Page images
PDF
EPUB

*Thus, without encroaching upon any decided case, and #472] acting in strict conformity to the settled doctrines, it must be determined, that although Bennett is a certified insolvent, yet as the separate estate of Dashiell is insufficient to pay his individual debts, the complainant, a joint creditor of Bennett and Dashiell, cannot be permitted to come in pari passu with the separate creditors of Dashiell.

Decree affirmed.

The respective rights of the two classes, of joint and individual creditors, in relation to the partnership effects and to the separate estates of the partners, are different, during the time that the partnership continues, and its effects are within the control of the partners and subject to the creditors at law, and after the partnership is broken up by bankruptcy, insolvency, or death, and the estate has gone into equity for distribution. The case In the matter of Smith expresses the relation of the two sets of creditors at law, and during the solvency and continuance of the firm: and McCulloh v. Dashiell states the rule in bankruptcy and equity. These may be considered separately.

I. At law, and while the partnership is going on.

The private estate of a partner is subject both to his private creditors, and to the partnership creditors, who have against it precisely the same rights.(1) But upon the partnership effects, the joint creditors have a prior claim; not by virtue of any inherent right or equity in them, but in consequence of the equity between the partners that the partnership accounts shall be settled before any separate interest is drawn out; each partner being considered as holding his interest in the joint effects, subject to a trust for the partnership creditors, and the claims of his copartner, and only the residue for his own benefit.(2) Accordingly, the separate beneficial interest of each partner, in the joint property, in relation to his private creditors on execution or on a separate commission of bankruptcy, and to purchasers of his share, is his residuary share after the partnership accounts are settled. For a partnership debt, therefore, though there be no judgment only against one partner, the entire joint property is sold absolutely; [at all events in a suit brought against all the partners, some of them only being served and judgment being against

(1) Newman v. Bagley and Tr., 16 Pickering, 570; Allen v. Wells, 22 Id. 450; Ladd v. Griswold et al., 4 Gilman, 25, 36; dicta in Bell v. Newman, 5 Sergeant & Rawle, 78, 86. (2) This preference of the joint creditors, however, does not exist in the case of a secret partnership; Lord v. Baldwin, 6 Pickering, 348; French et al. v. Chase, 6 Greenleaf, 166; though the contrary was held in Witter v. Richards, 10 Connecticut, 37, 40.

one only;(1] but when an *execution issues against one for his individual debt, and is levied on partnership property, the rule as [*473 stated In the matter of Smith, and more fully in the learned note of Mr. Johnson, applies; the property is sold subject to the partnership debts and the claims of the other partner, and the interest vested in the pur chaser is just that which the partner himself had, namely, the residual interest after the settlement of the firm accounts; and this principle has been repeatedly affirmed.(2)

Moreover, as is settled by the weight of the best authorities, a court of equity will not interfere, the firm being solvent, to stop an execution at law, in such a case, until the partnership accounts have been taken ;(3) though in Ohio, while the sheriff is allowed to levy or seize, the sale it seems may be enjoined until the interest of the partner is ascertained. Place v. Sweetzer, 16 Ohio, 143. But the stricter rule is more general in courts of equity. Nor, in ordinary cases, will the court out of which (1) ["For the separate debt of a partner," said GIBSON, C. J., in this case, "I admit, only his separate estate can be sold; and as by the contract of partnership, the debts are to be paid before capital or profits can be divided, it follows that he has no specific interest in the partnership effects, but only in what may remain after the settlement of the partnership account, and nothing beyond can be levied. But for a partnership debt, the entire property in the specific thing must be sold, even in a judgment against one of the partners; because through the medium of the execution, the law compels him to make the same application of the joint funds to the joint debts, that it was undoubtedly competent to him to make voluntarily. The sheriff levies and sells the entire property, because the partner defendant has no specific share that may be levied and sold separately; and, even were that otherwise, yet unless the sale should work a dissolution of the partnership pro tanto, the remainder would not be the property of the other partners individually, but of the firm, and liable to execution by any other joint creditor: so that the sheriff might as well go on and levy the whole at once. Besides, as the other partners would be liable to contribution, their remaining interest in the effects sold, being carried into the partnership account, would entitle them to a credit exactly equal to what should be necessary to reimburse the partner defendants the loss of his individual share; so that the effect of selling a part of the whole, would, as between the partners them selves, be exactly the same; nothing being gained by the sale of an undivided interest but the embarrassment incident to a joint ownership by the purchaser and the firm.”] Taylor & Fitzsimmons v. Henderson, 17 Sergeant & Rawle, 453, 457; and see dictum in Bagley v. Osborn, 2 Wendell, 527, 531.

(2) United States v. Hack et al., 8 Peters, 271, 276; Nicoll v. Mumford, 4 Johnson's Chancery, 523, 525; Averill v. Loucks, 6 Barbour's S. Ct. 20; Muir v. Leitch, 7 Id. 341; Knox et al. v. Summers, 4 Yeates, 477; Doner, &c., v. Stauffer, &c., 1 Penrose & Watts, 198; Snodgrass' Appeal, 1 Harris, 471; Pierce v. Jackson, 6 Massachusetts, 242; Commercial Bank v. Wilkins, 9 Greenleaf, 28; Filley v. Phelps, 18 Connecticut, 296, 301; Morrison v. Blodgett et al., 8 New Hampshire, 238; Christian v. Ellis et als., 1 Grattan, 396; White v. Woodward & Rand, 8 B. Monroe, 484; Ex parte Stebbins & Mason, R. M. Charlton, 77; Sutcliffe v. Dohrman, 18 Ohio, 181; Atwood v. Meredith, 37 Mississippi, 636; see also Garbett v. Veale, 5 Queen's Bench, 408.

(3) Moody v. Payne, 2 Johnson's Chancery, 548; Thompson v. Lewis, 34 Maine, 169, 170; Sitler & Johnson v. Walker, 1 Freeman's Chancery (Mississippi), 77; see Brewster v. Hammet, 4 Connecticut, 540; and Camac v. Johnson, 1 Green's N. J. Chancery, 169.

the execution issues, interfere on motion.(1) [Still, however, if it appear, as it did in Cropper v. Coburn, 2 Curtis, 473, on demurrer or otherwise, that the partner for whose private debt the process has issued, have by reason of partnership debts, no interest whatever in the partnership property which could pass by a sale, that is that no surplus will remain after paying such debts, in such a case equity would (in Massachusetts, at least, and on a seizure under their mesne process of attachment, and perhaps generally) enjoin, as it did there, the levy of an execution against one partner on the property of the firm.]

To reconcile the various cases relating to the satisfaction of separate creditors out of partnership property, it is necessary to distinguish between a common law execution against tangible chattels, such as a fieri facias, and a foreign attachment, or proceeding in its nature, against a debt due to the firm, or property belonging to it in the possession of a garnishee.

According to one class of cases a foreign attachment, or proceeding in the nature of a foreign attachment, against a debt or other chose in action, and also against chattels in the possession of a garnishee, by its very nature, attaches only upon the separate beneficial interest of the partner in the debt, or other subject, in the hands of the garnishee; because it is a part of the proceedings to measure and adjudge what is the interest of the partner in the hands of the garnishee. It cannot, therefore, be maintained, unless it be proved that the partnership is solvent, and be shown what interest the partner *has in the firm effects after all the *474] debts are paid ;(2) but whether a court of law will, in a foreign attachment, go thus into the partnership accounts, these cases do not appear to determine; and it must be considered doubtful, therefore, upon the cases just cited, whether a foreign attachment will lie against partnership property for a debt due by one partner. In fact, the case of Johnson v. King, 6 Humphreys, 233, decides, that an execution creditor of one member of a partnership is not entitled to judgment, in a garnishment (or attachment of execution) proceeding, against a debtor to the partnership. "Such debt," said Reese, J., delivering the opinion of the court, "belongs to, and is assets of the partnership, primarily liable to the satisfaction of partnership debts. If a judgment were given at law, upon the garnishment proceeding against the debtor to the partnership, to satisfy the separate liability of one of the partners, it would unjustly abstract a portion of the fund primarily belonging to the objects and purposes and creditors of the concern. And, in such garnishment, nothing

(1) See Chapman v. Koops, 3 Bosanquet & Puller, 289; and Phillips v. Cook, 24 Wendell, 390, 401, 408; and see Scudder v. Delashmut, 7 Iowa, 41.

(2) Fisk et al. v. Herrick and Trustees, 6 Massachusetts, 271; Lyndon v. Gorham, 1 Gallison, 367; Church v. Knox, 2 Connecticut, 514; Barber v. Hartford Bank, 9 Id. 407 ; Winston v. Ewing, 1 Alabama, 129.

can be done but to give or to refuse judgment. The court has no power to impound the debt, until by the adjustment of all the partnership af fairs, it shall appear whether the separate debtor of the execution creditor has any, and what interest in the general surplus, or in the particular debt so impounded. Such proceedings cannot take place at law." In Pennsylvania and South Carolina, and perhaps some other States, the practice in foreign attachment is different: on the attachment of a debt, a part, proportionate to the partner's interest in the concern, is adjudged to the creditor, subject in the latter State, to a refunding bond ;(1) and on the attachment of chattels in possession of the garnishee, the whole is seized, as on a common law execution.(2) But the distinction established in the first class of cases, between a foreign attachment and a common law execution, appears to be a necessary consequence of the modern rule in regard to a partner's interest in the partnership effects: because, in foreign attachment, the court adjudges what is the partner's interest in the hands of the garnishee, and then gives its proceeds to the creditor, but on a common law execution, that interest, without its being determined what it is, is sold, and it is left to the purchaser to have its quantum settled. The proceeding in Pennsylvania and South Carolina, on the attachment of a debt due to the partnership is certainly anomalous. It is either the legal or the beneficial interest of the partner that is severed and detached by the judgment against the garnishee; but the former, which is merely a right of action, cannot be divided, and the latter cannot be determined without a settlement of the accounts.

There is no doubt that the writ of attachment, existing in some of the New England States, as an ordinary mesne process, may, for an individual debt, be levied on partnership property, so far as the debtor has an interest in it, subject to the prior claims of the partnership creditors;(3) but how it is to be *executed is perhaps not fully settled. In [*475 New Hampshire, the writ is not to be executed by the seizure of the property, and it is only the partner's general residuary interest in the firm that is the subject of levy and sale.(4) In Massachusetts, on an attachment against one tenant in common, the sheriff seizes the whole possession;(5) and in Vermont, the property of partners is attached in the same manner.(6)

On a domestic attachment, against one partner, for either a separate, or a firm debt, it was decided In the matter of Smith, that the sheriff

(1) McCarty v. Emlen, 2 Yeates, 190; 2 Dallas, 277, Yeates, J., dissenting; Schatzill & Co. v. Bolton, 2 McCord, 479; S. C., 3 Id. 33; Knox v. Schepler, 2 Hill's So. Car. 595. (2) Morgan v. Watmough, 5 Wharton, 125.

(3) Douglass v. Winslow, 20 Maine, 89; Bradbury v. Smith, 21 Id. 117, 122; Dow v. Sayward, 13 New Hampshire, 271, 276.

(4) Morrison v. Blodgett et al., 8 New Hampshire, 238; Dow v. Sayward.

(5) Reed v. Howard, 2 Metcalf, 36, 39.

(6) Reed et al. v. Shepardson, 2 Vermont, 120; Whitney v. Ladd, 10 Id. 165.

can take the separate property only, of the absconding debtor; that he cannot seize the partnership effects, for the other partner has a right to retain and dispose of them, for the payment of the partnership debts; and that the right of the trustees will attach on the interest only of the absconding debtor in those effects, or to his proportion of the surplus remaining, after the payment of all the debts of the partnership: and accordingly, in that case, where on a domestic attachment against one, partnership property had been seized by the sheriff, an order of restitution was made. But Burgess v. Atkins, 5 Blackford, 337, decides that, on such a proceeding, in such a case, the sheriff seizes the whole partnership property levied on, and sells the absconding debtor's undivided interest.

In the case of a common law execution, such as a fi. fa., for an individual debt, levied on tangible chattels of the firm, the books, indeed, speak of nothing but the partner's residuary interest in the firm being transferred by the sale, yet the method by which that result is accomplished is this. The partner's several legal interest in the chattel, as cotenant of the partnership property, is levied on, and by the sale vested in the purchaser, subject to the equitable lien of the debts due to the firm creditors and the other partners, on a settlement of accounts.(1) What is meant, therefore, by the language used in the books, is, that the beneficial interest vested in the purchaser at sheriff's sale, is only the residue of the partner's interest in the joint effects after the accounts are settled. As to the mode of execution, the sheriff must levy upon and sell the partner's interest in the chattel, and if he levies upon the whole partnership interest, he is a trespasser; (2) or he may be made liable in trover to the other partner; (3) but he must take and retain custody of the chattel, and entire custody, for there is no other manner of validly executing the writ.(4) The late case of Johnson v. Evans, 7 Manning & Granger, 240, establishes the principle, that *the *476] sheriff seizes the whole, and sells the separate interest of the partner, against whom the judgment is. And this is the rule in Missis

(1) See Aldrich v. Wallace, &c., 8 Dana, 287; and per Hosmer, J., in Church v. Knox, 2 Connecticut, 514, 524; and dictum in Hubbard v. Curtis, 8 Iowa, 14.

(2) Waddell v. Cook, 2 Hill's N. Y. 47.

(3) Walsh v. Adams, 3 Denio, 125, 127; and see Gibson v. Stevens, 7 New Hampshire, 352, 358.

(4) Moore & Co. v. Sample, 3 Alabama, 319; Whitney v. Ladd, 10 Vermont, 165 (and sce Reed et al. v. Shepardson, 2 Id. 120; and Welch v. Clark, 12 Id. 681, 686); Shaver . White & Dougherty, 6 Munford, 110, 113; Burgess v. Atkins, 5 Blackford, 337, $38; Scrugham v. Carter, 12 Wendell, 131, 133; Phillips v. Cook, 24 Id. 390 (correcting whatever may have been contra, in The matter of Smith, in Crane v. French, 1 Wendell, 311, 313; and Dunham v. Murdock, 2 Id. 553; but see a doubt expressed in Burrall v. Acker, 23 Id. 606, 610); Walsh v. Adams, 3 Denio, 125, 127; dictum in Church v. Knox, 2 Connecticut, 514, 522; and see Knox et al. v. Summers, 4 Yeates, 477; and Wiles v. Maddox, 6 Missouri, 76.

« PreviousContinue »