Whitcomb v. Fowle

Larremore, J. [After stating the facts as above.]—If this were an action in the nature of a creditor’s bill, the plaintiffs would have no status in court without alleging the recovery of a final judgment and execution issued and returned thereon (Geery v. Geery, 63 N. Y. 252, and cases there cited). But I do not understand that the doctrine laid down in Innes v. Lansing (7 Paige, 583), has been disturbed or disputed. That case holds that when a limited partnership be [25] comes insolvent, its assets are a special fund for the payment of its debts ratably (except those due to the special partner), and any creditor, although he have not proceeded to judgment and execution at law, may file a bill in equity to restrain the insolvent partners from disposing of the property contrary to law, and for the appointment of a receiver. This practice was reviewed and approved in Van Alstyne v. Cook (25 N. Y. 489). If the plaintiffs have asked for more or greater relief than the court can afford them on a final judgment, that is no reason why the court on a mere motion should try issues upon the determination of which they may be entitled to some relief. If as general creditors they cannot (as contended) contest the validity of the assignment, yet as general creditors they may have the right to prevent a dissipation of the co-partnership assets. The authorities cited by the counsel for the defendants (Hone v. Woolsey, 2 Edw. Ch. 289 ; Mills v. Argall, 6 Paige, 577; Metcalf v. Van Brunt, 37 Barb. 621) establish the theory that as between the parties to it the assignment is binding and revocable at their pleasure. But no case goes to the extent of holding that such a revocation could in any way prejudice or impair the rights of creditors. In the case under consideration the creditors had commenced proceedings to protect their rights upon a statement of facts which should not be decided on affidavits. Considering the hopeless insolvency of the firm, that its indebtedness to its special partner would almost, if not entirely, exhaust its assets, the peculiar relations of the assignee and the special partner, and also the entire merits of the application to remove the receiver and vacate the injunction, I think it should be denied. Motion denied.