Connecticut. Supreme Court of Errors.

Connecticut reports: containing cases argued and determined in ..., Volume 58 online

. (page 13 of 60)
Online LibraryConnecticut. Supreme Court of ErrorsConnecticut reports: containing cases argued and determined in ..., Volume 58 → online text (page 13 of 60)
Font size
QR-code for this ebook

included the power, if the business required it, to capitalize
profits. Added to this is the fact that the management act-
ually exercised the power with the knowledge and by the
consent of all the parties in interest, for more than a quarter
of a century — a practical construction which amounts to
strong if not conclusive proof of the existence of authority
to do so.

Nor is this all. When all the partners, including Mrs. Bur-
rows, agreed, for the purpose of forming the corporation,
that the property should be valued at $320,000, they agreed,
so far as that sum embraced profits, that profits should be
capitalized. If any doubt still remains, we say further, that
when the legislature authorized the formation of a corporation
on that basis, and every partner accepted that act and took
his or her proportion of the stock, it put an end to all con-
troversy. They then had legislative authority to capitalize
profits, and they actually did it.

It is hardly necessary to cite cases in support of the propo-
sition that such action is binding ; it is like citing cases to
prove that one is bound by his own acts.

In this the partners acted for and by themselves, and not
through an agency. So far as such acts are concerned it is
not a question of authority to agents, but whether their own
acts are binding. Surely on that question no argument or
authority is necessary.

That the act of a corporation, or of a partnership when
duly authorized, in capitalizing profits, is binding upon all
concerned, in England seems to be well established.


zed by Google

DECEMBER, 1889. 187

Hotchkiss V, Brainerd Quarry Co.

In Straker v. Wilsonj L. R., 6 Ch. App., 503, the head note
is as follows : — *•' A testator gave to his wife a life interest in
his one seventh of a colliery in which he was a partner. By
the deed of partnership the majority in value of the partners
had power to dispose of the profits by adding them to the
capital or dividing them between the partners or carrying
them to the separate accounts of the partners. For several
years profits were made, but retained to the credit of a pro-
fit and loss account. Afterwards profits were divided, but
at the death of the tenant for life a large sum remained to
the credit of the profit and loss account, a greater part of
which had been sunk in the works of the colliery. Held
that, under the circumstances, the share of the testator in
the sum standing to the credit of the profit and loss account
belonged to the person entitled in remainder, and not to
the executor of the tenant for life."

In re Barton's Trusty L. R., 5 Eq. Cases, 238, was as fol-
lows: — During A's lifetime (a life tenant,) an addition of
three new fully paid up shares to those already held in trust
for her was made, pursuant to a resolution passed at a gen-
eral meeting of the company to apply a portion of the net
earnings during the half year to necessary works, and issue
new shares to represent the money so applied, a dividend
being declared out of the remaining portion of the earnings.
It was held that these new shares were capital, and not in-
come, as between the tenant for life and those entitled in
remainder. Sir W. Payne Wood, V. C, says : — " The div-
idend to which a tenant for life is entitled is the dividend
which the company chooses to declare. And when the com-
pany meet and say that they wiU not declare a dividend, but
will carry over some portion of the half year's earnings to
the capital account, and turn it into capital, it is competent
for them, I apprehend, to do so; and when this is done
everybody is bound by it, and the tenant for life of those
shares cannot complain."

In Sprovle v. Bouch, L. R., 29 Ch. Div., 635, Fry, L. J.,
says on page 653: "When a testator or settlor directs or
pei-mits the subject of his disposition to remain as shares


zed by Google

188 DECEMBER, 1889.

Hotchkiss V, Brainerd Quarry Co.

1 •

or stock in a company which has the power either of dis-
tributing its profits as dividends or of converting them
into capital, and the company validly exercises this power,
such exercise of its power is binding on all persons inter-
ested under him, the testator or settlor, in the shares, and
consequently what is paid by the company as dividend goes
to the tenant for life, and what is paid by the company to
the shareholder as capital, or appropriated as an increase of
the capital stock in the concern, enures to the benefit of all
who are interested in the capital. In a word, what the
company says4s income, shall be income, and what it says
is capital, shall be capital."

This case was appealed to the House of Lords and Privy
Council, 12 Appeal Cases, 385. On page 397 Lord Heb-
SCHELL quotes the above language of Lord Justice Fry with

We come now to consider briefly Mrs. White's appeal.
It is contended that Mrs. Burrows is entitled to no stock in
fee on account of the personal property. The argument is
that the distribution gave the widow no absolute interest ex-
cept in certain specific articles ; that all these items of per-
sonal property disappeared from existence long before the
corporation was organized to succeed the firm ; that she re-
ceived more than an equivalent in dividends ; and that she
has no interest in after -acquired personal property, etc.
The foundation of the whole argument is in the assumption
that there was distributed to the widow an interest in certain
specified articles of personal property, and not an interest in
the partnership.

We do not so interpret the record. The will gave to the
widow one third of the personal property in fee, and a life
estate in one third of the real estate. The testator's in-
terest in the quarry company constituted all of his real
estate. That, and his interest in the personal property used
in the quarry business, were appraised separately. His
interest in each was a fractional part, one eighth of the
whole. The distribution, following the appraisal, set to the
widow " the one undivided third of the one eighth of the


zed by Google

DECEMBER, 1889. 189

Hotohkiss V. Brftinerd Quarry Co.

Braiuerd & Co. quarry, and the undivided third of the one
eighth of the personal estate in the Brainerd quaiTj." It
seems to us that they gave her no interest in specific arti-
cles, but a fractional interest of a fractional interest in the
whole property. The separation of the personal estate from
the real in the quarry business seems to have been regarded
as necessary in order to comply with the provisions of the
will and give the widow a life estate only in the real estate.
Had they called it all real estate Mrs. Burrows would have
complained; had they called it all personal property Mi*s.
White would have felt aggrieved. For the purpose of set-
tling the estate they made a separation, and both parties
seem to have been satisfied. The fact that they avoided a
division of the assets of the partnership among the partners,
and gave to the widow and the daughter undivided interests
in the whole, clearly indicates that it was intended that each
should take an interest in the partnership as such. Indeed
it is hardly possible to put any other rational construction
upon the transaction. Counsel say that it was the estate of
Frederick Hall that remained in the partnership. And who
are the parties beneficially interested in the estate? No one
but Mrs. White and Mrs. Burrows. They therefore are the
parties beneficially interested in the partnership, and are the
real partners as to one eighth of the whole. Mrs. White
may be excluded for the benefit of Mrs. Burrows with the
same propriety that Mrs. Burrows may be excluded for the
benefit of Mrs. White. Neither can be excluded. After the
distribution therefore, as before, these two parties were and
continued to be partners. Each had an interest in the part-
nership property so long as the partnership continued ; and
that interest was measured by the terms of the will. Each
had an interest in the earnings of the pai*tnership measured
by the same rule, although qualified as to the time of enjoy-
ment by the articles of co-partnership. When they went
into the corporation they carried unimpaired their respective
interests, which each now retains.

That this is a correct view is apparent we think from the
nature of the partnership. Partnerships for quarrying stone,


zed by Google

140 DECEMBER, 1889.

Hotchkiss V, Brainerd Quarry Co.

like mining partnerships, require more permanence, and the
law allows it. Moreover the parties themselves provided
for it in the provision that the partnership should continue
so long as a majority in interest desired it. As a conse-
quence of this, counsel for Mrs. White contend, as to the
real estate, that it was not in the power of the widow or
heirs to take it out of the hands of the partnership without
the consent of a majority in interest of the partners ; that
the estate in the lands was inseparable from the partnership
so long as it endured. To withdraw it would have broken
up the partnership. If this is true of the real estate, it is
equally true of the personal property. The latter was just
as essential to the purposes of the partnership as the former.
Whether counsel are right or wrong in this is not now ma-
terial ; for, if they had the power to dissolve and wind up
the partnership, it is certain that they never exercised it.
They, in common with the other partners, chose to continue
it, and they did so. In substance it continues now, although
in a little different form ; for a quarry partnership, and es-
pecially this one, is but little less than a corporation'. For
many purposes it is a corporation ; a change from one to the
other is not so radical as to change materially the rights of
the partners. Their relations to each other may be some-
what changed, but their interests remain the same.

We think therefore that in 1883, when the corporation was
formed, Mrs. Burrows and Mrs. White owned together the
precise interest in the partnership which they received from
Mr. Hairs estate in 1857, and that as between themselves
their relative rights were precisely the same as then, without
reference to the varying proportions of the personal and
real estate owned by the partnership, or to the proportion of
the one to the other in 1883.

In 1857 the share of the Hall estate in the personal pro-
perty of the partnership was valued, as we have seen, at
$6,000, and in the real estate at *19,000. This was one
eighth of the whole partnership property. When the cor-
poration was formed the whole partnership property that
went into it, as we have seen, was valued at $320,000, repre-


zed by Google

DECEMBER, 1889. 141

Hotchkiss V, Brainerd Quarry Co.

seated by three thousand two hundred shares. Of these
Mrs. Burrows and Mrs. White took together four hundred
shares, representing $40,000, and being one eighth of the
whole. Taking the proportions in which they relatively
owned the property in 1867, Mrs. Burrows would be entitled
absolutely to one third of ninety-six shares, representing the
then personal property, and the life use of one third of three
hundred and four shares, representing the then real estate —
or thirty-two shares absolutely and one hundred and one
and a third shares for life ; and Mrs. White to sixty-four
shares, representing two thirds of the then personal proper-
ty, and two hundred and two and two thirds shares, as repre-
senting two thirds of the then real estate, with a right upon
the death of Mrs. Burrows to the shares which she takes for
her life. And this is precisely the division of the stock
made by the court below.

Other questions were made, some upon the pleadings, and
some upon the rulings of the court in receiving and reject-
ing testimony, but it does not seem to us that they mate-
rially affect the merits of the case, and we have not deemed
it necessary to consider them, as the views we have ex-
pressed render them immaterial.

We find no eiTor in the judgment appealed from.

In this opinion Andrews, C. J., Loomis and Beabds-
LBT, Js., concurred.

Pabdee, J., (dissenting.) Frederick Hall devised to his
widow the use of one third of his real estate for life ; the
remainder over, together with the two other thirds, to his
daughter absolutely. He bequeathed to his widow one
third of his personal estate absolutely ; to his daughter two
thirds absolutely. The real estate was a stone quarry ; the
portion of the personal estate with which we are concerned
consisted of carts, teams and tools necessary for the working
of the quarry.

This property, real and personal, was by contract subject
to the control of a majority of the partners associated with


zed by Google

142 DECEMBER, 1889.

Hotchkiss V, Brainerd Qaarry Co.

himself in the quarrying business. It is not necessary to
consider any questions as to the right either of the widow
or of the daughter to withdraw her share of the estate from
such partnership and management and have her own in sev-
eralty and under her sole individual control, for this reason,
that each waived all possible rights of this nature, and during
a quarter of a century subjected her estate to the hazards
of a continuing partnership ; and, being of legal capacity,
repeatedly ratified and confirmed all acts of the managers.

Neither it is necessary to determine the precise meaaure
of the right of the widow, under her devise, to exhaust the
quarry by her life use ; or of the daughter to compel the
purchase, from profits, of new quarry land in order to con-
tinue the business; or of the right of the widow to any por-
tion of the profit from quarrying in land bought subsequently
to the testator's death, for this reason, that the widow and
the daughter agreed each with the other to permit the estate
which they represented to remain a member of the partner-
ship; that the managers might replace worn out teams,
carts and tools, and make purchases of quarry land necessary
to the continuance of the business, from the profits, at their
discretion; and that they might mingle indistinguishably
profits from working newly purchased land, with profits
from working lands held at the death of the testator ; that
the widow might receive some portion of the profits from
newly opened quarries, and the daughter some portion of
the profits from working the portion of the quarry subjected
to the life use of the widow ; and during a quarter of a cen-
tury each received without objection and in accordance with
this agreement her proportion of the profits from all quar-
ries; and, being of legal capacity, each ratified and con-
firmed her contract with the other.

It seems to me to follow from this that when the business
ceased to be managed as a partnership, and began to be
managed as that of a corporation, the widow owned abso-
lutely one twenty-fourth of the personal property of the
partnership, and the right to use for life one twenty-fourth
of the realty ; this, by the agreement between herself and


zed by Google

DECEMBER, 1889. 143

Hotchkiss 0. Brainerd Quarry Co.

the daughter. It is found also that each agreed with the
other that the same measure of ownership in each in the
pai-tnership should continue in the corporation ; that is, be-
tween themselves neither should gain nor lose by the substi-
tution of corporate for partnership form ; that the shares of
stock representing the estate of Frederick Hall should be
so divided between them as to preserve to each of them pre-
cisely the same right in character and quantity which each
had in the partnership.

Therefore the widow is entitled to such shares absolute-
ly as will represent one twenty-fourth part of the personal
property, carried from the partnership into the corporation.
But the value of this personal property is unknown ; *he
proportion of personal to real in the capital of the corpora-
tion is unknown ; and in the absence of this knowledge it is
impossible to assign a given number of shares to the widow
as measuring her absolute ownership of personalty, without
risk of doing injustice either to her or to the daughter.

The widow and daughter agreed, each with the other,
that the capital stock of the corporation should be divided
into thirty-two hundred shares, and that four hundred
shares should represent the estate of Frederick Hall.

This, as between that estate on one side, and all of the
other shareholders on the other. As between themselves
only, they agreed that the four hundred shares should be
so allotted as that the kind and proportion of property which
each had in the partnership should be continued to her in
kind and proportion in the corporation. As between the
estate of Frederick Hall on one side, and the other stock-
holders on the other, it was not a matter of the least im-
portance to know the value of the entire property or of
either kind of property. The capital might as well have
been a million as less ; each owned one eighth of it ; each
would have one eighth of the shares, whatever the number.

The agreement between the widow and daughter that
four hundred shares should represent their aggregate owner-
ship was not intended to, and in no wise does, affect their


zed by Google

144 DECEMBER, 1889.

58 144
71 38

Ladies' Seamen's Friend Society v, Halstead.

agreement to preserve to and for each her proper portion of
the four hundred in kind and quantity.

For this last special division it remains necessary to know
the value of the realty which went into the corporation ;
the value of the personalty and the difference, if there be
any, between the real values and the amount assumed as the
capital. Then the actual value of the personal and of the
real property going into each of the four hundred shares,
will be known ; and to each of the contestants, upon com-
putation, can be assigned the proportion of the four hun-
dred, which will accurately measure her kind and proportion
of ownership.

Thb Ladies' Seamen's Friend Society v8. Andrew C
Halstead and others.

New Haven & Fairfield Cos., Oct T., 1889. Andrews, C. J., Cabpsbtteb,
LooMis, Pbbntice and J. M. Hall, Js.

Where a grantor conveys part of a tract of land to a purchaser, bounding
him on his own remaining land, but it is left uncertain by the deed
wlkich of two lines was intended as the dividing line, a later grant to
other parties of the remainder of his land by the same grantor, in which
the dividing line is clearly stated to be the one of the two lines which
gives to the first grantee more land than the other, is admissible in
favor of the first grantee as an admission of the grantor against his in-

Mud fiats on the seashore between high and low water mark may be con-
veyed separately from the adjoining upland.

And they may be used by the owner for any purpose which does not inter-
fere with navigation.

And where a portion adjoining the upland is reclaimed, it becomes upland
for most if not all purposes.

An adverse occupancy of a portion of the flats belonging to the owners of
the adjacent upland, is a disseizin of the owner as much as if it were

Where land upon a highway that ran close along the shore and parallel
with it, was conveyed, eight rods in depth and extending into the mud
flats, but with the sides not at right angles to the highway, it was held


zed by Google

DECEMBER, 1889. 145

Ladies' Seamen's Friend Society tj. Halstead.

that the lines beyond the eight rods and extending to low water mark,
ran at right angles to the highway.

[Argued October 23d— decided December 0th, 1889.]

Action to recover possession of real estate ; brought to
the Superior Court in New Haven County, and tried to the
court before Fenn^ J. Facts found and judgment rendered
for the plaintiffs and appeal by the defendants. The case is
fully stated in the opinion.

J. TFI Allinffy for the appellants.

W. B, Stoddard and J. 0-. Clark^ with whom was S. 0.
Loomisj for the appellees.

Carpenter, J. The matter in dispute is the boundary
line between the plaintiff and defendants, adjoining owners
of portions of the flats in the harbor of New Haven. They
derive their respective titles remotely from the same grant-
ors. In 1830 Henry Daggett, Elnathan Atwater, Abram
Heaton and William Mosely owned the premisses now owned
by both parties, lying south of Water street. That street
was originally two and one half rods wide, the south line of
which was substantially the line of high water. Prior to
1830 the street had been widened by constructing a sea-wall
one and one half rods below the high water line and reclaim-
ing the land to that wall. Each party is bounded north by
Water street. The contention relates to the boundary line
between them.

November:, 26th, 1830, Henry Daggett and his associates
deeded to the trustees of the estate of Eli Whitney a part of
the premises now owned by the defendants, described as
follows : " A piece of flats at the southerly side of Water
street, in said New Haven, between Brown street and Wells
street. The northwest comer is at the northeast corner of
a wall or wharf belonging to the grantors, then run easterly
by the south line of Water street, one hundred and ninety-
nine feet more or less, to a point precisely against the pres-
VoL. liVni. — 10


zed by Google

146 DECEMBER, 1889.

Ladies' Seamen's Friend Society v. HaUtead.

ent east line of a lot," etc., "thence run southerly eight
rods to the flats of said easterly division line, then run west-
erly parallel with Water street one hundred and ninety-nine
feet, more or less, to a point eight rods southerly of the
place of beginning, thence running north eight rods to the
place of beginning ; and so is bounded northerly by Water
street ; easterly on flats of the grantors ; southerly on flats ;
and westerly part on flats of the grantors and part by the
easterly side of their wall or wharf."

In 1834 another piece on the east of the above described
premises was deeded to the same grantees. Subsequently
the title to the above premises vested in one Mary M.
Ward, and on the 30th day of December, 1869, she conveyed
the same, with more, extending southerly from Water street
five hundred and ninety-one feet, to Elihu Larkin and John
W. Bishop. How the grantor obtained title to the south
part of the premises conveyed does not appear. Afterwards
Bishop, having acquired the interest of Larkin, conveyed
the premises to the defendants. In the deeds from Ward to
Larkin and Bishop, and from Bishop to the defendants, the
premises are described as bounded on the west " by land and
flats formerly belonging to Elnathan Atwater."

In September, 1831, Daggett and his associates deeded
the flats west of the premises deeded to the trustees of the
Whitney estate to George Rowland, described as follows : —
" Begin at the northeast corner of Brown street slip, then
run east by the south line of Water street one hundred and
fifty-two feet to the west line of land and flats owned by
Eli Whitney's heirs ; then south by the line of said heii*s
eight rods ; then west in a line parallel to and eight rods
south of Water street, one hundred and sixty-two feet to
the east line of Brown street slip ; then northerly by the line
of said slip eight rods to the place of beginning."

On the same day Rowland re-deeded said premises to the
grantors, portions to each in severalty, the east portion to
Elnathan Atwater, described as follows : — " Begin at a point
one hundred and ten feet east from the northeast corner of
Brown street slip, then run easterly by the south line of


zed by Google

DECEMBER, 1889. 147

Ladies' Seamen's Friend Society v. Halstead.

Water street forty -two feet to the east side of the wall
against flats or land owned by Eli Whitney's heirs, then
southerly by the line of said heirs eight rods, then westerly
in a line parallel to and eight rods south of Water street
forty-eight feet, then north eight rods to tlie place of be-

Subsequently Atwater purchased a piece of Heaton, and
the two pieces thus conveyed to him were conveyed by
trustees to the plaintiff, February 26th, 1882.

The contention is as to the dividing line between the par-
ties south of the eight rods limit. As we view the case that
question must be determined mainly by the boundary line
established by the deeds within the eight rods.

It will be observed that the defendants have a record title
extending much more than eight rods south of Water street,

Online LibraryConnecticut. Supreme Court of ErrorsConnecticut reports: containing cases argued and determined in ..., Volume 58 → online text (page 13 of 60)