SECTION 6.-RIGHT OF A CREDITOR OF A PARTNER IN THE PARTNER'S INDIVIDUAL CAPACITY WITH RESPECT TO PARTNERSHIP PROPERTY

Uniform Partnership Act, Section 25. (2) (c) A partner's right in specific partnership property is not subject to attachment or execution, except on a claim against the partnership. * * * Section 28. (1) On due application to a competent court by any judgment creditor of a partner, the court which entered the judgment, order, or decree, or any other court, may charge the interest of the debtor partner with payment of the unsatisfied amount of such judgment debt with interest thereon; and may then or later appoint a receiver of his share of the profits, and of any other money due or to fall due to him in respect of the partnership, and make all other orders, directions, accounts and inquiries which the debtor partner might have made, or which the circumstances of the case may require.

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Section 32. (2) On application by or for a partner the court shall decree a dissolution on the application of the purchaser of a partner's interest in sections 28 or 29: (a) After the termination of the specified term or particular undertaking; (b) at any time if the partnership was a partnership at will when the interest was assigned or when the charging order was issued.

JOHNSON v. WINGFIELD et al.

(Court of Chancery Appeals of Tennessee, 1897. 42 S. W. 203.) BARTON, J. This cause is before us on bill and demurrer. The demurrer was sustained, and the bill dismissed. Complainant appealed, and assigns errors. The main question presented in the case is whether in this state specific property belonging to the firm is subject to levy for the individual debt of one of the members of the firm. The case made in the bill substantially is as follows: The complainant shows and avers that he had obtained before a justice of the peace in Hamilton county two judgments against the defendant Wingfield, on which executions had been issued and certified, in pursuance of section 3786 of the Code of Tennessee, to Hamblen county, where executions had been issued, which were placed in the hands of a constable, and by him. on the 2d day of January, 1896, levied on the interest of Nisbet Wingfield in a lot of iron pipe and other material, the property of the firm of J. N. Hazelhurst & Co., a firm composed of J. N. Hazelhurst and Nisbet Wingfield, in which firm, it is alleged, Hazelhurst and Wingfield were equal partners. * * * The defendants filed a demurrer

Lewis' Note to Section 28 (1).—This provision is taken from section 23 (2) of the English Partnership Act. The operation of the provision has given great satisfaction. The judgment creditor does not acquire any greater rights than the debtor is entitled to for his own benefit. Sutton v. English & Colonial Produce Co., [1902] 2 Ch. 502; Howard v. Sadler, [1893] 1 Q. B. 1; Cooper v. Griflin, [1892] 1 Q. B. 740; Scott v. Lord Hastings, 4 K. & J. 633 (1858).

and answer, the demurrer being incorporated in the answer; the substance and point of demurrer being that a levy cannot be made on a certain, specific part of partnership property for the individual debt of one of the members of the firm, as the bill shows was done in this case, and that, to reach a partner's interest in partnership property, the levy must be made upon all the partnership property. The point is made that the partnership owned as an entirety the particular assets of the partnership, and had a right to use the same in the business of the partnership; that the purchaser would be required simply to take the interest of the debtor partner, and would have no right to maintain this bill for trover or conversion of the specific property levied As stated, the demurrer was sustained, and the bill was

on.

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dismissed. * * *

The main question presented has been before our Supreme Court in a number of cases, and the subject seems to be surrounded by many perplexities. One of the earlier and the leading case in this state on the subject is that of Haskins v. Everett, 4 Sneed, 531. This was an action of replevin brought by Haskins & Reynolds against James Everett, to recover certain personal property belonging to the firm of Haskins & Reynolds, which had been levied on by an execution in the hands of a constable, issued on a judgment recovered by one Browden against Haskins for his individual debt. Judge Caruthers, in his opinion, stated that the question was whether partnership property can be taken in execution and sold for the private debt of one of the members. The circuit judge held that it could, and gave judgment for the value of the property, and also for $43, damages for the detention of the property which had been taken in the action, against the complainants, Haskins & Reynolds; and this judgment was affirmed by the Supreme Court. Judge Caruthers, in his opinion, says: "Whatever doubts and difficulties may have existed on this subject, the law is now well settled that partnership property may be seized and the interest of one partner sold for his individual debt. The purchaser, however, only takes the interest of such judgment debtor after the settlement and adjustment of the partnership accounts, and not his proportion of the property sold. What that interest is cannot generally be ascertained until a final adjustment and settlement of the partnership concerns. The effect of the sale and purchase is only to place the purchaser in the shoes of the partner whose interest he buys, and make him a tenant in common with the other partners. This is a necessary consequence of the rule that each partner has a lien upon the firm property, as well for the debts due by the firm as his own share and proportion thereof. The judgment creditor or the purchaser under him must take the interest sold subject to all such liens and claims. To ascertain the interest sold, the purchaser or any of the other partners may file a bill for the settlement of the partnership. The great uncertainty of the value of the interest purchased (for it may be nothing, or more or less than the amount bid) does not affect the principle."

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Referring to authorities outside of the state: The confusion and perplexity in which this question is involved is not confined to our own. state, but is found in the annunciations of the text writers on this subject, and in the decisions of nearly all of the courts of last resort of the United States and in England. Mr. Freeman, in his work on ExeB.& B.BUS. LAW-83

cutions (2d Ed. § 125), in treating of the matter, says: "It is universally conceded that, except where some statutory provision to the contrary has been enacted, the interest of the partner is liable to an execution for his individual debts. * * * Confessedly, a sale under an execution against one partner does not divest the title of the partnership in the property. It transfers only such interest as remains in the judgment debtor upon the settlement and adjustment of the affairs of the partnership. As the rights of the partnership are paramount, it would seem that they would preclude the officer serving the writ from taking the property into his exclusive possession, even for the purposes of levy and sale. And this view has been maintained with. great force in several decisions pronounced in the supreme court of New Hampshire. The authorities elsewhere are almost unanimous in affirming that the officer may, in levying on the interest of a partner, assume exclusive possession of the chattels of the firm, and retain it until the sale. It is also undoubted that the interest subject to execution is, at least in equity, in no respect greater than that held by the defendant; that it is subject to the paramount claims against the partnership, and is in fact nothing beyond the right to demand an accounting, and to share in the surplus that may remain after all the partnership obligations have been discharged. Whether the levy can be upon any specific part of the goods of the firm, and whether, by the sale, the purchaser acquires any interest in the property sold, beyond the right to call for an accounting, are questions upon which the authorities are not agreed. The earlier cases were determined when partnerships were regarded as mere co-tenancies. Hence those cases, and such modern cases as have been controlled by them, place sales under execution for the separate debt of a co-partner very much on the same ground as a sale for a separate debt of a co-tenant. Therefore, according to this view, an officer can, under such an execution, levy upon a part as well as upon the whole of the chattels of the firm; and it can, by his sale, transfer a moiety of the legal title, together with the right to take and hold possession against the other partners, leaving them without any other means of enforcing the rights of the partnership than by proceedings in chancery. But the courts have gradually progressed towards a realization of the true nature of partnerships, and have therefore come to understand that they are materially different from co-tenancies. A co-partner has no right to any specific chattel belonging to the firm, nor has he any right as against the firm to take or hold exclusive possession of any such chattel. The real ownership of all the chattels is vested in the firm. The interest of each partner is merely a right to share in the proceeds of these chattels after all the partnership obligations have been satisfied. Upon what principle can the purchaser at an execution sale be sustained in the exercise of rights to which the defendant was never entitled? Clearly, upon no principle whatever. The precedents made at an early day, when the law of partnership was imperfectly understood, are losing their force as authorities. Their place is being supplied by a line of decisions destined to grow in favor and in number declaring that the creditor of an individual partner cannot sell any specific article, but only the partner's interest in the whole of the partnership assets and that the purchaser does not acquire the right to hold possession of the property purchased as against the other member of the firm, but only an interest in the proceeds, after the business of the firm shall have been settled.

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Though the right of the officer to seize the property of the partnership under an execution against one of its members is conceded, it must be exercised, as far as possible, in harmony with the rights of the other partners, and not in hostility to them. His power to take and deliver possession of the corpus of the property is merely incidental of the right to reach the interest of the debtor, and is to be exercised only as a means to that end. Consequently, if he exceeds that limit, and undertakes to interfere with the rights of the other partners to a greater extent than is necessary to reach the interest of the debtor partner, he undertakes to sell the entire property, though his act is nugatory, such interference renders him liable as a trespasser ab initio." In the same authority (section 254) it is said: * The majority of the decisions on this subject are based on the false assumption that a co-partnership is a co-tenancy, and therefore sustains the officer in taking exclusive possession of the partnership property under a writ against one member alone. * *The minority, based on more correct perceptions of the nature of a co-partnership and the rights of its respective members, will not permit a writ against one member to be used to seize all the assets and to suspend the business of the firm. The law with respect to the levy of a writ on a partner's interest in firm property involves many perplexities, the solution of which is worthy of legislative aid. To deny the right to make such a levy may very seriously embarrass creditors of a debtor amply able to discharge their debt; while to admit the right may involve the co-partners, and perhaps the creditors of the firm, in very serious inconvenience and substantial loss. Where the levy is permitted, its ultimate effect is to confer on the purchaser thereunder nothing beyond the right to an accounting. This is all the judgment debtor has, and therefore all he can transfer, whether the transfer be voluntary or involuntary.

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These extracts will show into what confusion this subject has fallen by reason of the early decisions in all the states, evidently based, as stated by the text writers from whom we have quoted, on an erroneous conception, or, rather, a failure to recognize the true status of -partnership property. It is well settled everywhere that, as to partnership property, partners are trustees of the partnership, as to each other, and the advantages derived from it inure to the benefit of the firm. And it is undoubtedly true that a firm or its members could, by injunction, or other appropriate remedy, prevent a partner from diverting partnership property to his individual use, to the damage of the firm, and could prevent him from exercising rights of possession. and control which would be destructive of the purposes, or an injury to the business, of the firm. It is also well settled, as a general rule, that an execution cannot reach any higher interest in property than the debtor himself has; and yet all these decisions which justify an officer in taking exclusive possession of firm property would seem to ignore these just principles, which are so absolutely necessary to the successful operation of partnership business.

It would seem to be a contradiction of terms and principles to hold that the officer only takes and the purchaser only gets the interest which a partner may have in partnership property after a firm has been wound up and liquidated, and the partner's ultimate interest thus ascertained, and that an officer may seize partnership property, and retain exclusive possession of it until the sale, he thus being enabled

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And it

to do what the individual partner would have no right to do. also seems a violation of fundamental rights, and the taking of private property without compensation, to hold, that where a partnership has endeavored to assert its rights of possession by a replevin suit as against an officer who had levied on the property for the individual debt of one of its members, it would be liable for damages for the use and detention of its own property. * * * It seems to be clear that, as long as property has not been converted by a partner, and is being used, or subject to be used, for the legitimate purposes of the partnership, no partner has any certain or exclusive or special interest in any specific partnership property, but it is the property of the entity, the firm. How, then, can a creditor or an officer take any specific interest in any particular piece of property belonging to the firm under such an execution, levy, and sale? * In other words, does the levy on specific property appropriate any specific property, or only the debtor's interest in the firm?

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It would seem that by far the more sensible and enlightened method of reaching a partner's interest in the firm would be by garnishment, as provided by statute in Georgia; and, as said in Freem. Ex'ns, it would seem to be a subject deserving of legislative attention. * But, whatever trouble may arise from these holdings, we do not feel at liberty, in this court, to depart from what we understand to be well-settled principles in this state. Nor do we wish to be understood as criticising the holdings of our supreme court upon this subject, further than to call attention to the seeming inconsistencies that arise therefrom, and which are common to all the earlier cases in almost every state in the Union, as well as in England. But, for the purposes of this case, we may state that the decisions in this state from which we have above quoted settle the following points: (1) That partnership property may be levied on by the creditor for the individual debt of a member of the firm. (2) That specific property may be levied on, and it is not necessary that the execution be levied upon all the property of the firm. (3) That the officer may, and that in fact it is his duty to, take actual possession of the property levied on, and to retain it until the sale is made. (4) That the purchaser only takes the interest of such judgment debtor after the settlement and adjustment of the partnership accounts. (5) That, as stated by Judge Freeman in Bank v. Gray, 12 Lea, 459, a levy is necessary in order to fix a lien so as to authorize the filing of a bill.

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These points being settled, it results, in our opinion, that the chancellor was in error in dismissing the complainant's bill. While we think that Hazelhurst had the right to use, and properly, whether by himself, or by the new firm of Hazelhurst & Co., used, the iron which had been levied on, in carrying out the contract and business of the old. firm, still it is the logical effect of the decisions which we have quoted that the creditor, Johnson, having the right to have the property levied on, by the sale and purchase took whatever interest Wingfield had in this property at that time, which could only be ascertained by an accounting, and that this he has a right to do. If it shall turn out on an accounting that at the time of the levy the liabilities of the firm, as claimed in the answer filed with the demurrer, exceeded the assets, and that the firm was insolvent, then Johnson will, of course, take nothing by his purchase; and it is also clear that Johnson's interest could not exceed the value of Wingfield's share in all the partnership assets after