Douglas v. Winslow

The opinion of the Court was by Weston C. J. The authorities cited for the plaintiffs very clearly establish the doctrine, that partnership creditors have a priority over tire separate creditors, in relation to the partnership funds. It was recognized in Massachusetts at an early period ; and is the settled law of that State and this. Pierce v. Jackson, 6 Mass. R. 242; Commercial Bank v. Wilkins, 9 Greenl. 28. The interest of each partner is in his portion of the residuum, after all the debts and liabilities of the firm are liquidated and discharged. Equity will not aid the separate creditor, until the partnership claims are first adjusted. And they will interpose to aid the creditors of the firm, when a separate creditor attempts to withdraw funds, in regard to which [92] they have a priority. These principles are illustrated and sustained in many of the cases cited for the plaintiffs. But at common law, according to the English practice, a separate creditor of one of the firm, may seize and sell on execution the interest of his debtor in the partnership stock. No case has been referred to at law, where this has been prevented by any movement or interference, in behalf of the partnership. They have in England no attachment of property upon mesne process, except that of foreign attachment, which depends upon its own peculiar principles. But in this State and in Massachusetts, a separate creditor may attach the goods -of a firm, so far as his debtor has an interest in them, subject to the paramount claims of the creditors of the firm. This right has been repeatedly exercised; and has never been defeated, so far as the cases have come to our knowledge, unless in behalf of partnership creditors. In the case of Pierce v. Jackson, Parsons C. J. says, “ a creditor of one of the firm, has a right to attach the partnership effects, against all creditors, whose demand is not upon the company.” That the debtor himself should join with his partner in a suit to prevent this, has never before, that we are aware of, been attempted. The existence of the right, and its exercise, subject to the superior rights of the partnership creditors, is assumed in the case of the Bank v. Wilkins. It may be inconvenient to other partners to have their operations thus broken in upon, and partnerships virtually dissolved, for the benefit of separate creditors ; but it is a hazard, to which they are necessarily subjected, when they unite in business with others, incumbered with separate debts. In Allen & al. v. Wells & al. 22 Pick. 450, the superior claims of partnership creditors are discussed and admitted, but the right of a separate creditor to attach, when he is not thereby brought in conflict with them, is conceded. Were the law otherwise, a wide door would be open to delay and defraud creditors. A man with funds to a very large amount, half of which is due to others, has nothing to do but to invest them in a partnership, and he may thus set his creditors [93] at defiance, or oblige them to wait, until the partnership concerns are liquitated and closed by the slow process of a court of equity. Whthe the policy of the law has been to withdraw the body of the debtor from coercion and restraint, it has been equally its policy, with certain exceptions, which humanity requires, to afford adequate remedies, by which all his property may be made available to satisfy his creditors. It lends its aid to defeat all devices, to delay or defraud them; and it will not suffer legal principles, established for beneficial purposes, to be perverted to their prejudice. The defendant was justified in making the attachment at the suit of a separate creditor, and relinquishing it for the benefit of partnership creditors. Upon the view we have taken of the case, it has become unnecessary to decide the question raised, as to the sufficiency of the proof of the existence of a partnership between the plaintiffs. Nonsuit confirmed.