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state or condition of man, are personal statutes, and follow and govern him in every country. Now, sup: posing the case of our law fixing the age of majority at twenty-five, and the country in which a man was born and lived previous to his coming here placing it at twenty-one, no objection could, perhaps, be made to the rule just stated. And it may be, and, we believe, would be true, that a contract made here between the two periods already mentioned would bind him. But reverse the facts of the case, and suppose, as is the truth, that our law placed the age of majority at twenty-one; that twenty-five was the period at which a man ceased to be a minor in the country in which he resided; and that at the age of twenty-four he came into this state and entered into contracts; would it be permitted that he should, in our courts, and to the demand of one of our citizens, plead as to protection against his engagements, the laws of a foreign country, of which the people of Louisiana had no knowledge? Most assuredly it would not."
Referring to this last decision Mr. Wharton says: “It will be seen, therefore, that the opinion of the Su. preme Court of Louisiana, severely as it has been condemned, is that which now obtains through the German Empire, and may be regarded as the law both in England and the United States.” Conf. Laws, $ 115.
But so far as England and the United States are concerned, Mr. Wharton does not seem to be sustained by the authorities. It is believed that the rule generally followed in this country was correctly stated in Bank of La. v. Williams et ux, 46 Miss. 624, where it was said: “It is the prerogative of the sovereignty of every country to define the conditions of its members, not merely its resident inhabitants, but others temporarily there, as to capacity and incapacity. But capacity or incapacity, as to acts done in a foreign country, where the person may be temporarily, will be recognized as valid or not in the forum of his domicil, as they may infringe or not its interests, laws and policies."
mulation, borrowing and redemption of capital.” The capital stock was fixed at $300,000, and the shares were $200 each. The same was to be paid at the rate of one dollar per share each month. It was provided in the articles of incorp-ratiou that certain fines might be imposed for non-payment of monthly dues and dereliction of duties on the part of officers.
Such were the sources from which the corporation in the first instance obtained any money and it was loaned to the member who would pay the highest premium therefor. The theory of the organization was, that in ten years or less the accu. mulations arising from the several sources of revenue would make the shares worth par or $200 each, and whenever that period arrived the assets were to be divided and the corporation cease to exist. But in no event was it to exist longer than ten years.
The defendant became a member of such corporation and subscribed for several shares of the stock. After having paid his monthly dues for some time he applied for a loan of $1,400, and the same was put up to be competed for among the members. The defendant bid 59 1-2 per cent. premium, which being the highest bid, the loan was made to him, to secure which he gave the plaintiff a written obligation and mortgage, and this action is brought to foreclose such mortgage.
The defendant continued to pay his monthly dues and the interest stipulated for when the loan was made for some time thereafter, but finally he ceased to make any payments whatever.
The defendant in his answer alleged that the contract was usurious and that he had paid more than was legally due thereon and asked an accounting and that he be allowed his proportionate share of all the assets of the corporation as an "offset to the contract," and that the mortgage be declared satisfied and cancelled of record.
There was a reference, a finding of facts made by the referee and his conclusions of law reported to the court, which report was confirmed and the mortgage decreed satisfied and judgment rendered in favor of the defendant for $88.73, and against him in favor of the School fund for 53.55. The plaintiff appeals,
Brown & Binford for appellant; 0. L. Binford, W. E. Snelling and Caswell & Meeker, for appellee.
SEEVERS, J., delivered the opinion of the court.
The abstract contains all the evidence, but the appellee objec:s, there cannot be a trial de novo in this court because no motion was made at any time for a trial on written evidence. This objection is well taken. Vinsant v. Vinsant, December term, 1877, and numerous other cases. Error, however, has been assigned and the finding of facts is perhaps sufficiently full and complete to enable us to determine all the questions made by counsel which are of vital importance.
The obligation given by the defendant and secured by the mortgage is as follows:
“$1400. On or before ten years from this date I promise to pay to the Hawkeye Benefit and Loan Association, of Marshall county, Iowa, the sum of fourteen hundred dollars with interest thereon at
APPEAL from Marshall District Court:
The plaintiff is a corporation organized in March, 1870, under the general incorporation law, for the express object of “assisting the members of the association in the acquisition of freehold property, in the erection of buildings and otherwise improving the same, and in the removal of incumbrances or liabilities upon property already held by them, and to enable them to secure the amount of their shares in advance upon furnishing good mortgage security as provided by the bylaws of the association, and to facilitate the accu
the rate of six per cent. per annum, payable apparant than real. Be this, however, as it may, monthly, on the first Monday of each and every we are fully warranted in establishing such a rule month, or on such other day as may be fixed upon as seems to us to fully accord with the statutes by said association for the collection of monthly and policy of this state. dues of its members. The principal sum of fourteen The question whether this contract was usurious hundred dollars, and all interest accrued thereon, under the statute in force at the time the contract shall become due and payable whenever the inter- was made need not be separately considered beest shall be more than six months in arrears and cause of a statute passed in 1872, which, it is inunpaid; or at the longest, at such time (not ex- sisted, has the effect to remove the taint of usury ceeding ten years) as said Hawkeye Benefit and if such ever existed. This statute forms a part Loan Association shall have accumulated suffi
of the code, being sections 1184, 1185, 1186 and cient assets, embracing moneys, property, and 1187 thereof. It is there provided that corporanotes of like import with this, to divide to each
tions, to effectuate the same objects as those exof its members the value of two hundred dollars
pressed in the articles of incorporation of the for each share held by him in the capital stock of plaintiff, might be organized; and § 1185 provides said association; and the dividend so accruing to and determines how and in what manner money the maker of this note shall be then applied here- may be obtained for the purposes of the corporaon in payments. This note is secured by mort- tion. If loans are made to members in strict acgage on real estate.
cord with the provisions of the statute, it is exDated at Marshalltown, Marshall county, Iowa, pressly declared that such loans shall not be conthis third day of April, 1871.
strued as usurious. Section 1186 is of a legalizing JOHN F. BLACKBURN." nature, and evidently intended to apply to such The amount of money actually loaned was only corporations as the plaintiff and to contracts like $574, and the referee found the contract to be the one in question. It provides that the laws of tainted with usury. But this was more in the such corporations, made in pursuance of their nature of a legal conclusion from concluded facts, 6 articles of incorporation and by-laws" and the than a finding of facts based on evidence which 6 notes, obligations and securities " taken therewas in any manner conflicting. Such conclusion for 6 shall not be construed or held to be usurious is the subject of review in this court.
by reason of any fines or premiums for the right Associations, incorporated or unincorporated, of preference in taking such loans, paid in addibased on the same general principles as the tion to the legal rate of interest, but the same shall plaintiff, have existed for some time, both in this be valid and binding in all respects; the payment country and England. In the latter they do not of such fines or premiums in addition to a rate of profess corporate powers, and the ruling there
interest not exceeding ten per centum per annum, seems to be that such contracts as the one under payable annually, or at any less period, notwithconsideration are not usurious because the asso- standing." The legal rate of interest can not in ciations are mere partnerships, and the transac
this state exceed ten per centum per annum on tions constitutes a dealing in partnership funds. the sum actually loaned. If any greater rate is Silver v. Barnes, 6 Bing. N. C. 180; Burbidge v. charged or received, either directly or indirectly, Cotton, 8 E. L. and Eq. 57. It was so held also in the contract is usurious. Code $S 2077, 2078. Shannon v. Dunn, 43 N. H. 194; Merrill v. McIntire, The amount of money actually loaned being only 13 Gray, 157, and we do not doubt that imilar $574, and the plaintiff having charged and received rulings have been made in other states. We be- as interest thereon for each month the sum of $7, lieve it to be true that in neither New Hampshire
such contract is usurious, because interest thereon nor Massachusetts was the association vested with at the legal rate would only amount to $4.78 1-3 corporate powers. Certainly this is true as to the if paid monthly. former state. In Pennsylvania the contrary doc- There can be found in the statute no words which trine prevails. Reiser v. William Tell S. F. Associa- warrant the construction that interest might be tion, 39 Pa. St. 137. In Connecticut such associa- charged or received on the premium bid for the tions have corporate powers, and it was in sub- money loaned. The language used forbids such stance held such contracts were usurious. The construction for the interest can not thereunder Mechanics’and Workingmens' Mutual Savings Bank exceed the legal rate. Before such an exaction and Building Association of New Haven v. Wilcox, in the shape of interest can be judicially sustained, 24 Conn. 147. The same rule was adopted in Butte- the authority for it should be found unequivocally more Permanent Building and Land Society v. expressed in the statute. Section 1185, of the Taylor, 41 Md.; Mills v. Salisbury Building and code, is in substance the same as the Ohio statutes, Loan Association, 75 N. C. 292; Forest City United and it was expressly held in the Forest City United Land and Building Association v. Gallagher et al., Land and Building Association v. Gallagher, 25 Ohio St. 208.
supra, that the Ohio statutes did not authorize a Without stopping to enquire whether there is charge or payment of interest on the premium. any difference between an incorporated and an It can not be presumed the general assembly inunincorporated association it is quite apparent tended to legalize contracts which the statute did there is a conflict of authority, and that courts of
not authorize. the highest respectability are not in accord on this We therefore hold the statute does not legalize question. A critical examination of the various or make valid the contract in question because cases might demonstrate that this conflict is more more than ten per cent. per annum is exacted on
the association. For ought that appears in this case, the defendant may not be entitled to receive back anything by reason of losses. The amount due for dues and penalties must be paid. The losses ascertained, and, if any, the defendant's proper proportion thereof deducted froin the sum paid, and the defendant is entitled to the residue, and has no further interest in the corporation. The cause is remanded to the circuit court for further proceedings in accordance with this opinion.
PARTNERSHIP-COVENANT NOT TO ENGAGE IN ANY BUSINESS EXCEPT FOR BENEFIT OF PARTNERSHIP_CLAIM FOR PROFITS.
DEAN V. MCDOWELL.
the money actually loaned. This view relieves us of the necessity of determining whether the legalizing statute is retrospective, and, if so, whether it is unconstitutional.
The referee found the defendant had paid on the contract, exclusive of monthly dues and fines, $336, and, as a conclusion of law, that he was entitled to credit therefor on the sum actually borrowed. This result, in case the contract is found to be tainted with usury, is not, as we understand, seriously contested by appellant.
The referee also found the defendant was entitled to monthly dues to the amount of $326.73, which he had paid to the plaintiff from time to time. In this way the result is reached that defendant is entitled to a judgment against the plaintiff.
It will be seen the written obligation in no manner refers to the monthly dues, nor does the mortgage. If the interest is in arrears and unpaid for six months the principal sum becomes due.
But the non-payment of dues does not produce this or any other result, so far as the contract is concerned. In other words, the payment of such dues is not secured by the usurious contract. Nor did the referee so find, but that the defendant was entitled to a credit for such monthly dues under article thirty, of the “ constitution and bylawa" of the corporation, which is as follows:
“ Members whose dues and penalties are all paid up, may, on one month notice, withdraw from *the association, and shall be entitled to receive back the money they have actually paid for monthly dres, deducting the proper proportion of all losses which the association may have sustained. Members wishing to withdraw, who have had loans from the association, must also first pay up the principal and interest due upon such loans.”
The referee found at the time the defendant filed his answer and cross petition he was indebted to the plaintiff for monthly dues $77; fines, $7.70; and interest on dues, $1.57. According to the plain and explicit provisions of the foregoing article, before the defendant could sunder his connection as a member with plaintiff, and receive back the money actually paid, he must have paid up all his dues and penalties.
From the money so paid must be deducted his proper proportion of the losses, and he must also pay the principal and interest thereon of all money loaned him by the plaintiff.
Now as he was in debt to the plaintiff for dues and penalties and interest thereon he was not entitled to withdraw from the corporation and receive the money actually paid. There is no finding whether or not the corporation has met with any losses. We incline to think it should affirınatively appear it had not before the defendant can receive back the whole of the money actualy paid.
Of course he was not under any legal obligation to pay the interest on the money borrowed, for none is due the plaintiff thereon.
The defendant therefore did not have the right to withdraw from the association at the time he filed his answer, because he was then indebted to
English Court of Appeal, March, 1878. 1. THE RIGHT OF ONE PARTNER TO SHARE IN THE PROFITS MADE BY ANOTHER PARTNER in another business carried on in contravention of the partnership articles is confined to three cases, viz. : where the profits have arisen (1) by use of the partnership property; (2) from a business in rivalry with the partnership; or (3) in a transaction carried on by taking an unfair advantage of his connection with the partnership. In other cases there is no such remedy un. less it is expressly given by the articles.
2. CLAIM FOR PROFITS-REMEDY.-Without this the partners are in the simple position of covenantor and covenantee, and the only remedy is by injunction or dissolution, or, after the termination of the partnership, by action of damages. Dicta, in Story, and other text books overruled.
The plaintiff and defendant entered in 1866 isto articles of partnership as Dean Brothers, in which the defendant was made the managing partner, and covenanted (clause 8) to devote his whole time to the business, and also (clause 11) that “ he would not alone nor with any other person either directly or indirectly engage in any trade or business except on account and for the benefit of the partnership.” The business of the firm was that of salt merchants and salt brokers, selling salt upon commission for manufacturers, among whom their chief constituents were a tirm of Nicholas, Aston & Co.
The partnership between plaintiff and defendant expired by effluxion of time on the 28th of February, 1873. Subsequently the .plaintiff discovered that in 1871 the defendant had entered into a secret partnership with one Wilson to purchase the business of salt manufacturers belonging to Nicholas, Aston & Co., and to carry it on simultaneously with his partnership with the plaintiff.
The transaction was arranged in the following manner: The defendant provided the capital for the purchase and carrying on of the business of Nicholas, Aston & Co., but put in a
nominal partner of Wilson. The son executed a declaration that he was only nominee of his father. Articles of partners hip
entered into between Wilson and the
defendant's son for a term which would expire one month after the termination of the defendant's partnership with the plaintiff, i.e., on the 31st of March, 1873, and the business was carried on under the old name of Nicholas, Aston & Co. Accordingly the defendant after the termination of his partnership with the plaintiff took his son's place in the partnership with Wilson, and they then continued the business of salt manufacturers, selling their own salt and not employing brokers.
The plaintiff on discovering these facts filed a bill in 1874 claiming an account of the profits made by the defendant in the business of Nicholas, Aston & Co., during his partnership with the plaintiff.
After this, Wilson retired from the firm of Nicholas Aston & Co., and left the defendant the sole owner of that business.
The plaintiff brought a further action in which he claimed to have the business of Nicholas, Aston & Co., accounted for to the partnership of Dean Brothers, as an accretion from the advantage taken by the defendant of his fiduciary position in the latter partnership.
Nov. 20, 1877.-The suit and action were heard together before the Master of the Rolls.
Southgate, Q. C., Chitty, Q. C., and Rotch for the plaintiff
Roxburgh, Q. C., Davey, Q. C., and C. Parke for the defendant.
In my opinion there is no equity whatever in this bill; and as I have often said upon questions of construction, if there is a question of construction in this case, I am never apt to be very positive as to the correctness of my opinion, because it iš only an opinion, but I must say that to my mind there is no question whatever here. It is a clause as familiar to me as any clause that was ever penned. It is correlative to clause 8. The two clauses mean this: clause 8 means that the partner shall devote himself diligently to the business, and clause 11 means that he shall not engage in any other business. That is the whole of it. The words are not in any other” business, because the first business is not mentioned, but the words are that he shall not directly or indirectly engage in any trade or business except on account and for the benefit of the partnership, that is, excepting the partnership business. But there is no covenant that if he does he will account for the profits to the partnership, which is what this bill asks for. It is a simple breach by engaging indirectly. It does not appear to me at present that he has damaged the partnership at all, but this is not a bill for damages, it is a bill to take an account of the share of the profits made by him in another business in which he engaged by the agen. cy or intermediacy of a trustee. He was indirectly engaged, because he furnished the capital and took the profits. It is not even alleged that he neglected the partnership business, or that the partnership sustained any damage whatever.
That being so, it appears to me that this article is to be enforced, and has always been enforced,
when a breach is discovered, either by injunction to restrain the man from engaging in the other business, or by a dissolution. The mischiefs of his engaging in another business are two: it may be it turns his mind from the partnership business, and takes away his time and attention, which did not happen in this case; or it may be that it makes him liable for the losses of the other business, and so may involve him and damage the partnership in which he is engaged. Therefore the other partners have an option of intervening by injunction, and that has been the remedy usually adopted; or they may, at their election, dissolve the partnership for breach of the article. Those are the two remedies. But ever since the Court of Chancery existed till it was abolished no one ever heard of such a bill as this, frequent as the breach, I am afraid, has been. This is pretty good proof that there is no such equity.
But, in addition to that, I go upon the plain words. It is a mere negative covenant, and is not an affirmative covenant at all. It does entitle the partners in the present business to interfere or to take his share of the other partnership business, or interfere in it in any way whatever, as far as I understand that covenant. Therefore, there being no superadded equity, it seems to me that the bill wholly fails, and ought to be dismissed.
As regards the costs, in my opinion, what he did was a breach. It may not have done any harm to the partnership, or it may. I do not see any claim for damages. At the same time a man who enters into engagements of this kind should observe them; and when a bill is brought against him, and more especially when he has not demurred, or put in an answer attempting to defend his conduct, I think I must say that he is so blameable for what he did that it warrants me in dismissing the bill without costs.
As to the claim in the second action, in my opinion, that is simply extravagant, and should be dismissed, with costs.
The bill, therefore, will be dismissed, without costs, and there will be judgment for the defendant in the action.
From this judgment the plaintiffs appealed.
Southgate, Q. C., and Chitty, Q. C., (Gazdar with them).
The Master of the Rolls held that the clause in the articles, for breach of which we sue, was put in for a particular purpose, and that our only remedy is by injunction or dissolution. But by the secresy of the transaction we are deprived of that remedy, and we are entitled to the remedy we ask. Courts of equity have always allowed this remedy in cases where there is no legal duty-e.g., as between patentee and infringer of patent. In support of their contention they quoted Somerville v. Mackey, 16 Ves. 382; Lock v. Lynam, 4 Ir. Ch. Rep. 188; Russell v. Austwick, 1 Sim. 52, and they especially relied upon the concurrence of a series of text writers upon the subject with regard to the specific claim of a right to the profits of the other business. Story's Equity Jurisprudence, p. 66); Collyer on Partnership (1810) p. 165; Bisset on Partnership (1817) p. 134. [JAMES, L. J.-It is of no use to
quote these 'ext writers. They all copy from one v. Mackey, but the points there were entirely differanother, and give us as their only authority the ent. The plaintiff and defendant had entered incase of Somerville v. Mackey, which in reality is to a joint adventure for exporting goods to Rusnot a decision to that effect. Text writers are not the business in which the defendant engaged legislators.] Lindley on Partnership (1873), pp. was within the scope of the partnership, and it 595, 609, quoting Burton v. Wookey, 6 Madd. 367; could not be allowed that he should keep the profGardiner v. McCutcheon, 4 Beav. 534.
its. Here the defendant's other business is in no Roxburgh, Q. C., and C. Parke, for the respond- way within the scope of the partnership business. ents, were not called on.
It was dealing with salt, but in a totally different JAMES, L. J.:
way; and the profit was not made out of the firm The order of the Master of the Rolls cannot be in which he and the plaintiff were engaged. The rereversed. It is quite a new thing in equity that a fore it is not within the rule that a partner is enmere breach of covenant should entitle the coven- titled to share in the profits. antee to the profits made by the breach. It is true There are clear rules and principles which entithat in all matters of partnership, there must be tle a partner to share in the profits made by his the utmost good faith, and that there is a fiduciary partner. If they are made from a trade within the relation between the partners. One partner must scope of the partnership business, then the partnot use the partnership assets nor carry on the ner who is engaging in that secretly, cannot say partnership business, nor any other similar busi- that it is not the partnership business. It is that ness, except for the benefit of the partnership; which he ought to have engaged in only for the that is, he must not in any way act in rivalry with purposes of the partnership. the partnership. If he does any of these on his The same principle holds in the case of the use own account, that is really part of the thing for of the partnership assets, for then the profit is which the partnership was established, and there- made out of the partnership property. So if a man fore his partner is allowed to take a share of the use his position as a partner to get a profit or a profits. In this case the partner did not enter into business which is profitable or an interest in the any business in any way analogous to the business partnership property or in property which the of the firm, which was that of merchants and partners require, he cannot hold it for himself. brokers selling on commission the produce of salt But this business of the defendant in the present works. The business in which the defendant engag- case not being within the scope of the partnered was that of a manufacturer of salt. If he had de- ship, nor acquired by him by means of his conprived the firm of any profits they would have nection with the firm, nor by a use of the partnermade, or had diverted business from the firm, then ship assets, there can be no ground for this claim they might claim the profits. But it is not alleged to the profits. that he did anything of the sort, or that there was The second action is disposed of by the considone farthing's worth of actual damage to the work in eration that the business was not acquired by the which the firm traded. It was not a benefit arising defendant by any advantage taken of his position out of his connection with the partnership; there as a partner with the plaintiff. was no other obligation between him and the de
THESIGER, L. J.: fendant than that of an ordinary covenantor with his
In this case there has been a clear breach of cop. covenantee. It might have resulted in damage to the
enant by the defendant. But the covenant itself firm, but it was not in any way connected with the
does not attach to the breach the specific remedy fiduciary relation of partners. The Master of the
which the plaintiff's claim. We must go then to Rolls was right in saying that it was an act which
general principles. An action at law would arise did not result in any loss to the partnership, and
upon the breach, but that would not suit the plaincould not have so resulted unless the defendant's
tiff, because there has been no loss as the result of time had been given to the other business and lost
the breach, and he would only recover nominal to the partnership. Then damage might have re
damages. The plaintiff therefore seeks to follow sulted, which might have been matter for an ac
the profits made by the defendant. He must obtion for damages; but here it was not so, and tain this relief, if he is to succeed, upon some esthere is no damage; and if no damage, certainly
established principle of law or equity. I am no sort of claim to profits.
unable to find any to support his contention. The subject-matter of the second action is ex
From the cases that have been cited there are to be travagant.
deduced three principles correctly laid down by COTTON, L. J.:
Mr. Justice Lindley in his book on Partnership:No doubt the defendant committed a breach of 1. A partner shall not be allowed to obtain any the partnership articles. The question is what the exclusive advantage by employment of the partplaintiff is entitled to. I agree with the Master of nership property; and this is illustrated by the the Rolls that the clause is not one which gives a cases of Burton v. Wookey and Gardner v. Mcright to profits in any other business engaged in Cutcheon. by a partner. The object of the clause is to keep 2. A partner is not to derive any exclusive adthe whole of the partner's time to the partnership vantage from transactions which are in rivalry business.
with the business of the firm. This is illustrated I had more doubt upon the general principle of by the cases of Somerville v. Mackey–if, indeed, the partnership contract. The only case cited that case is to be treated at all as a decision on this which bore upon the point was that of Somerville point-and Lock v. Lynam.