Gaut v. Reed Bros. & Co.

Wheeler, C. J. An examination of all the questions which the record suggests, and which might be considered in disposing of the case, would lead to an extensive inquiry into the law and practice of the court, particularly respecting the rights and remedies of the creditors of a partnership, upon its dissolution by the death of one of its members, and the powers of the court in administering those remedies. But as the examination of these questions is not necessary to a decision, it is not thought advisable to enter upon such an examination without further argument. The proceedings in the case seem to us quite anomalous, and we think the judgment wholly erroneous. Counsel for the plaintiffs and appellees have furnished us with no precedent for such a proceeding, in the decisions or practice of courts of law or chancery. It cannot be supported as a creditor’s bill, as they suppose, if that remedy were not superseded by our law for the settlement of deceased person’s estate; for it seeks to subject the partnership property by a proceeding against the surviving partner. It makes the court take upon itself the administration and settlement of the partnership concerns, out of the hands, both of the surviving partner, and the representative of the deceased; and places all the partnership effects, consisting of tangible property in the hands of the sheriff, with directions to sell sufficient [54] to satisfy the plaintiffs’ judgment, and places the rights of action in the hands of the clerk as receiver, to proceed to collect and hold the proceeds, subject to the further order of the court. The decree seems to contemplate that the effects of the partnership shall be thus held by the officers of the court, to be applied in satisfaction of the claims of creditors, as they shall be made known to the court, and shall establish their demands by suit. It could not have been intended, that the clerk should assume the powers of a master in chancery, to pass upon the claims of creditors, as in case of a creditor’s bill. Such an administration, by the District Court, of the concerns of a partnership, we do not think authorized by the law. We see nothing in the evidence to warrant the jury in their finding, that the property and effects, transferred and assigned by the surviving partner, to the representatives of the deceased, were partnership property and effects, and that the survivor was not indebted to the deceased. The evidence establishes the contrary. By the articles of partnership, upon the death of the one partner, the title to the property became vested in the survivor, and he became indebted, as therein stipulated, to the representatives of the deceased. That such an agreement, made bond fide, and for a valuable consideration, is valid and effectual, to transfer the title to the property, is well settled. (Story on Part. § 358.) It is not questioned, that the agreement contained in the articles of partnership, was made bond fide, and for a valuable consideration. The property was thereby transferred to the survivor, and he had the right to dispose of it, by' a bond fide sale and transfer to any person, and as well to the representatives of the deceased, as to a stranger. (Id.) If the partnership was insolvent, his assignment of the property, though honestly intended to discharge a debt due from him to the representatives of the deceased, growing out of the partnership business, might not affect the right of creditors to have the property subjected to the satisfaction of their demands. But if it became necessary to proceed against the estate of the deceased partner, payment could only be enforced through the Probate Court. [55] But independently of this view of the case, we are of opinion that the decree, subjecting the property to the payment of the plaintiffs’ judgment, cannot he sustained. This suit was brought against Charles Yinzent, as upon his individual note, seeking the recovery of judgment, to subject his individual property to the payment of the debt. The writs of attachment and garnishment were sued out as against his individual property, rights and .credits; and the plaintiffs proceeded to take judgment against him individually. Pending the proceedings, and in the same suit, the plaintiffs declare upon the note as the joint contract of the firm, and seek a recovery against the defendant as surviving partner. They do not take judgment against him as surviving partner, but proceed to take a decree, subjecting the partnership property to the satisfaction of their individual judgment, though they allege that the partnership property is not sufficient to satisfy the partnership debts. Whether, after thus taking judgment against one of the partners, the plaintiffs could maintain an action upon the note, as the joint contract of the firm, is a question on which there has been some diversity of decision. But the great weight of authority seems to be against a second recovery upon the contract.' Mr. Collyer, in his Treatise on Partnership, lays it down, that the first judgment is a bar to the second action; and the American editor, in a learned note, in which he reviews the authorities, concludes, that the doctrine of the text is well supported by the authorities, and that the cases which seem to hold the contrary, have not sufficient support to stand upon. (Collyer on Part., Book 3, ch. 6, § 7, 8th edit., p. 688, n.; but see 3 Kent, Com., 8th edit., p. 30, n.) If, however, the plaintiffs could have recovered a second judgment upon the note, upon the joint liability of the firm, they have not done so. They have taken judgment upon the note, against the maker only, and individually; and it appears to be well settled, without any diversity of opinion, that equity will not aid them to subject the partnership property to the payment of that judgment. Thus, in Penny v. Martin, 4 Johns. Ch. Rep. 566, [56] this question arose, whether a creditor, who has sued the ostensible partners in a firm, and recovered judgment against them, which remained unsatisfied, and afterwards discovered that there were dormant partners jointly interested in the transaction, out of which the creditor’s right of action arose, could have the aid of a court of equity, to obtain satisfaction of his judgment against the dormant partners; and Chancellor Kent held that he had no jurisdiction to afford relief in such a case. The Chancellor said, the plaintiff’s ignorance, that there were dormant partners, afforded them no excuse. They should have made inquiry. “ If,” he added, “ they have now got into embarrassment and difficulty, in respect to their legal remedy, by pursuing the ostensible partners at law, without such inquiry, I do not know of any principle that will authorize this court to take jurisdiction of a case, where the remedy was, in the first instance, full and adequate at law, because the party may have lost that remedy by ignorance, founded -on negligence, not on accident or mistake, or on any misrepresentation or fraud.” (And see Willings v. Consequa, 1 Peters, C. C. Rep. 306; Robertson v. Smith, 18 Johns. Rep. 459; Smith v. Black, 9 Serg. & R. 144.) Here the plaintiffs have not even the excuse of ignorance of the fact; for although they may have been ignorant of the partnership, when they brought their suit, their pleadings show that they were fully apprised of it before taking their judgment. They ought, then,- either to have dismissed their suit, and brought suit against the defendant, as surviving partner, or, at least, having amended, by charging the defendant as surviving partner, they should have proceeded to judgment against him, as such, and not as sole contractor. (Willings v. Consequa, supra.) Had they done so, they might have proceeded at once against the estate of the deceased partner. For it is the well settled doctrine in equity, that every partnership debt is joint and several; and therefore the creditor may, at the same time, sue the survivor as such, and proceed against the estate of the deceased partner. (Collyer on Part., 4th Am. from 2d Eng. edit., p. 554, 555, n.; 3 Kent, 63, 64, n.; 1 Story, Eq. 676.) If the plain [57] tiffs would have proceeded against the estate of the deceased, they must have pursued the mode provided by the law regulating the settlement of the estates of deceased persons. But having taken their judgment against the survivor, not as surviving partner, but as upon his sole, individual contract and liability, their judgment gives them no right against the partnership effects. They cannot have satisfaction of it decreed them out of the partnership property, especially, when their pleadings show that it is not sufficient to satisfy the partnership debts and liabilities. The decree subjecting the property must, therefore, be reversed and annulled. It is not for us to indicate to the plaintiffs what their remedy may be, if any they have. It will be seen, by consulting the references we have given, that it might involve a question of no little difficulty and embarrassment. (And see Nichols v. Anguera, 2 Miles, 290; Ward v. Johnson, 13 Mass. 148; Anderson v. Levan, 1 Watts & Serg. 339; Pearce v. Kearney, 5 Hill, 94.) It may suffice upon this subject to say, that it is the course of legal judgment to decide cases only as they arise, and are presented for adjudication. The cause will be remanded, to afford the plaintiffs an opportunity to amend, or take such other proceeding as to them may seem advisable. Reversed and remanded.