Schleicher, Schumm & Co. v. Walker

Raney, C. J. : In Griffin vs. Orman, 9 Fla., 22, and 10 Fla., 9, there had been a partnership between Sewell, Orman and — 692 — Young, tinder the name of Orman &• Young, and the period for which, by the articles, it was to last, had expired, but there had been no settlement between the partners when, in January, 1829, Orman and Young sold their entire interest in tlm assets of the concern, for the consideration of $17,500, payable out of such assets, which payment was so made, to Sewell, he assuming the payment of the debts of the firm, and executing to them a bond, with surety, conditioned for the payment to the same. It «was contended that Or-man and Young had an equitable lien upon the partnership property for amounts which they had paid for the firm subsequent to the sale. This court held that this would, notwithstanding the dissolution, have been so, but for the agreement represented above, the effect of which was, in its opinion, that the partnership stock became the exclusive property of Sewell, and that Sewell should pay all the debts, and the indemnity bond being for security that he would do so. It will be borne in mind, says the opinion, that the partnership property was not left in the hands of Sewell to pay the debts with, he assuming the trust. “The partnership is dissolved, a final settlement made, an ageement entered into between the partners, m which the creditors are not parties, that Sewell as a part of the purchase money will pay all the debts, not specifically out of the partnership property, but that he would pay them, and as an indemnity against their suffering he executes a bond with security.” That the fact of taking this bond .with security, and the fact of Orman and — 693 — Young covenanting to warrant and defend against tlieir claim seemed conclusive that it was the intention of the parties that the effects assigned to Sewell should be appropriated to his private use. ■ In West vs. Chasten, 12 Fla., 315, there was an agreement between the remaining and the retiring partner by which the former assumed the debts of the firm, and agreed to save the latter harmless from the same, the latter transferring and assigning all his interest in the goods to the remaining partner, and it was held that by virtue of this agreement the partnership property ceased to be joint property and the lien or equity of the retiring partner to have a sale of the property and an application of it to the joint debts was destroyed. See also Upson vs. Arnold, 19 Ga., 190. It is true that these decisions wrere in ('.ases between former partners, but it must be remembered that the right or equity of a creditor of a partnership to have partnership assets applied to partnership debts as against the individual creditor of any one member of the firm is through that lien or equity of the other member or members, which constitutes the right of the latter to such application. Story’s Equity, secs. 675 and 1253; Story on Partnership, secs. 358, 360; Washburn vs. Bank, 19 Vt., 278; Bardwell vs. Perry, Ibid, 292; Rice vs. Barnard, 20 Vt., 479; Smith vs. Edwards, 7 Humph., 106; Ex parte Ruffin, 6 Vesey, 119; Ex parte Williams, 11 Vesey, 3; Ex parte Rowlandson, 2 V. & B.; 172; Baker’s Appeal, 21 — 694 — Penn. St., 76; Clement vs. Foster, 3 Ired. (Eq.), 213; Story on Partnership, sec. 359; Dimon vs. Hazard, 32 N. Y., 65; Sage vs. Chollar, 21 Barb., 596; Robb vs. Mudge, 14 Gray, 534; Rankin vs. Jones, 2 Jones, (Eq.), 169. One partner may upon a voluntary dissolution of a firm transfer to Ins copartner all his interest in the partnership concern, and if he do so bon,a fide and for a valuable consideration, before any lien has been acquired thereon by partnership creditors through an execution, an attachment or otherwise, the same will, if such be the intention of the partners, vest in the purchasing partner as his sole or individual jiroperty, divested of the right or equity mentioned above, in the selling partner. Not only do the authorities cited above affim this proposition, but the two decisions of ■this court are in conflict with the theory of the second instruction asked by the plaintiffs in error, that a stipulation upon the part of the purchasing partner to pay the firm debts would be fatal to the good faith of the transfer and to the divestiture of the joint ownership or partnership character of the property. There are numerous authorities in which the transfer has been sustained and the vesting of the property in the purchasing partner as his individual property has been upheld as against the claims of firm creditors, notwithstanding the presence of such a covenant; and such covenant may be the sole consideration of the. transfer. West vs. Chasten, 12 Fla., 315; Story on — 695 — Partnership, sec. 359; Croone vs. Bivens, 2 Head, 339; Dimon vs. Hazard, 32 N. Y., 65; Ladd vs. Griswold, 4 Gilmer, 25. The fact, however, is that in the case before us there was no such stipulation, and whether such an obligation upon the purchasing partner is implied by the terms of the agreement is a proposition which has not been argued. If it is implied, the same result follows as if it had been expressed. It is also- settled that where one partner transfers his entire interest in the partnership concerns to his copartner so as to vest in him the partnership assets as his sole property, a dissolution of the partnership results' and the purchasing partner may as against any simple creditor of the partnership, assign the property thus vested in him as his sole property, for the pay ment of his individual indebtedness. He can exercise the same dominion over it that he might over any other individual property. A partnership creditor can of course sue him and his former partner, and can levy his execution on the separate property of either, just as he could have sued both before the transfer and have levied upon the joint property of the firm or the several property of either member; but if before a lien has been thus or otherwise acquired by the firm creditors, the purchasing partner shall have transferred or applied in good faith the effects which have thus become his sole property; to the payment of his individual indebtedness, such transfer or assignment will be sustained in fayor of such individual creditor. — 696 — Tlie selling- partner by liis sale parts with the equity which he would have retained had. he not sold his interest to his copartner, and thus falls the support of any claim to such, equity by the partnership creditors. The pm-chasing- partner as sole owner has as against partnership creditors the same right to apply this sole property to his individual debts, as he has against individual creditors who have not acquired a lien thereon by attachment or execution, or in other lawful manner. Bullit vs. Chartered Fund of M. E. Church, 26 Penn. St., 106; Dimon vs. Hazard, 32 N. Y., 65; Sage vs. Chollar, 21 Barb., 596; Grover’s Appeal, 29 Penn. St., 9; Allen vs. Center Valley Co., 21 Conn., 130; Rankin vs. Jones, 2 Jones (Eq.), 146; Robb vs. Mudge, 14 Gray, 534. At the time Clarence Aslimead sold to William H. Ashmead, the plaintiffs in error had no lien on the partnership assets. This is clearly affirmed by the authorities cited above. Clarence had the right to make, and William the right to receive the transfer, and if done in good faith the partnership creditors cannot complain. Its validity depends upon the bona fides of the transaction. Ex parte Williams, 11 Vesey, 3. Where, at the time of the transfer, the firm and each of the partners are insolvent, as in Ex parte Mayon, 4 De G., J. & S., 663. or the firm had become insolvent, as in Yale vs. Yale, 18 Conn., 185; Roop vs. Herron, 15 Neb., 73; and Wilson vs. Robertson, 21 N. Y., 587, the transfer it seems should be held fraudulent and — 697 — void as to tlie partnership creditors, yet tlieie is authority in the effect that insolvency at such time will not of itself avoid the transfer. Howe vs. Lawrence, 9 Cush., 553; Allen vs. Center Valley Co., 21 Conn., 130. These parties'may have been entirely solvent at that time, notwithstanding their subsequent insolvency; Ex parte Fell, 10 Vesey, 347; Ex parte Walker, 4 De G., F. & J., 508; and if they were, such subsequent condition will not defeat a transfer which was not otherwise fraudulent. That they were insolvent when the second assignment was made, does not prove that they were so a month and a half before, when the sale was made by Clarence to William H. Ashmead. Though there is testimony that this sale was rescinded, there is none that John T. Walker was a party to the rescission, or that it was before the assignment to John T. Walker, or that the assignment of the insurance money to John T. Walker was ever abrogated. The questions of the good faith of the sale to William and of his assignment to John T. Walker, and of .intent to hinder and defraud creditors, and of whether or not such sale was made in contemplation of insolvency, were fairly submitted to the jury and they have passed upon them, and there is no testimory in the record that justifies interference by an appellant court with their verdict ? To justify such interference it must appear at least clearly that they have erred. The authorities cited by plaintiffs in error do not conflict with the views we have announced. The lan — 698 — guage quoted from Burrill on Assignments, sec. 88, p. 120, refers to an assignment by one partner to 'a third person, and in the same section it is said that an assignment by one partner of all his interest to the other partner or partners works a dissolution of the firm, and the remaining partner may thereupon execute an assignment of all his property, whether belonging to the previous firm or not, in trust for the payment of his individual creditors. Pomeroy vs. Benton, 57 Mo., 531; was a suit, involving questions between partner's, as was Filburn vs. Ivers, 92 Mo., 388. In Marsh vs. Bennett, 5 McLean, 117, the assignment by the retiring partner to the remaining one was expressly “for the purpose of paying ” off the partnership creditors, thus constituting or continuing him a trustee for such creditors. Conroy vs. Woods, 23 Cal., 626, holding that where a partner buys the interest of his copartners and agrees to pay the firm debts, the property of the firm remains bound for such debts just as before the sale, is in conflict with the above decisions of this court and the weight of authority. Yale vs. Yale, and Wilson vs. Robertson are explained above, as is Dim on vs. Hazard, Cannon vs. Lindsey holds that the appropriation of partnership assets by one partner to the payment of his own debts, without the assent of the other partner is a fraud on the latter; and Arnold vs. Wainwright, 6 Minn., 358, in so far as it should be noticed, involves the question of the rights of the pur — 699 — cliaser of land, partnership assets, where the legal title stood in the name of a partner. We will not be understood as expressing an opinion whether or not the assignment to John T. Walker is, one for the benefit of his individual creditors, and excluding creditors of the firm; nor as intimating that Clarence Aslnnead would be permitted to be paid out of the proceeds of the assignment as against the plaintiffs in error, even if the sale to him had not been rescinded ; Strattan vs. Tabb, 8 Ill., App., 225; nor as committing ourselves as to whether the use made of the “claim” proceeding in this case is proper. The judgment is affirmed.