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PERSONS-REPRESENTATION OF RELATION.

A person who holds himself out as a partner, or permits others to do so, is liable as such to third persons who give credit to the firm upon the faith of his connection therewith. [Ed. Note. For other cases, see Partnership, Cent. Dig. § 49; Dec. Dig. 34.] PARTNERSHIP 55 CONTRACT WITH THIRD PERSONS-REPRESENTATION OF RELATIONS.

name all rent which became due and pay- [3. PARTNERSHIP 34 - LIABILITY TO THIRD able subsequent to the conveyance of the property to him. The defendant, by payment of rent to the plaintiff under the terms of the lease, recognized the plaintiff's title. This right of a lessor to recover rent by the assignee of the lease is founded, not on contract, but on privity of estate. It is a gener-4. al proposition, which has but few exceptions, that the transfer of a reversion carries with In an action for the purchase price of street it the rent due and accruing thereafter by paving blocks furnished to defendants, evidence the lease creating the term, whether the as-held not to show that defendants, who entered signment be by deed or mortgage. In a like manner the plaintiff took the guaranty as an incident to this right to recover the rent. Daniel on Negotiable Instruments, vol. 2, § 1777; McLaren v. Watson, 26 Wend. (N. Y.) 425, 37 Am. Dec. 260; Stillman v. Northrup, 109 N. Y. 473, 17 N. E. 379.

into the contract under the belief that they were binding the corporation in which they were stockholders, represented themselves as being partners.

[Ed. Note.-For other cases, see Partnership, Cent. Dig. §§ 75, 78, 79, 81; Dec. Dig. 55.1 5. PARTNERSHIP 55 - CONTRACTS — ESTOPPEL TO DENY RELATION.

selves out as partners, which would estop them
bound.
from claiming that the corporation only was

It is stated in Allen v. Culver, 3 Denlo (N. paving materials furnished to defendant corporaIn an action for the purchase price of street Y.) 284, that, where a surety of a lessee by tion, evidence held not to show a course of cona separate covenant guarantees the pay-duct on the part of shareholders in holding themment of the rent and the performance of the covenants of the lease, such separate covenant passes to the grantee of the reversion, and enables him to maintain an action against the surety in his own name for a breach of his covenant. It follows, therefore, that the trial court properly directed a verdict for the plaintiff. There is no error.

curred.

(89 Conn. 633)

The other Judges con

UNITED STATES WOOD PRESERVING
CO. v. LAWRENCE et al.

[Ed. Note.-For other cases, see Partnership, Cent. Dig. §§ 75, 78, 79, 81; Dec. Dig. 55.]

Appeal from Superior Court, Fairfield County; Lucien F. Burpee, Judge.

Action by the United States Wood Preserving Company against John H. Lawrence and Edwin G. Gaynor, as partners. From a judgment for defendant, Gaynor, who alone appeared, plaintiff appeals. No error.

The finding shows the following facts: Early in the year 1913 the defendants, Lawrence and Gaynor, and one Waldo,

(Supreme Court of Errors of Connecticut. July agreed with each other to form a corporation

1. CORPORATIONS

27, 1915.)

448- CONTRACTS TRACTS BEFORE INCORPORATION.

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Defendants, having determined to form a corporation to do general contracting and construction work, appointed one of their number to bid on a street paving contract. The contract was let to defendants as "Lawrence & Gaynor," was signed in the same manner, and was made before the certificate of organization was filed. Held that, under the evidence, there was no contract with the city which was binding upon defendants as partners.

[Ed. Note.-For other cases, see Corporations, Cent. Dig. §§ 1709, 1789-1792; Dec. Dig. 448.]

2. CORPORATIONS 448-CONTRACTS-LIABIL ITY OF SHareholder AS PARTNER.

Defendants filed a certificate of incorporation, with the purpose of forming a corporation to do a general contracting business. Before the certificate of organization was filed, they entered into a contract with a street railroad company to pave its share of a certain street, and after organization with plaintiff to furnish the materials therefor. This contract was signed by the name of two of the incorporators, but the word "Incorporated" was by mistake omitted. Held, that defendants did not by operation of law become liable as partners as to either of the

contracts.

[Ed. Note. For other cases, see Corporations, Cent. Dig. §§ 1709, 1789-1792; Dec. Dig. 448.]

for the purpose of carrying on a general contracting business, to be known as "Lawrence & Gaynor, Incorporated," to be located in Bridgeport, and they instructed an attorney to prepare for them the necessary papers of incorporation and organization. Soon afterward the city of Bridgeport advertised that sealed proposals for paving certain streets would be received by its paving commission at 8 p. m. March 31, 1913, and that the bids would be publicly opened at that time. On March 30, 1913, the defendants and Waldo agreed that they, acting in behalf of the proposed corporation, would make proposals and bids for a certain part of said paving; it being then understood by them that the paving would not be begun until some time in the summer, and after the proposed corporation would be perfected and ready and able to go on with the work. Neither Gaynor nor Waldo had any experience or knowledge concerning such matters, and the preparation and presentation of the proposals and bids and the securing of the contract was left entirely to Lawrence, who was believed to be familiar with such business. Lawrence prepared the proposals and bids, signed them "Gaynor & Lawrence, Bid

der," and submitted them on March 31, 1913. | Gaynor, Incorporated," was signed and sworn Neither Gaynor nor Waldo saw them, or to by Gaynor and Lawrence and another inknew anything of their contents, or that corporator, and was deposited in the office of Lawrence had so signed them, before they the secretary of state and by him approved were submitted. Lawrence, on the day of on April 17, 1913. On June 4, 1913, a contheir submission, informed Gaynor that it tract, signed "Lawrence & Gaynor, John H. would be necessary to deposit a certified Lawrence," was made between the Connecticheck with the proposals and bids, and Gay- cut Company and Lawrence & Gaynor to nor procured such a check and gave it to supply the blocks and do the work of paving Lawrence for such purpose. The proposals for the Connecticut Company's part of the and bids submitted by Lawrence were ac- street which was to be paved. cepted, and contracts for doing the work were signed by him, "Gaynor & Lawrence, J. H. Lawrence," on April 9, 1913. In the bonds accompanying these contracts the principals were described as Edwin G. Gaynor and John H. Lawrence, doing business as the firm of Gaynor & Lawrence, of said Bridgeport, as principal," and the bonds were signed "Gaynor & Lawrence." It did not appear that the plaintiff knew anything concerning these bonds or the contracts which they were given to secure. On the day following the acceptance of the bids Gaynor saw in the newspapers that the successful bidder was "Gaynor & Lawrence," and understood that by that name was meant and intended the proposed corporation; and on the same day the certified check was returned to him, and thereby he knew that the bid submitted by Lawrence had been accepted.

It was a part of the original understanding and agreement between the defendants and Waldo to obtain this contract in connection with those with the city for and in behalf of the proposed corporation, to be carried out by it for its benefit and profit. They knew that Lawrence finally obtained the contract, but did not know its terms, or how it was signed, but supposed that he had signed it and those with the city as agent for the proposed corporation. On June 7, 1913, a certificate of organization of Lawrence & Gaynor, Incorporated, was signed and sworn to by Gaynor and Waldo, and on the 9th day of June, 1913, it was deposited in the office of the secretary of state and by him approved. Lawrence, being the only one of the stockholders of the corporation who had any experience or knowledge of the business which it was organized to carry on, was intrusted with exclusive power and duty of managing its affairs and securing and making its contracts. On June 10, 1913, Lawrence as agent and manager of the corporation wrote to the plaintiffs a letter ordering 7,600 square yards of wood block at the plaintiff's quoted price of $1.85 per square yard f. o. b. Bridgeport, and signed the letter "Lawrence & Gaynor, John H. Lawrence." The letter was written on paper having the heading "Lawrence & Gaynor, Engineering Contractors, Bridgeport, Conn.," which was part of a large quantity which Lawrence had printed without the knowledge of Gaynor or of Waldo, and on which, because of ignorance of the law, he had omitted the word "Incorporated." Gaynor did not see these letter heads until long after Lawrence had procured them, and then remarked to him that that was not the right name, and Lawrence replied, "Well, they are printed, and we may as well use them." On the 19th day of June the plaintiff by letter accepted the order for 7,600 yards of block, saying in the letter:

At about the same time the plaintiff contracted with the city to supply it with wood paving blocks to be used in paving the city's part of the streets under the contract, and learning that Lawrence had submitted the bid which had been accepted for laying the same, and believing that the contractor who had the city's contract would obtain a contract from the Connecticut Company, which had a street railway laid through the street which was to be paved and under the law was bound to pave a portion of the street, asked Lawrence, if he should get this contract, to buy the paving blocks required for it from the plaintiff. Prior to this time the plaintiff had never heard of any persons doing business under the name of Gaynor & Lawrence, or Lawrence & Gaynor. On May 15th an agent of the plaintiff had an interview with Lawrence on a street in Bridgeport about supplying the blocks which would be needed in laying the pavement for the Connecticut Company, and questioned Lawrence concerning his financial condition, and Lawrence answered that he had no money himself, but that he was "going to ally" himself with Gaynor, whose father had money, or could raise money, enough. The agent replied that that was not good security for payment, and that he would not sell any About the middle of July Lawrence left blocks unless he obtained an order on the Bridgeport and abandoned work under the Connecticut Company to pay the plaintiff city contract, which had but just begun, and directly for the number laid each month. thereupon Gaynor assumed the management No agreement was then made. On April 16, and control of this work, and all the business 1913, a certificate of incorporation of the of Lawrence & Gaynor as president and

"The only thing necessary now for you to do is to send us an order on the Connecticut Company to pay us each month for the number of yards of wood block laid by you on the monthly estimates at $1.85 per yard, less freight."

the contracts with the city.

On July 29th |

Sanford Stoddard and Philo C. Calhoun,

the plaintiff delivered the blocks contracted both of Bridgeport, for appellant. Edward J. for on June 19th to Lawrence & Gaynor, In- McManus, of Bridgeport, for appellee Gaycorporated, which laid a portion of the same nor. for the Connecticut Company under the supervision of Gaynor and carried out the contract with that company. The latter company, acting on an order given by the corporation called Lawrence & Gaynor, paid the plaintiff from time to time, for and in the name of the corporation, for the number of blocks actually laid by it for the Connecticut Company at the rate of $1.85 per square yard. At the completion of the contract 1,440 square yards of the block furnished by the plaintiff remained unused and not paid for. The city of Bridgeport by mistake took and used these left-over blocks in its paving operations, and when its attention was called to the matter acknowledged its willingness and readiness to pay for the blocks at the rate of $1.85 per cubic yard. Gaynor on April 29, 1914, presented a bill to the city for these blocks in the following form:

"Lawrence & Gaynor, Engineering Contractors, Bridgeport, Conn. Sold to City of Bridgeport, Connecticut, 1,400 sq. yds. United States Wood Blocks at $1.85, $2,664.00."

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THAYER, J. (after stating the facts as above). The defendant Lawrence, having as agent and manager full authority to act for a corporation then existing in Bridgeport under the name "Lawrence & Gaynor, Incorporated," on June 10, 1913, ordered of the plaintiff by letter a quantity of wooden blocks, and signed the letter, "Lawrence & Gaynor, John H. Lawrence." The letter was written upon paper having the heading "Lawrence & Gaynor, Contracting Engineers." He wrote with the purpose to bind the corporation only, and omitted the word "Incorporated" from the signature through ignorance of the law. The plaintiff accepted the order and delivered the blocks to the corporation, which is now insolvent. The defendants were members of the corporation, and the plaintiff by this action seeks to hold Gaynor, as a partner with Lawrence under the firm name "Lawrence & Gaynor," for the balance due on the contract. Lawrence was not served with process and did not appear to defend. The statement shows the circumstances under which the order was given. The court has found that the defendants were never, by agreement, partners in business.

The name of the Lawrence & Gaynor corporation had been changed to Gaynor & Lambert, Incorporated, about September 5, 1913, and the corporation is now insolvent. The plaintiff did not know in what manner Lawrence signed the contract with the Connecticut Company on June 4th, or of any instance or time when either of the defendants had represented or held out in any manner to any person that they were in partnership. Nothing was said or done by either defendant which was intended to or did in fact deceive the plaintiff, or cause it to believe that there was any partnership, or cause any loss or injury to it. It did not sell and deliver the paving blocks to Lawrence & Gaynor in trust and reliance upon their joint or individual credit and pecuniary means, or upon any supposed partnership, or with any care or concern whether the name "Lawrence & Gaynor" indicated a partnership or a corporation, but trusting and relying solely upon the order given to the Connecticut Company to make payment for the blocks as they were used directly by the plaintiff. It did not appear that there was any misrepresentation or bad faith by any one, or that either of the defendants had held themselves out to any one, either generally or specially, as a part-cated upon the doctrine of estoppel. nership. The defendants were never partners in business by agreement. Lawrence wrote the letter of June 10th to the plaintiff with full authority to represent and bind the corporation usually called Lawrence & Gaynor, and with the purpose to bind it only, and he omitted to use the word "Incorporat-poration. ed," or "Inc.," only because he did not know at the time that it was necessary or proper to use that word as a part of the corporate

The plaintiff claims that upon the facts found they were partners by implication of law, and, if not, that Gaynor by his acts is estopped to deny that as to the plaintiff he was the partner of Lawrence in the purchase of the blocks in question. In Morgan v. Farrel, 58 Conn. 413, 422, 20 Atl. 614, 18 Am. St. Rep. 282, it is said that a partnership as to third persons sometimes arises by operation of law even against the intention of the parties, and that this happens either because the contract which the parties have entered into in law makes each the principal and agent of the other (as in Parker v. Canfield, 37 Conn. 250, 9 Am. Rep. 317, and Citizens' Bank v. Hine, 49 Conn. 236, when the contracts called for a sharing of the profits of the business by the parties), or because by a course of dealing they have shown that such was the real relation between them. The liability in the latter case, as where a person holds himself out as a partner, is stated in Morgan v. Farrel, supra, 58 Conn. 426, 20 Atl. 614, 18 Am. St. Rep. 282, to be predi

[1] There was nothing in the arrangement made by the defendants in the present case from which the law will imply a partnership between them. There was no agreement to enter into any contract in behalf of themselves, but only in behalf of the proposed cor

Proposals and bids were to be made in its behalf, which, if accepted, were to result in contracts which would not, as contemplated, be performed until long after

be that, if such a contract were made by | was Lawrence's intent to bind, not a partthem in behalf of a nonexistent corporation, nership, but the corporation, as he was aua joint liability on their part might result; thorized to do. If it be conceded that there but this would be because they had falsely was in fact no prior existing partnership unheld themselves out to be the agents of a der the name "Lawrence & Gaynor," it will corporation which did not exist, or because hardly be claimed that the law will imply they would be presumed, having no authority one from the fact that the word "Incorporatto make the contract, to have intended to ed" was mistakenly omitted in signing the bind themselves. 1 Thompson on Corpora- name of the corporation to the contract. tions (1st Ed.) § 416; Johnson v. Smith, 21 Conn. 627, 634.

The plaintiff says that in fact contracts were made by Gaynor and Lawrence as partners with the city before the corporation was organized and that the court erred in overruling the plaintiff's claim that this was so. Upon the finding Lawrence had no authority from Gaynor to make such a contract, and if he attempted to make one it was not binding upon Gaynor, unless he ratified or assented to it, which he did not do. The court finds that Gaynor had no knowledge of the terms of the contract, or the way in which it was signed, and there is nothing in the facts found to indicate the contrary, except the fact that Gaynor at some time knew that Lawrence had letter heads printed, reading "Lawrence & Gaynor, Contracting Engineers," which he informed Lawrence was wrong, and the fact that after the contracts were completed Gaynor used one of these letter heads in making out a bill to the city in the name of Lawrence & Gaynor for the blocks which are in question in this action. These were facts proper to be considered in determining what the contract was between the defendants, and whether Gaynor ratified or accepted the contract as made by Law. rence with the city. They were by no means conclusive of the fact of such a ratification. Doubtless the usual way of speaking of the corporation, both when proposed and after it was organized, was as Lawrence & Gaynor. Whatever the reason for Gaynor's presenting the bill as he did after the city had mistakenly used the blocks, the court has found that he had no knowledge, until several months after the contracts were signed, of the contents of the contracts or the manner in which they had been signed, and supposed that they had been signed properly by Lawrence as the agent of the corporation. Upon the facts found the court properly held that no contract with the city which was binding upon Gaynor as a partner with Lawrence had been established by the plaintiff.

[3, 4] A person who holds himself out as a partner, or permits others to do so, is liable as such to third persons who give credit to the firm upon the faith of his connection with it, or who know of such holding out. Morgan v. Farrel, supra, 58 Conn. 426, 20 Atl. 614, 18 Am. St. Rep. 282. The plaintiff insists that Gaynor either held himself out to the city of Bridgeport as a partner with Lawrence, or permitted Lawrence to do so, in making the contracts with the city, and that the plaintiffs knew that the city contracts were made with Lawrence & Gaynor, and were entitled to presume that the partnership continued. If we assume that what was done by Lawrence constituted a representation by Lawrence that Gaynor was his partner in that transaction, all that Gaynor knew of the transaction tending to show permission or acquiescence was the fact, announced in the newspapers, that the successful bidder was "Gaynor & Lawrence." The finding shows that he did not see the bids or contracts until several months after the contracts were made, and thus necessarily after the corporation had been organized; that he did not know how they had been signed, but supposed that they had been signed properly by Lawrence as agent for the corporation. The fact that he saw in the newspaper that the contract was awarded to Gaynor & Lawrence would not call for an investigation on his part to learn whether the bids or contracts had been properly signed, and his failure to do so would not be sufficient under such circumstances to charge him with permitting himself to be held out as a partner of Lawrence. It might be different in case similar conduct on the part of Lawrence had continued for a considerable period of time, for knowledge may be presumed from a course of conduct. In a single instance where it is found that there was absence of knowledge in the party to be bound, mere silence on the latter's part is not enough to constitute permission or acquiescence.

[5] But, were permission to be presumed [2] There is less ground for claiming that from Gaynor's conduct, the other facts are he was by operation of law a partner as to such that he is not estopped to deny liability the contracts with the Connecticut Company as a partner. The court finds that the plainand the plaintiff. The corporation had been tiff did not sell and deliver the paving blocks incorporated, but not organized, when the relying upon the joint or individual credit contract was made with the Connecticut of Lawrence and Gaynor, or upon any supCompany, and had been organized when the posed partnership between them. It also contract with the plaintiff was made. In appears that after the plaintiff knew of the neither case did Lawrence have any author- city's contract, made before i contracted ity from Gaynor to make these contracts, with Lawrence to furnish the paving blocks,

[Ed. Note.-For other cases, see Receivers, Cent. Dig. §§ 129, 130; Dec. Dig. ~72.] 3. RECEIVERS 77-ASSETS-LIENS. its assets burdened with all valid liens and The receivers of an insolvent company take equities against it.

[Ed. Note.-For other cases, see Receivers, Cent. Dig. §§ 91, 138-144; Dec. Dig. 77.] 4. RECEIVERS 77-COLLATERAL DEPOSITED

WITH TRUSTEE-RIGHT TO ADMINISTER.

and was then told that he had no money, I authorized, in that it impaired the contract but that he was "going to ally" himself with creating the trust. Gaynor. This was a representation that no partnership then existed, and what was done and said at that time by the plaintiff and Lawrence justifies the finding that the plaintiff sold the blocks, not relying upon any partnership which it supposed existed because of the city contract. Anything done by Gaynor after the contract with the plaintiff was made could not have been acted upon by the plaintiff when it accepted the order and closed the contract for the blocks. His claimed silent acquiescence when Lawrence indicated that he would use the letter heads after Gaynor told him the name was wrong, and his rendering the city a bill for the blocks which it had taken by mistake, relied upon by the plaintiff as acts of acquiescence, could not, for this reason, have been relied upon by the plaintiff in making the contract. The court, therefore, properly overruled the plaintiff's claim that Gaynor was estopped from denying that a partnership between him and Lawrence existed at the time its contract was made.

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ING CO.

Where a debtor has deposited collateral with a trustee as security for payment of his debt, the trustee cannot be compelled to surrender the collateral to receivers of the insolvent debtor until the debt is paid, but after default, if the trust be one to apply the proceeds of the collateral for the benefit of the secured creditor, the trustee may administer the trust as against the receivers of the insolvent debtor.

[Ed. Note. For other cases, see Receivers, Cent. Dig. §§ 91, 138-144; Dec. Dig. 77.] 5. RECEIVERS 110-RECEIVER AS TRUSTEE— POWER OF Court.

While a court of equity has control of a trustee appointed by contract or otherwise trusts and trustees and may, for cause, displace and name another in his stead, it cannot order that a receiver act as and for a trustee.

[Ed. Note. For other cases, see Receivers, Cent. Dig. §§ 195-197; Dec. Dig. 110.] 6. TRUSTS 178-DISCRETION OF TRUSTEEJUDICIAL CONTROL.

While a court of equity may restrain a trustee from abusing his power, it cannot conhim by the trust agreement.

(Supreme Court of Errors of Connecticut. trol the exercise of the discretion vested in

July 27, 1915.)

1. RECEIVERS 72-MORTGAGES HELD AS
COLLATERAL COLLECTION-Order.
Where a banking company engaged in mak-
ing farm loans deposited the mortgages taken
to secure loans with trust companies as security
for certain of its creditors who had invested
money with it, an order that receivers subse-
quently appointed for the company take the
mortgages from the hands of the trustees and
collect same, could not be justified on the the-
ory that the receivers, as successors of the
company, could more efficiently make collec-
tions by reason of an organization perfected by
the banking company for that purpose, since
the court had power to require that the receiv-
ers turn over to the trustees the control of
such organization if it should appear that the
collections would be thereby facilitated.
[Ed. Note. For other cases, see Receivers,
Cent. Dig. §§ 129, 130; Dec. Dig. 72.]

2. RECEIVERS 72 PROPERTY HELD IN
TRUST-IMPAIRMENT OF CONTRACT.
Where such trustees were bound under the
trust agreement to act as such, and to hold and
administer the collateral in accordance with
their agreements, and agreed to certify to each
debenture and on default to collect the col-
lateral and apply the proceeds, less their ex-
penses and charges, the assignments of the
mortgages being held unrecorded until default
be made, an order, providing that the receivers
should collect the collateral for the benefit of
the debenture holders; that the assignments of
the mortgages should not be recorded; that
the receivers could make substitutions in the
collateral at their discretion and charge against
the proceeds of the collateral collected their ex-
penses and a reasonable sum for their services
and pay the balance to the trustees-was un-

[Ed. Note.-For other cases, see Trusts, Cent. Dig. § 232; Dec. Dig. 178.]

7. TRUSTS 172-SALE OF TRUST PROPERTY

-TRUST AGREEMENT-INSOLVENCY.

Where the agreements under which mortgages were deposited by a banking company in trust as security provided that on default the trustee could sell the collateral, the default contemplated was not limited to one occurring while the banking company was a going concern, but included one occurring after insolvency of the company and the appointment of receivers, though the agreements provided that no such sale should be made at less than the face value of the collateral with accrued interest, except on consent of the banking company, its successors or assigns, and that the trustee should not be liable for any act or omission, except for bad faith in executing the

trust.

[Ed. Note. For other cases, see Trusts, Cent. Dig. § 227; Dec. Dig. 172.]

8. TRUSTS 181-TRUST AGREEMENT-CONSTRUCTION-POWER OF TRUSTEE-COMPROMISE OF CLAIMS.

The provision of such trust agreements that the sale could not be made at less than the face value with accrued interest except on consent, when construed with a provision that if the trustee should fail to make such sale it should proceed to collect the collateral in such manner as should be deemed for the best interests of those for whose protection the trust was created, authorized the trustee, if consent to a sale could not be procured, to compromise claims according to its best judgment, using due care and good faith.

[Ed. Note.-For other cases, see Trusts, Cent. Dig. §§ 234, 235, 328; Dec. Dig. 181.]

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