WATSON V. BETTMAN.
to say, in this part of his deed the master describes that tract as the "north half of section 13, township 38 north, of range 13 east of the third principal meridian," so that on the face of the master's deed there is obviously a mistake. Presumptively, the word "north" in the granting part of the deed was the mistake. Presumptively-even if this bill did not expressly aver that the master conveyed to Mrs. Green the property sold, and even if the records set forth in the bill did not affirmatively show the fact-the word "south" should have been written where the word "north" appears. If the word "north" be rejected as a false description, the granting part of the deed would read, "Also the half of section 13," etc.; and by reference to the introductory part of the deed it suffi· ciently appears that the half mentioned in the granting part is the south half. The rule is laid down in some of the text-books that where the description in the granting part of a deed contradicts that in the introductory part of the deed, the words in the granting part prevail. But this rule should not hold against an obvious in· tent to the contrary, shown on the face of the deed. In the pres· ent instance the master commences the granting part of the deed with the words, "Kow, therefore, this indenture witnesseth," etc., as before quoted, meaning to convey the property which, according to prior recitals, he had advertised and sold. Prima facie and pre· sumptively the intent of the master was to specify in the granting part of the deed the property described in the introductory part as having been sold by him to Mrs. Green. But, as already inti· mated, the foreclosure decree and other proceedings recited in this bill show the word "north" in the granting part of this deed to be a false description. 'Vithout this wor'd, there is enough in the granting part of this deed, when read in the light of what goes before, and in connection with the showing of the bill, to make the instrument operative under the statute of conveyances as a good and valid convevanc(> of the south half of section 13. It is unnec· essary to discuss othe.' features of the citse. The demurrer is sus· tained
WATSON v. BETTMAN et aI. (Circuit Court, D. West Virginia. July 19, 1898.)
A recpiver will be appointed at the instance of a partner when It apppars that the firm is insolvent, that its accounts have been confused by the defendant partnprs with those of other firms of which they are also members, that they have fraUdulently procured assignments to be made hy sucb other firms, and have confessed jndgments in favor of their relatives, which can only be satisfied out of their partnership Interest.
STATE AND FEDERAl, COURTS-CONFLICTING JUIUBDICTION-ABBIGNMENTS FOR CRED 1'l'ORS-RECEIVERS.
The mere fact that an assignee for benefit of creditors has qualified hefore a New York state court. which has accepted his bond, does not give that court jurisdiction. so as to prevent a federal court from appoint· Ing a receiver for the assigned property.
RECEIVERS-SELECTION AND ApPOINTMENT.
A receiver, appointed in a suit by a partner against his cQ-partners charging them with mismanagement and fraudulent misappl1catlonot
, the court, will ,not appoint one, how.everqweIl ,qualified in who is interellted In judgments defetldants, which can only be satisfied out of their Interests' 'in pattnersbip assets, and,. woo is connected by marriage with varl, ous parties secured by deeds of Rlilsignment made by defendants.
A., L-eo Weil, ;Dewey Follett, and B. Mason Ambler, for plainti;l'f., '" " '," ,'", " Frank ;B,Enslow, John ,T; McQ-raw, and John G. McCluer, for defendants. ", ' V. B. Archer, for Joseph'Loucl;lheim.
JACKSON, ,District Judge, On' the 21st day of May, 1898, GilbertL. filed his biU in eqllity against Marcus A. Bettman, David Bettmau,EmtlnUel W.Blo9mingdale, in his own right and as trustee, and Mal'C'us A. BettlIlan and David Bettman, executors of the last will a;nd testament ofM:eyer H.Bernheimer, deceased, and Mamie, Manu, executri,x of Bernheimer, deceased. The bill charges that prior tothe month of December, 1897, Watson was a member of the firm of Rettman, Watson & Bernheimer, which firm was the owner of certain oil hl,nds, oil properties, and leaseholds in the states of Qhio, Indiana, West Virginia, and Pennsylvania, and that the saidfirIll also operated a manufacturing plant in Pleasants county, W. Va., and a general supply store in the city of Parkersburg; that Bernhcimer died in the month of December, 1897, and that the business, after his death, was carried on in the partnership name by :the,sliJ'yiving partners; that the partnership was engaged in the pI'oduction of oil, and was dealing in oil-well snpplies; that the partners of the firm each held a one-fourth interest; that prior to the 5th day of March, 1898, the plaintiff and his associates had been engaged for more than eight years in the oil business, ilnd that they had acquired a large amount of property, and had drilled upon their various properties in the different states over 300 wells, lUost of them heing productive and remunerative, and from which qnantities of oil have been taken and sold, realizing to the firm fl'OIl1 $10,()()0 to $25,000 monthly; and that, in addition to the revenue realized from this source, tl1e firm had sold leaseholds and otllPr pl'operties, amounting to $330,OOO,-Illaking a total of abont $600,OOO,of which $300,000 is claimed to have been net profit; and that all the funds realized frolU this sourCe had gone into the ('(lntro! of Stettlleimer & Bettman, who are bankers and brokers. The bill charges. that the Bettinans are brothers, and that their wi yes are ()f ' Bernhei'mer, and that David Rettman was a 'llH¢Ul of. the firJ¥of Stettheimer & Bettman, consisting of Hen[·jetta Stettheimer find David Bettman. 'The bill further charges that there was another firm doinghusiness under the name of Stett· ,'wimer & ,Co., composed of,.J oseph Stettheimer and Marcus and David .Rettman; that, Joseph having died, the business under the Stettheimer & Co. by the surviving partners; that Stettheimer & Co. were owners of oil property in Pennsylvania.. It appears from'the bill that Watson, the plaintiff aetlon, 'aq, thi:> op'erations in the oil fields, as
WfU as of the manufacturing supply company, and that the manage·. ment of the accounts of the firm and its finances were intrnsted to his associates, who assured the plaintiff from time to time that the lmsiness was profitable, and that the accounts were accurately and honestly kept. It is charged that the accounts of Bettman, Watson & Bernheimer were not kept in separate books, but that they were kept in the books of Stettheimer & Bettman, in New York City; and when the plaintiff made a demand that separate books should be opened and kept of the transactions of the partnership, his as· sociates promised to do so, but the promise, to this date, has never been kept. The plaintiff also demanded and tried to get a settle' ment of the co-partnership business,but has never been able to do so. It is further charged that there are five different firms com· posed of the Bettmans, "Watson, and others: First, the firm of M. A. and D. Bettman, composed of M. A. Bettman and David Bett· man; .second, the firm of Stettheimer & Bettman, composed of Hen· rietta Stettheimer and M. A. Bettman; third, the firm of J. Stett· beimer & Co., composed of the executors of J. Stettheimer and the l1ettmans; fourth, Bettman & Watson, composed of M. A. and D. Hettman and Gilbert L. Watson; fifth, the firm of M. A. Bettman, David Bettman, and Gilbert L. Watson, composing the partnership of Bettman, Watson & Bernheimer. That these five different firm are composed of the Bettmans, Watson, Bernheimer, and Stett· heimer; the Bettmans being members of all the firms, while Wat· /lon is only a member of two of them. Bettmun, Watson & Bern· beimer is the oil firm, whose business is the subject·matter in con· troversy in this case, being the same firm that has been carried on in the name of Bettman, Watson & Bernheimer since the death of Brnheimer. It is charged that the accounts of Bettman, Watson & Bernheimer have been kept upon the books of Stettheimer & Bett· man, one of the other firms, and have become so interwoven and entangled with the accounts of the other firms that it is difficult, at this time, to determine what moneys and revenues derived from the oil properties of the firm of Bettman, Watson & Bernheimer belong to it. It is not alleged in the bilI that the firm of Bettman, \Vatson & Bernheimer is insolvent, but that the revenues have been misappropriated and misapplied in such a manner as to deprive the plaintiff in this action of his rights and interest in the co-partner· ship property and its revenues; but it is admitted and claimed in the answer of Bloomingdale, the trustee in these various assign· ments, that the oil firm of Bettman, Watson & Bernheimer is insolvent. It is charged that L. G. Blooming-dale has large judgments against the Bettmans, amounting to about $70,000; that E. W. Bloomingdale, the trustee in these various assignments, is interested in the business of Bloomingdale Bros., as appears from the bilI, and his answer does not deny, but seems to admit, it, and the allegation of the bilI is sustained by the testimony of the Bett· mans. It appears that there are judgments amounting to nearly $600,000 against the Bettmans and other parties, for which the interest of the Bettmans in the co-partnership of Bettman, Watson & Bemheimer is liable. Stettheimer & Bettman claim directly
against the l1rm of :Bettman, Watson & Bernheimer $192,000, and, in addition: to this claim, it is claimed that the firm of Bettman, Watson & Bernheimer is liable as indorser for said firm for $109,000. In addition to the allegations of the bill heretofore referred to, it appears that sundry judgments have been rendered in the courts of New York by confession against the firm of Stettheimer & Bettman, and other firms of which Bloomingdale is assignee, in favor of the wives of the Bettmans. Two judgments alone against Stettheimer & Bettman amount to $236,327, which judgments are expected to be made and satisfied out of the interest of the Bettmans in the firm of Bettman, Watson & Bernheimer. It is apparent from this state of facts that E. W. Bloomingdale occupies a dual relation under his appointment as trustee, and he must, on the one hand, enforce collection of the claims of Stettheimer & Hettman against tb(jproperty of tbe firm of Bettman, Watson & Bernheimer, one of tbe judgments being a judgment in favor of his own brother, which it is claimed can only be satisfied out of the individual interest of the Bettmans in the firm property of Bettman, ·Watson & Bernbeimerj wbile, on tbe otber band. it will be bis duty, as trustee, to contest the claims of Stettbeimer & Bettman against the firm of Bettman, Watson & Bernbeimerj and, if be was appointed as receiver of this property, tbe same dual relation would continue to exist. It further appears that on the 5th day of 1898, the five firms, which included the firm of Bettman, Watson & Bernheimer, made an in the state of New York, of all their pl'operty, to E. W. Bloomingdale, trustee, for the benefit of their creditors, which the bill alleges was through f.raudulent misrepresentations as to tbe insolvency of the co-partnership of Bettman, 'Vatson & Bernheimer. Upon this state of facts tbe defendants E. W. Bloomingdale and Marcus A. Bettman and David Bettman, executors of the last will and testament of Meyer H.J Bernheimer, deceased, filed their demurrers to the bill, setting up five different grounds of demurrer, and prayi:ng the judgment of the court upon the same, and that the bill be dismissed. In the view the court takes of this case, it seems that all the grounds of demurrer are substantially embraced in the first and second assignments. Tbe first assignment is,virtually, a want of equity upon tbe face of the bill. This ground of demurrer invokes the: consideration of the court as to whether the allegations upon the face of the bill justify the court in the appointment of a receiver. From the inspection of the bill and answer. and the assignment made on the 5th day of March, 1898, toE. W. Bloomingdale, the court must reacb the conclusion tbat the co-partnership was insolvent. It is true, the bill does not allege insolvency, but the answer of the trustee not only claims it, but admits it, and the evidence of the Bettmans, taken in snpport ·of the answer, tends to establish the truth of the allegation;· This alone, independent of any other grounds, is sufficient to justify a court of equity in tak· ing possession of the property, and putting it in the hands ot a receiver. But the bill charges a fraudulent misapplication and an
improper conversion and waste of the assets of the co·partnership by the defendants Bettmans and Bernheimer, who had charge of this branch of the business at their New York office. This charge must be accepted as true, and, if true, ought not a court of equity, when appealed to, interpose, to protect the right of any member of this co-partnership as against other members, who, by their action, have so misapplied the revenues arising from the management of the property as to place the co-partnership in a condition approaching insolvency, if not altogether insolvent? I think so. There can be but one answer to the question. The Bettmans, 'Watson, and Bernheimer were equal partners in this property, each owning a one-fourth interest. This, in the opinion of the court, is another reason why the court should exercise its powers for the protection of the property. A further allegation in the bill is that there are heavy judgments at law against the members of the co-partnership, which, if enforced, would be ruinous to the value of the property, and entail a great loss to its owners; and, further, that there have been judgments obtained, by confession, against the Bettmans, in favor of their sisters, which can only be satisfied out of their individual interest in the co-partnership property. This allegation, coupled with the fact that it is claimed that the revenues of this co-partnership have gone into the hands of other co-partnerships in which the Bettmans and Bernheimer are interested, but in which the plaintiff, 'Watson, has no interest whatever; would seem to justify a court of equity in taking charge of the property. The court is of the opinion that the various allegations of the bill, being accepted as true, are sufficient in law to maintain this action, and to justify the court in appointing a receiver, and for this reason the first ground of demurrer is overruled. The second ground of demurrer is that the assignee, Blooming. dale, qualified under the laws of the state of New York, in the supreme court of the city and county of New York, and gave bond in that court, and was, at the time of the filing of the bill in this case, acting under and by virtue of the orders of the supreme court of New York, which action, it is claimed, conferred jurisdiction on the court over the property of this defendant co-partnership. I do not concur in this position. The appointment and qualification of Bloomingdale, as assignee, under the deed of assignment, was purely a statutory proceeding under the laws of the state of New York, which required him togo before the supreme court of New York. and file his bond, to be approved by the court, before entering upon his duties as such assignee; was not an order of the supreme court forthe city and county of New York, but waM merely the result of the deed of assignment executed to him on the 5th day of March, 1898. This act upon the part of that court was not a judicial, but purely a ministerial, one, to comply with the requirements of the statute under which the assignment was made. It was in no sense a judicial proceeding. No order of the court was necessary, under the statute, to put the assignee in possession of the property transferred under the deed of assignment. No jll-
88 FEDERAL &EPORTER.
instituted in the court by which it became the dQty()( the courtto tal\ecognj,zance and possession ,of the property. NqHtigatiov. has grown <!lut ot the I'\ssignmentby it became necessary for ,that court. ·of the property. It is therefore thatt4ere was no seizure, either actual or constructive, of the property embraced in the assignment of March 5, ,1898"to Bloomingdale" upder the orqer of the supreme court of the state, and city of '.l'he jurisdiction of that court did not attach; and, so far as court is advised, up to this date, :IlO judicial proceeding of ;any ,character has been instituted in that court that would give it jurisdiction over the property in question. I must hold, therefore, that the jurisdiction obtained under the bill filed in this case was first acquired over the property and persons of the defendant co-partnership, and that the second ground «)f demurrer must, be overruled. It is apparent from the bill that the interests of all the parties connected with this property are so conflicting that it is necessary that the management of this property should be confided to some one person to control and manage it for all the interests con'cerned. That the property is a very large and valuable estate no oue can question; and it is claimed if it is properly managed that it will not only discharge all, liabilities against it, but will, in the .end, prove to be very remunerative to the owners. Courts of equity appoint receivers for the assets of a firm whenever there is any misconduct, upon the part of the defendants, or where partners themselves are wholly unable to agree as to the management of the property and the settlement of the partnership affairs, upon the part of the defendants in interest. Porn. Eq. JUl'. § 1333. In this, case there are charges of insolvency, fraudulent misapplication of the revenues, and inability upon the part of the defendant co-partnership to discharge heavy claims existing against it and judgments against its members. Irreconcilable differences exist between the members of the co-partnership as to the management of the 'property, and under these circumstances this court is appealed to to take charge of this property, and appoint a receiver to manage it for the benefit of all the parties concerned. In the view I take>of this case, it is the duty of the court to grant this prayer of the bm. , The next question for the consideration of the court is, who shall be the receiver in this case? The court is requested to appoint Mr. R.W. Bloomingdale, the assignee under the deed of assignment of March 5, ;1.898, as tlle receiver in this cause. This request is supported and fortified by numerous letters from prominent men of the city of New YOrk who are well acquainted with his character as.a tp.an andohis ,reputation for integrity in business circles. So fiLl' as the persoQlll character of Mr. Bloomingdale is concerned, the court frankly: admits that·· the evidence :filed in this case in supthe ,of receiver satisfies it that he is port of bis a Plan Qfhigb character and unqqestionable integrity, but this ification is ,not. the only indiElpensable one for such a position. A l'eeeiver shol,lld have no personal in the controversy, or
in the property in his charge, which would prevent the exercise of his duties' and powers' without favor to any of the parties. He has the cus,tody and management of the property which is the subject-matter of judicial action. Can it be said, where a man is interested in judgments against the property of a co-partnership, and is connected by marriage with the various parties who are l',ecured under the deed of assignment, and who is charged with being'cognizantof the fraudulent misapplication of the assets of the 'defendant co-pa,rtnership by the defendant members of the coin this su,lt, that he is such a disinterested party as would justify the court in selecting him to take the control and management of the property which is the subject-matter of litigation in this cause? A statement of the facts seems to the court to answer the question. While I do not in any wise reflect, by my action, upon the character and standing of Mr. Bloomingdale, nor upon his character for integrity as a business man, which, I have said, is beyond question, still I consider it to be my duty to select some one who has no personal interest in the property whatever, and whose and management of it could not be influenced by any personal interest in the property. But there is another reason why the court should not appoint Mr. Bloomingdale. The property involved in this suit lies in four different states, no portion of which is in the state of New York, and. so far as the court is advised, there are no assets of any kind whatever in the city or state of New York, and all the revenues that are to be collected and disbursed by the receiver should be held and disbursed under the orders of the court of this district. If Mr. Bloomingdale were appointed receiver, the revenues would be carried to the state of New York, outside of the jurisdiction of ,this court; and when. by the decree of the court they were to be distributed, they would be distributed from that point. This is a potential consideration, which controls the action of the court against appointing a receiver outside of this district. Mr. Bloomingdale is a resident of the state of New York, many hundreds of miles away from the location of the properties. He is largely interested in the mercantile business, and. as the evidence discloses in this case, has nearly 2,000 clerks in his employ. He could hardly be expected, under such cir. cumstances, to give the close attention to his business as receiver that the court would require of one having charge of property of the magnitude and character of this. His interest in claims against parties of thE:: co-partnership makes him an interested, instead of a disinterested, party. 'rile receiver should be in touch with the court, so that, when the court finds it necessary to pass an order in vacation, he can place his hands upon him. I recall no instance, in my long experience on the bench, in which I have ever appointed a: receiver outside of the limits of my district, except as ancillary to :a proceeding in another ,court. , This rule has always been enforced by me, and I have never seen any reason for deviating from it. Under these circumstances I must decline to appoint E. W. Bloomi,ngdale receiver.
88 FEDERAL REPORTER. UNITED STATES v, SOUTHERN PAO. R. 00. et aL (Circuit Court, S. D. Oalifornia. June 27, 1898.)
1. PUBLIC LANDS -
In a suit by the United States under Act March 3, 1887 (24 Stat. to annul patents issued to a railroad company for lands, and the certifica· tion of other lands not yet patented, to which certain purchasers from the company were made defendants, a decree was entered canceling the patents and certifications, but saving the rights of the purchasers under the act, which prOVided that purchasers in good faith from the grantee, who were citizens of the United States, or had declared their Intention to become such, should, on proper proof before the land department, be en· titled to patents for the lands so purchased. An appeal was pending In the supreme court when Act March 2, 1896 (29 Stat. 42), was passed, confil'ruing the titles of all bona fide purchasers from patentees under railroad grants. The decree was affirmed, "SUbject, hoWever. to the right of the government to proceed in the circuit court to a final decree" as to the purl'hasers defendant;, Held. that the later aC't was applicable to such purchasers of lands for which patents had issued to the railroad company, whose titles were thereby and would be recognized by the final decree, on proof that their purchases were made In good faith, without reg'ard to the question of ,citizenship.
S. SAME-CITIZENSHrP OF PURCHASER.
CANCELLATION OF\, PATENTS RIGHTS OF PURCHASERS. IN .GOOD FAITH.
As to land, however, which had been certified but not patented to the railroad company, the government was entitled to a decree quieting Its title as against purchasers not shown by the evidence to be Citizens, or to have declared their intention to become citizens.
I"HOM ALIEN GRANTEE.
That the first grantee of a railroad company of lands erroneously certi· fied under a grant is an allen will not deprive a subsequent g.anil e, who is a citizen of the United States, of his rights as a bona fide purchaaer, under Act March 3,
SAME-BoNA FIDE PURCHASER DEF1NED.
A Oona fide purchaser of lands from a patentee under a railroad grant, within the meaning of act March 2; 1896 (29 Stat. 42), and whose right and title are thereby confirmed,. is one who purchased in good faith, for value, expecting to obtain title through the railroad company, though he may have been chargeable, as matter of law, with constructive notice of the invalidity of the patentee's title.
fl. SAME-PAYMENT OF PUHCHASE MONEY.
The fact that a purchaser of lands patented to a railroad company holds under a contract, and has paid only a portion of the purchase money, does not affect his characterasa bona fide purchaser, whose title Is protected by Act March 2, 1896 (29 Stat. 42).
SAHE.....;OPERATION OF STATUTES-SUBSEQUENT PURCHASERS.
The legislation of congress in relation to bona fide purchasers of lands which have been erronoolisly ;certified or vatented under railroad grants Is remedial In its nature, and t,he sev.eral aets apply to those purchasing after as well as before their passage.
This wasa suit in equity by the United States against the Southern Pacific Railroad Company and others to annul the certification and patenting of certain lands to defendant company under grants· by congress. :A. decree granting the relief prayed for against the company was affirmed by the supreme court. 168 U. So 1, 18 Sup. Ct. 18. The cause came on for further hearing in this court, on a motion of complainant for further decree as to certain defendants who were pur· chasers of lands from the railroad company.