Van Brunt v. . Applegate

[EDITORS' NOTE: THIS PAGE CONTAINS HEADNOTES. HEADNOTES ARE NOT AN OFFICIAL PRODUCT OF THE COURT, THEREFORE THEY ARE NOT DISPLAYED.] *Page 546 It must be considered an established principle in the disposition of co-partnership property, in this State, since the decision of Mabbett v. White (2 Kernan, p. 442), that each partner has full power to sell and transfer the entirety of any particular goods, wares and merchandise, or other personal effects and property belonging to the partnership, and not merely his own share thereof, for purposes within the scope of the partnership, and that such sale and transfer can be made directly to a creditor of the firm, in the payment of a debt due from it, without the knowledge or consent of the co-partners, although the firm is insolvent and the effect of such sale and transfer is to give such creditor a preference over the other creditors. The decision in this case, by the court below, is based on the fact that the real estate in question was partnership property, at the time of its conveyance to the defendant, and it was on that account to be considered and treated, in equity, as personal estate, and liable, in the same manner as other partnership personal property, to the payment and satisfaction of partnership debts and the division of the assets between the partners. Assuming the fact and the principle founded thereon to be as stated, I find no sufficient ground for questioning the *Page 548 defendant's title. It is found by the referee that the firm, of which the grantor was a member, was indebted to him in a greater amount than the consideration expressed in his deed, and that it was given and accepted in part payment of such indebtedness; and although the firm was at that time, and had been for some time previous thereto, insolvent, it does not appear that the fact of such insolvency was known to the defendant, or that his object was to secure a preference over other creditors. The sufficiency of the consideration is not questioned, and there is nothing shown to impeach the bona fides of the transaction. On the contrary, the referee states, in his opinion, that there was no claim made upon the trial that the conveyance was made with any fraudulent intent, as against the creditors of the firm, or of Westervelt, the member who did not join therein nor assent thereto. If, therefore, the settled rule governing and controlling the disposition of personal property, to which I have referred, is applicable to this case, it follows that the defendant acquired a perfect title. Is there any good reason why it should not apply? The only ground, on which the plaintiff can claim title, is that it is personal property, and that he, as representing creditors of the firm to which it belonged, is entitled to it, in preference to the defendant, who claimed by title, and appears to have been regarded by the court as a purchaser, from one of the members of a firm, in a private transaction between them as individuals, entirely ignoring the fact that the conveyance was taken in part payment and satisfaction of a partnership debt. The contest is, therefore, between partnership creditors, having equal rights and standing in the same relation to the property. There is, consequently, no violation of the equitable rule, that such creditors are entitled to the payment of their debts out of copartnership assets, before recourse can be had thereto by creditors of any or either of the individual partners. The referee and the court below, for the purpose of enforcing the plaintiff's claim, treat the land in question as personal estate, and yet at the same time and in the same breath recognize *Page 549 it, in the repudiation of the claim of the defendant, as real estate, in the first case giving effect to the equitable title, and in the latter asserting the legal title; and they deny the defendant the benefit of the equitable rule, on the technical rule of law that real estate must be conveyed by an instrument under seal, and that the authority to execute such instruments by one partner alone does not result from the partnership relation, but can only be exercised by the express authority of the other under seal. Conceding such to be the rule at law, when the legal title is in question, I do not admit that it applies and controls where, as in this case, the plaintiff is obliged to ask a court of equity to give him relief, on the ground that such real estate is in equity to be considered as personal property, against the claims of another having the same equitable rights thereto. It is by no means certain that the defendant may not avail himself of a transfer, although under seal, on the same ground. It is, however, unnecessary to decide that question. Thelegal title to the whole of the estate and interest conveyed to the defendant, and which is the subject of controversy, was vested in Welch, his grantor, alone; and assuming that he held it for the benefit of his partner, as well as himself, and that, to the extent of his partner's interest, he may be considered in equity as a trustee, yet he himself could convey such legal title absolutely, and the assent or authority of his partner was not necessary. The technical rule referred to, has, therefore, no application to the case. The defendant, by the conveyance to him, having become vested with the legal title to the property, and having equal rights in equity with the plaintiff, is entitled to hold it for his own exclusive use and benefit. It follows, as the result of these views, that the judgment of the court below is erroneous and should be reversed, and a new trial is ordered, costs to abide the event.