Laffan v. Naglee.

it was merely optional with him to buy or not, that he was at this time both willing to buy and able to buy upon the terms of the purchase. If we have shown that Naglee was not bound to wait, and Mrs. Hinkley was not bound to wait on Laffan's convenience, then Laffan must show his willingness and ability to make the purchase when the sale was to be made. He must have been ready when they were. It is evident that he lost nothing in losing a privilege which he did not intend, or was not able to avail himself of. If we concede that when Naglee bought, Laffan's right to come in was not divested, still the right was only the right to come in on the same terms with Naglee, and he must have been ready and must have tendered a compliance with those terms on his part before he could get any advantage from the purchase.

Hitherto we have impliedly considered this case as if, in a lease of partners, one partner could not purchase in the reversion for his own benefit; and we sought to distinguish the case at bar, from others falling within the supposed principle. But our concession, even thus limited, was too liberal. This is not the law even in respect to partners, leasing as such, and occupying for the benefit of the firm, the leased premises. The rule is limited to cases of leases, in which one partner procured the renewal of a lease of property, formerly leased and used by the partnership. But it has no application to cases of purchase of the reversion or fee. The rule is stated in Anderson v. Lemon, 4 Selden's R., 237.

Randall v. Russell, 3 Merrivale's R., 190, testator bequeathed leasehold estate to his wife; she afterwards renewed the lease, and then she purchased in the reversion. The bill was filed by the heirs to hold her as trustee for the renewed lease and also for the fee. That part of the bill to hold her as trustee was dismissed.

In a note to 7 Vesey, Jr., Moody v. Matthews, p. 185, note 1, the doctrine on this subject is reviewed. See note 2, p. 186. See Hardman v. Johnson, 3 Merivale, 352.

Now, upon what right does Laffan stand? Not as a cestui que trust-for, according to these cases, there was no estate upon which a trust could rest. He had no interest in the fee. Not again upon a resulting trust, for Naglee purchased with his own. money-not Laffan's. Not upon a trust created by writing, for there was none. The doctrine of leases between partners does not apply, for that rests on the idea that a renewal is but the continuance of the estate first created-i. e., of the former lease; but the sale never took effect until the termination of this lease, and it creates a new title, and there was no partnership here.

Even in the case of a purchase of trust property by a trustee, or by an attorney or agent in his own name, instead of his principal's (to which case the respondent's counsel have sought to

Laffan v. Naglee.

liken this case) it has always been held that it was competent for the cestui que trust or principal to ratify the act and so be estopped from questioning the validity of the purchase.

In the case of Campbell v. Walker, (5 Vesey, 678,) the Court say that "any trustee, purchasing the trust property, is liable to have the purchase set aside, if, in any reasonable time, the cestui que trust chooses to say he is not satisfied with it." * * "The trustee purchases subject to that equity; that if the cestuis que trust come in a reasonable time they may call to have the estate resold."

To the same effect is the case of Morse v. Royal, 12 Vesey, 374. So, in Prevost v. Gratz, Peters C. C. R., p. 368.

Hoge & Wilson for Respondent.

The appellant claims to be entitled to one-half of the fee of the tract of land of which he and the respondent held the leasehold, on two distinct grounds:

1. By reason of the terms and provisions of the original lease and various assignments referred to.

2. Because of the partnership, and other peculiar and confidential relations existing between the appellant and respondent.

Is there any rule or principle of law that saps the foundation of all these various business transactions, based on the pre-emption clause of the lease? It is a covenant in the lease-part of a solemn legal instrument, of as much validity as any covenant in a valid agreement to do or not to do a particular thing. This "right of refusal"-this pre-emption right, is frequently to be found in all kinds of legal instruments; sometimes in a deed conveying the fee, as in the case of Jackson v. Schultz, 18 Johns. R., 184. This was a conveyance of a fee-simple, subject to be defeated upon a condition subsequent. One of the conditions was, as stated by the Court, that if he was minded to sell, he should first offer the premises to the grantor, etc. Sometimes it is found in a mortgage, as in the cases cited in 1 Powell on Mortgages, 125 -6, and in the text; sometimes in leases, as in Jackson v. Groat, 7 Cow., 286, and in the cases there cited. In fact, a covenant of renewal of the term of a lease, on its expiration, is a substantial pre-emption right, so far as the leasehold is concerned. In Goodtitle v. Saville, et al., 16 East., 87, a pre-emption in growing timber thereafter to be cut was enforced. So, equity will enforce a will proposing a right of pre-emption. See 1 Sugden on Vend., 214, 6 Am., from 10th Lon. ed. In all these cases, and in all of these instruments, this right of pre-emption has been enforced, and determined to be a distinct, tangible, and valuable thing, for "practical purposes."

But it is said, and not very consistently with the first proposition (i. e., that this right is an intangible, uninforcible obligation,") "that this pre-emptive right was a personal privilege to

Laffan v. Naglee.

the first lessee," and was not assignable, and did not pass to the assignees of the lease; or, in other words, that it is a covenant that does not run with the land or leasehold. Here we must not permit the word "assigns" to deceive us; for some covenants pass with the estate whether the word "assigns" be used or not, and some estates will not carry the covenants though the word "assigns" be used. Covenants that run with the land do so independently of the mere language of the assignment, but collateral covenants do not pass under any words with the land.

This is made very clear in the case of Vernon v. Smith, 5 Barn. and Ald., 11.

But a pre-emptive right to an adjoining tract of land was held to be a collateral covenant, and therefore it would not pass to the assignee, though named. Collison v. Letson, 6 Taunt., 224.

A covenant of a renewal of the lease runs with the land, though executors or assignees are not named. The tenant's right of renewal is a part of his interest in the lease. Winslow v. Tighe, 2 Ball & Beatty, 195; Rowe v. Chichester, Amb., 715.

In Jackson ex dem. Livingston et al. v. Groat, 7 Cow., 285, the very question under consideration was raised and determined. The validity of these covenants is fully established by the case of Jackson ex dem. Lewis and wife v. Schultz, 18 John., 174. The covenants extend to every alienation. See the language of Lord Ellenborough, C. J., in the case of Roe ex dem. Bamford v. Hayley, 12 East., 454.

The assignee of an assignee, as well of a reversion as of a term, have the same rights at common law as the first assignee. Hornbridge v. Wilson, 3 Per. & Dav., 641; 4 Per. & Dav., 120; S. C., 11 Ad. & El., 403; 3 Barn. & Ald., 346; 11 Ad. & El., 186; 8 Taunt., 715.

When a covenant relates to and is to operate on a thing in being, parcel of the demise, the thing to be done is annexed to the thing demised, and shall go with the land though the word "assigns" is not used. Woodfall Land. & Ten., 277-8. So, implied covenants, from the use of the word "demise," go to the assignee of the term. Ibid., 284. As an assignee is bound by a covenant real which runs with the land, so shall he take advantage of it. Ibid., 284.

But it is said that the pre-emption right can not be divided, and avail Laffan as mere assignee of part of the leasehold.

The general rules are that a covenant is divisible and follows the land, and that covenant will lie against an assignee of a part of the thing demised. Woodfall's Land & Ten., 280. So, covenant may be brought by assignee of a part. Ibid; Van Horne v. Crain, 1 Paige, 458.

Who can for one moment doubt that it was the fixed design of the parties to the foregoing instruments, to assign each time this pre-emptive right? After Naglee assigns all his estate and

Laffan v. Naglee.

all his rights, and all the improvements, he goes on further to assign all his rights under the lease. There could be but one object, and that seems to have been accomplished. It was to give Laffan a perfect equality with himself in every respect, and to let him share in every favorable or unfavorable covenant.

Our conclusion is, that Laffan is entitled, by reason of the terms of the foregoing instruments, to a conveyance from Naglee of one-half the fee of the land, the leasehold of which was assigned to him by Naglee.

This brings us to the second branch of the question, that Laffan is entitled to a conveyance of one-half the fee:

2. Because of the partnership, and other peculiar and confidential relations, existing between the appellant and respondent. This branch of the question throws out of view entirely the covenant of pre-emption, and is to be considered as if the proposition of the respondent's counsel were successfully maintained, to wit: that the pre-emptive right" was an intangible, uninforcible obligation, and for any practical purpose valueless."

They started out as co-tenants in the leasehold, and what is the end? Naglee has become the landlord of his own co-tenant. From a union of interest with him against a common landlord, he has become that landlord. He not only owns one-half of the improvements with Laffan, but claims to own the fee-simple, in his own sole right for his own sole use. His plain duty to Laffan is to aid him with his judgment, his sagacity, his management, and business capacity and experience, as co-tenant and co-owner in the buildings, in getting the highest price for the improvements from the landlord, or in buying the fee at as low a rate as possible. But his plain interest, now, is to get Laffan's share of the improvements as low as possible, or to sell him the fee at as high a price as possible.

Here is the very conflict that a Court of Equity does not permit to exist in one man—that is, duty against interest. Which would influence the appellant the most? Who would be sacrificed, Naglee or Laffan? Thorpe et al. v. McCallum, et al., 1 Gilm., 626.

"A man can not be at once vendor and vendee. He can not represent in himself two opposite and conflicting interests. As vendor he must always desire to sell as high, and as purchaser to buy as low as possible, and the law has wisely prohibited any person from assuming such dangerous and incompatible characters." Wormsley v. Wormsley, 8 Wheat. R., 421. See, also, opinion of Judge Johnson, p. 488 of S. C., 5 Cond. U. S. R.

"The principles of Courts of Equity will not permit that parties bound to each other by an express or implied contract, to promote an undertaking for the common benefit, should any of them engage in another concern which necessarily gives them a direct interest adverse to that undertaking." Story on Part., §

Laffan v. Naglee.

178; Glassington v. Thwaites, 1 Sim. & Stu., 124, 133; Coll. on Part., 185-6.

It does not matter how fair the transaction is. Van Eppes v. Van Eppes, 9 Paige, 241; Hawley Cramer, 4 Cow. R., 717; Torrey v. Bk. of N. O., 9 Paige, 662; S. C., 6 Hill, 260; 4 Kent's Com., 483; 1 Story Eq. Jur., § 323; Holeridge v. Gillespie, 2 J. C. C., 33; Fonblanque Eq., 477, and note.

The principles on this subject that apply between trustee and cestui que trust, apply as between partners. There may be a fraud and the party unable to show it. 1 Story Eq. Ju., §§ 322-3, pp. 318-19.

A trustee ought strictly to pursue the tenor of his way, without perverting it, directly or indiretly, to his own personal advantage. Collyer on Part., p. 170, § 182.

The learned counsel say "they were not partners." It is difficult to frame a definition of a copartnership, if Naglee and Laffan were not partners. Then, certainly, Chancellor Kent, Judge Story, and Mr. Collyer, and many others have failed in describing that relationship. They agree in saying that, "Partnership is a contract of two or more persons to place their money, effects, labor, and skill, or some or all of them, in lawful commerce or business, and to divide the profit and bear the loss in certain proportions." 3 Kent's Com., 23; Story on Part., § 2; Coll. on Part., § 3; Gilmore v. Black, 2 Fair R., 489; Jones, adm'r of Jones, v. Jones, 1 Iredell Eq. R., 332; Brownlee v. Allen, 21 Mo. R., 123-7. See, also, Carlisle, adm'r, v. Mulhorn et al., 19 ib., 58. In Barrett v. Swan, 17 Me. R., 182-3, the defendants had entered into an association for the manufacture of paper. No stipulation was expressly made to share profit and loss, but it was held that this results as an incident to the prosecution of their joint business. Why this does not constitute a partnership, (says the Court) even between themselves, it may not be easy to perceive. See, also, to same point, Doak v. Swan et al., 8 Greenl., 170.

The case of Heirs of Ludlow v. Cooper's Devisees, 4 Ohio St. R., 2, shows a contract to buy land and improve it and share the profits, and though not near so strong a case as this, the Court held it to be a clear partnership. "So, where two persons took a building lease, and laid out money in erecting houses, they were held to be partners with respect to this property, and the survivor was held to be a trustee of a moiety for the representa-, tives of the deceased." 3 Sugden on Vend., 166-7, and cases there cited; Lyster v. Dolland, 1 Ves. Jr., 431, etc. See, also, cases cited in note 2, 436.

So, where money is laid out jointly in improving the value of a leasehold vested in two, it is considered in the way of trade, so that it alters the estate in the lease at law, and makes it equit able and divisible. 1 Ch. Gen. Pr., 102, and note. A lease taken