when the original judgments were entered. The only questions he could raise were whether the judgments had been paid or satisfied, or whether their lien upon the house owned by him had expired. Whether satisfaction of the judgments could be exacted from his property before the lands remaining in Billmyer were exhausted, was a question impertinent to any issues that could have been raised in the action of scire facias. If it could not, still the creditor was entitled to his judgments of revival. The equity to control the order in which two or more properties shall be taken to satisfy a judgment is an equity not against the judgment, but against the execution.

Though, then, the judgments of Porter, now for the use of McCormick, were liens both upon the house and lot in Milton and upon the saw-mill, or 13 acre tract, they are entitled to be paid first out of the latter. The ease calls for nothing more. The fundamental errors of the decree in the court below were first, holding that the 13 acre tract had become partnership property in such a sense as to transfer the title from Martin Billmyer, and thus render judgments entered against him no liens upon it; and, secondly, in regarding the Orphans’ Court sale as having passed something other than the estate of Billmyer, that of which he died seised, in other words, his interest as realty.

It thus appears that out of the fund arising from the sale of the 13 acre lot, the judgments 112, 113 and 114, Jan. Term 1854, having been kept alive by revivals, are entitled to priority of payment over all other claimants than Philip Billmyer, the mortgagee-of an undivided half. And they are the first lien, and first entitled to payment out of the half of the-tract which was not covered by Philip Billmyer’s mortgage. Taking the facts as stated in the auditor’s report, that part of the sum realized by the Orphans’ Court sale of the 13 acres and 4 perches, applicable to the payment of these judgments, was sufficient to pay them in full. The decree is, therefore, to be reversed.

The decree of the Orphaps’ Court is reversed, .and the record is remittecTwith instructions to award distribution in accordance with the rule laid down in this opinion.