Imágenes de páginas
PDF
EPUB

clared a second lien. That Gilman & Ruhl and Turner & Jay, having complied with chapter 117 of the acts of 1886, are subrogated to all the rights of Sarah Archer under said mortgage, and under said chapter 117, to have their judge ments against Smith Brothers declared a third lien upon the proceeds of said property. The other attaching creditors are entitled to preference in the order in which the attache ments were levied in their favor against Smith Brothers. The case will be remanded for decree in conformity with this opinion.

Reversed on plaintiff's appeal, and affirmed on the appeal of Warfield & Howell, Spangler, Eroe & Co., and Doggett, Bassett & Hills Company.

a

Partnership Creditors, Rights and Remedies of. General Rnle.—The creditors of a partnership, in the enforcement of their rights by any action or proceeding at law, may pursue precisely the same remedies as if their cause of action were against a single individual, or against persons between whom no partnership relation had ever existed Each of the partners is answerable for the obligations of the partnership, and while, in the absence of statutes making his liability several, as well as joint, he can ordinarily only be sued when his copartners are ma le parties with him, yet the property, which may be reached by attachment or execu. tion against the partnership, includes the individual or separate property the partners, or of any of them, as well as the property of the partnership; and a writ levied upon the property of a partner for a partnership debt can. not be overreached by a writ subsequently levied upon such property for his personal or individual debt. In equity, however, a different rule prevails, at least as to equitable assets. We do not mean to assert that equity will deprive a partnership creditor of a lien acquired by his diligence at law in seizing upon the individual property of a partner, or in otherwise securing a lien thereon for the satisfaction of a partnership obligation. When the partnérship creditors or creditors of one member only of the partnership are calling upon a court of equity for its assistance, and funds or other property are within the control of the court for distribution, partnership credito ors are usually considered as having paramount rights in the partnership assets, and the individual creditors of each partner as baving such right in his individual or personal assets, so that the partnership property will not be awarded to individual cre litors until the partnership obligations are Batisfied, and the individual property of the several partners will not be appropriated to the satisfaction of the partnership obligations until his individual creditors have been pail. The rule upon this subject, its hige tory, and the fluctuations in its application were thus stated in a leading case in the supreme court of the United States: “This rule may be traced back in England, with certainty, to the cases of Ex parte Crowder, 2 Vern. 706 (in 1715), and of Ec parte Cook, 2 P. Wms. 500 (in 1728) nearly a cen. tury and a half since. It was affirmed by Lord Hardwicke in Ex parte Hunter, in 1 Atk. 228 (in 1742), and continued unchanged until the year 1785, when a material innovation was made upon it by Lord Thurlow, in the case of Ex parte Holyson, 2 Brown Ch. 5. By the decision last men. tioned, the estallished practice, then of sixty years, WAS 80 changed, and the distinction between joint and separate creditors so broken up, that the former were permitted to come in and to receive dividends pari pussu with the latter froin the separate estate. This change led to the practice of filing a bill on behalf of the separate creditors, to restrain the or«ler in bankruptcy whenever there was a joint estate, and, by this means the rights of the joint and separate creditors on their respective funds were maintained, a proceeding which could rest on no other founilation than tho peculiar equities of these different parties with respect to the funds with which they have been respectively connected. In consequence of the inconvenience of Lorul Thurlow's rule, and of the injustice it was thought to involve, Lord Loughborough re-established the practice that had so long previously existed, with the single modification of permitting the joint creditors to prove under a separate commission; but denying to them any right to dividends, until after the separate creditors were satisfied. The reasoning of his lordship, as going to show that his decision is founded in pure principles of equity, is peculiarly forcible. Speaking of the rule of Lord Thurlow, he says: "The difficulty that has struck me upon it is, that what I order here sitting in bankruptcy, I shall forbid to-inorrow sitting in chancery; for it is quite of course to stop the dividend upon a bill filed. The plain rule of distribution is, that each estate shall bear its own debts. The equity is so plain, that it is of course upon a bill filed. The object of the commission is to distribute the effects with the least expense. Every oriler I make to prove a joint debt on a separate estate must produce a bill in equity. It is not fundamentally a just distribution, nor a convenient distribution. Every cre litor of the partnership would come non the sepa. rate estate. The consequence would be, the assignees of the separate estate must file a bill to restrain the dividend upon all these proofs, and make the partners parties. But there is another circumstance. It is a contrivance to throw this upon the separate estate.' Again, his lordship says: “It is not stated as a case where there are no joint funils. Here is only that there are two funds. Their proper fund is the joint estate, and they must get all they can from that first. I have no difficulty in ordering them to be permitted to prove, but not to receive a dividend.' This doc. trine of Lord Loughborough, deduced, as he tells us, not less from funda. inental principles of equity than from convenience in the ai ministration of bankrupts' estates, appears to have been followed in England ever since": Murrill y. Neill, 8 How. 425. The rule thus stated has been generally maintained and applied in the United States as well as in Englanıl: Ex parte Elion, 3 Ves. 238; note to McCulloh v. Dashiell, 18 Am. Dec. 280; Black's Appeai. 44 Pa. St. 503. In some of the states are statutes which a lopt the rule of equity to the extent of applying it to proceedings at law, or which, at least, do not permit the creditors of the partnership to proceed against the individual partners by virtue of a judgment against the partner. ship, but require them, after obtaining a judgment against the firm, to institute a further proceeding to reach the separate property of the part. mers: Hasking v. Alcott, 13 Ohio St. 210; Leach v. Milburn W. Co., 14 Neb. 106. These special statutes, departing from the general rules of law upon the subject, we caunot undertake to consider at length or in detail in this note.

Proseedings at Lav Agrinst the Separate Property of a Partner.Unless some statute has maile necessary a special proceeiling to reach the separate property of a partner there is no doubt that an execution, attachment, or other writ commanding the officer to seize upon property and to hold or sell it for the satisfaction of the plaintiff can be levied upon the property of either partner as well as upon the property of the firm, and that such levy cannot at law be displaced or impaired by the fact that the debt or judgment upon or for which the writ issued was one due from a partnership: Hassell v. Griffin, 2 Jones Eq. 117; Bardwell v. Perry, 19 Vt. 292; 47 Am. Dec. 687; McCulloh v, Dilshiell, 1 Har. & G. 96; 18 Am. Dec. 271. Under the operation of this rule a levy and sale of the separate property of a partner, under an execution against the firm, takes precedence over a subsequent levy upon the saine property under a writ against such partner alone, based upon a judgment, attachment, or other claiin against him indi. vidually. Nor can a creditor of the partner individually avoid this result by resorting to proceedings in equity for the purpose of depriving a partnership creditor of the precedence which he has acquired by virtue of his legal lien. The rule that individual creditors are preferred as to the indi. viilual estate of a partner, and partnership creclitors as to the partnership estate, is not a rule of such controlling force as to deprive, or to authorize a court to deprive, a party of a legal lien or of a legal title. Therefore, if a creditor of a partnership who has acquired a lien by execution, attachment, or otherwise against the separate property of a partner, or has obtained title to such property under an execution sale or by virtue of a voluntary transfer made by the partner, either in satisfaction of a partnership obliga. tion, or to create a fund out of which such obligation may be realized, equity will not interpose at the instance of an individual creditor either to cancel or to compel the relinquishment of the lien, or the surrender of the property, or a resort to partnership assets in preference to the separate es• tate of the partners, or either of them: Bowker v. Smith, 48 N. H. III; 2 Am. Kep. 189; Cleghorn v. Insurance Bank, 9 Ga. 319; Wisham v. Lippin. coll, 9 N. J. Eq. 353; Straus v. Kerngood, 21 Gratt. 584; Allen v. Welle, 22 Pick. 450; 33 Am. Dec, 757; Meech v. Allen, 17 N. Y. 300; 72 Am. Dec. 465; Crook v. Rinilskopf, 103 N. Y. 476; Haralson v. Campbell, 63 Ala. 278; Leinkauff v. Munter, 76 Ala. 194; Bray v. Seligman, 75 Mo. 31; Saunders V. Reilly, 105 N. Y. 21; 59 Ain. Rep. 472; Elgin N. W. Co. v. Meyers, 30 Fed. Rep. 659; Stevens v. Perry, 113 Miss. 380; Gillespy v. Peck, 46 Iowa, 461; Howell v. Teel, 29 N. J. Eq. 490; Fullam v. Abrahams, 29 Kan. 725; Newman v. Bagley, 16 Pick. 570; Kuhne v. Law, 14 Rich. L. 18; Gallagher's Appeal, 114 Pa. St. 353; 60 Am. Rep. 350; Cummings' Appeal, 25 Pa. St. 268; 64 Am. Dec. 695; Lord v. Devendorf, 54 Wis. 491; 41 Am. Rep. 58. An exception to this exists in New Hampshire, in which state the rule that individual property shall first be applied to the satisfaction of individual debts appears to prevail in proceedings at law, and to entitle an individual creditor, in whose favor a writ issued upon a judgment for a separate debt of a partner, to precedence over an extent previously made on the lands of such partner under a writ against the partnership: Jarvis F. Brooks, 23 N. H. 136.

Rights to Separate Property of Partner in Equitable Proceedings. - As we have shown in the preceding paragraph, according to the rules gen. erally prevailing, partnership creditors are entitled to the same remedies at law against any member of the partnership as are his individual creditors. The question remaining for consideration is with respect to the rights of partnership creditors in proceedlings in equity, and in such other tribunals as have for their guidance in that regard substantially adopted the rules of equity jurisprudence.

Upon the death of any member of a partnership the whole legal liability remains with the surviving members, against whom all actions at law mnist be brought. In such actions a partnership creditor cannot pursue the ad. 'ministrator or other representative of the deceased partner: Childs v. Hyde, 10 Iowa, 294; 77 Am. Dec. 113, and note; McLain v. Carson, 4 Ark. 164; 37 Ain. Dec. 777; Sherman v. Kreul, 42 Wis. 33. For the purpose of proceedings at law the remaining partners are the only debtors. In equity it was otherwise, and the authorities agree that, at least when the remedies at law are inadequate, the partnership creditor may seek satisfaction in equity by a suit against the representatives of a deceased partner. Ac. cording to the views of the English courts of chancery a partnership obli. gation is in equity several as well as joint, and therefore, upon the death of either partner, a partnership creditor may proceed in equity to obtain sat. isfaction from the personal representative of the decedent, and while in the suit the surviving partner must be made a party, yet no relief need be asked against him, nor need it be shown that he is insolvent, or that the firm assets are not ample for the payment of the obligation in question: Devaynes v. Noble, 2 Russ. & M. 495; Wilkinson v. Henderson, 1 Mylne & K. 582; Thorpe v. Jackson, 2 Younge & C. 553; In re Hodgson, L. R. 31 Ch. Div. 177. This rule has been adopted without judicial dissent, so far as we are aware, in England, but in America has met with serious opposition, and while it has been accepted and enforced by the supreme court of the United States, and by the highest appellate tribunals in several of the states (Nel. son v. Hill, 5 How. 127; Lewis v. United States, 92 U. S. 618; Blair v. Wood, 108 Pa. St. 278; Story's Equity Jurisprudence, sec. 676; Fillyar v. Laverty, 3 Fla. 72; McLain v. Carson, 4 Ark. 164; 37 Ain. Dec. 777; Postlethwait v. Howes, 3 Iowa, 365; Sampson v. Shaw, 101 Mass. 145; 3 Am. Rep. 327) it has been repudiated by a majority of the state courts. In the states thus dis. senting a partnership creditor seeking in equity to coinpel payınent of a partnership liability out of the estate of a deceased copartner must, in effect, show that the remedies at law are inadequate; or, in other words, that he cannot, by proceeding at law against the surviving partner and the partner. ship assets, obtain satisfaction of the partnership liability: Buckingham v. Ludlum, 37 N. J. Eq. 138; Voorhis s. Childs, 17 N. Y. 354; Sherman v. Kreul, 42 Wis. 33; Pope v. Cole, 55 N. Y. 124; 14 Am. Rep. 198; Emanuel v. Bird, 19 Ala. 596; 54 Am. Dec. 200; Alsop v. Mather, 8 Conn. 584; 21 Am. Dec. 703; Pearson v. Keedy, 6 B. Mon. 128; 43 Am. Dec. 160; Troy I. N. F. v. Winslow, 11 Blatchf. 513; Pullen v. Whitfield, 55 Ga. 174; Morrison v. Kurtz, 15 Ill. 193; Adams v. Sturges, 55 III. 463.

If proceedings are instituted in equity to charge the estate of a deceased partner with the payment of a partnership debt, or if, by any other means, courts of equity have jurisdiction so that it becomes their duty to apply the partnership property or the property of an individual member of a partner. ship to the payment of a partnership obligation, and a conflict of interest arises between the creditors of the partnership and the creditors of a single member thereof, and it appears that the property out of which payment is to be made is insufficient, and some loss must result to one or both of these several classes of creditors, then the rule generally prevailing is that each class of assets shall be deemed to be liable for, and shall be first applied to, thu satisfaction of obligations of the same class; that is, partnership assets shall first be applied to the payment of the partnership liabilities, and the separate or individual assets to the payment of the individual liabilities. Therefore, if the proceedling is against the estate of a deceased partner, and there are both separate and partnership assets, then the individual creditors must first be paid in full before partnership creditors will be allowed to par. ticipate in the individual estate: Crooker v. Crooker, 52 Me. 267; 83 Am. Dec. 509; McCulloh v. Dashiell, 1 Har. & G. 96; 18 Am. Dec. 271; Rodgers V. Meranda, 7 Ohio St. 179; Union Nat. Bank v. Bank of Commerce, 94 Ill. 2713 Bond v. Navre, 62 Ind. 505; Rainey v. Nance, 54 Ill. 29; Kirby v. Schoon. miker, 3 Barb. Ch. 46; 49 Am. Dec. 160; Egherts v. Wod, 3 Paige, 517; 24 Am. Dec. 236; Ladd v. Griswold, 4 Gilm. 25; 46 Am. Dec. 443; Warren V. Able, 91 Ind. 107; Buke v. Smiley, 84 Ind. 212; Weyer v. Thornburgh, 15 Ind. 124. In the application of this rule, excluding the partnership credito ors from the benefit of the separate estate, it must generally appear that there were also partnership assets, so that in fact there are two classes of funds or property to be applied to the satisfaction of the two different classes of creditors. Under these circumstances, though the partnership funds are of but little value, and the partnership obligations of great extent, the part. nership creditors will not be allowed to pursue the separate estate of a do. ceased partner until his individual creditors have first been satisfied, but if, on the other hand, there are no partnership assets, the partnership creditors and the separate creditors of a deceased partner are placed upon an equality, and are entitled to share ratably in his estate: Rodijers v. Meranda, 7 Ohio St. 179; Brock v. Bateman, 25 Ohio St. 609; Pearce v. Cooke, 13 R. I. 184; Grosvenor v. Austin, 6 Ohio, 103; 25 Am. Dec. 743; Harris v. Peabody, 73 Me. 262; Higgins v. Rector, 47 Tex. 361; Emanuel v. Bird, 19 Ala. 596; 54 Am. Dec. 200. In Indiana, however, though there are no partnership assets, the partnership creditors will not be permitted to obtain satisfaction out of the separate estate of a deceased partner until his individual creditors have been paid: Warren v. Farmer, 100 Ind. 593. In some of the states the mere existence of partnership assets does not entirely exclude the partner. ship creditors from redress against the estate of a deceased partner, though the assets of that estate are not sufficient to pay his individual liabilities. Thus, in Virginia and South Carolina, if the partnership creditors have proceeded against and exhausted the partnership assets without obtaining complete satisfaction, the balance due from them is treated as though it wero the separate obligation of the deceased partner, and they are permitted to share ratably with his separate creditors in the assets of his estate: Hutzler v. Phillips, 26 S. C. 136; 4 Am. St. Rep. 687; Pettyjohn v. Woodruff, 86 Van 478; Shackelford v. Shackelford, 32 Gratt. 481. In Kentucky, after the partnership creditors have exhausted the partnership estate, the separate creditors are entitled to receive a like amount irom the estate of a deceased copariner, and, if any thing thereafter remains, the separate and partuership creditors are entitled to a ratable participation therein: Fayette Nat. Bank v. Kenney's Assignee, 79 Ky. 133; Northern Bank v. Keizer, 2 Duvall, 169.

Bankrupts and Insolvents.—The rules of equity have with little or no ex. ception been adopted as controlling courts having the alministration of tho estates of bankrupts and insolvents. Sometimes, as in the case of the late National Bankrupt Law, the equitable rule was expressly made a part of the statute. Thus section 36 in that law declared: “And, after deducting out of the whole amount received by such assignee the whole of the expenses and disbursements, the net proceeds of the joint stock shall be appropriated to pay the creditors of the copartnership, and the net proceeds of the separate estate of each partner shall be appropriated to pay his separate cred. itors; and, if there shall be any balance of the separate estate of any partner, after the payment of his separate debts, such balance shall be added to the

« AnteriorContinuar »