In re the Accounting of Petze

Nash, J. Where one of two partners retires from the business, relinquishing to the other all his interest in the partnership property, the remaining partner acquires the same dominion as if it had ever been his own separate property, the transfer being in good faith, the title vests in the remaining partner as his own private estate, free from any lien or equity of partnership creditors, and such remaining partner may lawfully transfer such property in payment of Ms individual debts. Dimon v. Hazard, 32 N. Y. 65; Stanton v. Westover, 101 id. 265. But the transfer cannot be upheld as against firm creditors, unless at the time of the transfer the firm is solvent and there remain sufficient assets besides the capital withdrawn by the retiring partner to pay the debts of the firm. Menagh v. Whitwell 52 N. Y. 153; Baily v. Hornthal, 154 id. 648; Bliss v. Hornthal, 33 App. Div. 225. Here the evidence before the referee is to the effect that the firm of George F. Taylor & Brush, at the time that Taylor gave his notes to his partner Brush for Ms interest in the business, was insolvent. They estimated the value of the assets at $32,757.26 (good-will, $6,500; stock, $7,680.11; cash, $213.54; fixtures and machinery, $1,400; bills and accounts receivable, $16,963.61); [73] Lilis and accounts payable, $20,010.90. The stock, $7,680.11, consisted of a quantity of bone black, pledged for advances and loans, and for which there was no market, and within six weeks thereafter it was taken for a debt, leaving a deficiency. The estimate of $6,500 for the good-will was based upon nothing tangible. Brush could not tell anything about the value of the bills receivable, $16,963.61, a good portion of which were pledged to secure indebtedness. Within six weeks after the transfer, when Taylor, who continued the business, assigned, the assets, which, as estimated for the purposes of the sale to Brush, had exceeded liabilities $12,746.36, shrunk so that the liabilities exceeded the assets $15,661.09. This discrepancy is so great that without explanation insolvency of the firm at thie time of the transfer would be inferred if there were no evidence such as we have that the firm liabilities largely exceeded the assets. The report of the referee should be modified by disallowing the claim of John H. Ireland, assignee of L. T. Brush, and corrected in the particulars conceded, and as so modified, corrected and confirmed, and the motion to- confirm in other particulars granted. Ordered accordingly.