Zell's Appeal

Mr. Justice Paxson delivered the opinion of the court, March 29th, 1886. The appellant was one of the enumerated creditors referred to in the articles of copartnership of the firm T. Ell-wood Zell, Davis & Co. His claim as scheduled amounts to $15,050. This sum he seeks to retain out of the assets of the firm remaining after its dissolution, as against the other creditors named in the schedule. He also claims to retain in like manner the amount he advanced his partner, Davis, to pay Fagan & Son, who were among the enumerated creditors. The Master and the Court below rejected both of appellant’s claims, and made a decree appropriating the value of said assets to and among the enumerated creditors pro rata. The appellant put no capital into the firm beyond the use of certain electrotype and stereotype plates, &c., valued at $92,769.17, a list of which will be found in the articles of copartnership. The firm were given the right to use these plates, and to buy them if desired, but until so bought the [546] ownership thereof renmined’in the appellant. The said Davis' put into the firm the stock, manufactured and unmarrafactured, the good-will and fixtures of the publishing business at that time carried on by him, bills receivable and open accounts due him, a schedule of which was intended to be made. The articles then provided: “The said Zell (appellant) shall draw for his use' monthly at the rate of $500, and the said Davis (appellee) at the rate of $250. The said Zell shall draw quarterly at the rate of six per cent, on $15,050 until such debt shall be paid. Interest to be reduced as the principal is paid. After the payment of the current expenses in the conduct of the business and in manufacturing the stock, in addition to the sum as above, the said Davis shall draw for the payment of the debts hereinbefore enumerated. When said debts are fully paid, the stock on hand, and everything of which the said Davis was the sole owner‘■immediately before the execution of this agreement, shall be equally divided, or the value thereof credited to each. The profits and losses in, the conduct of the copartnership shall be divided, one third to Davis and two thirds to Zell.” The said Davis was to give his time exclusively to the business; Zell was at liberty to absent himself from the business and the city as much as he pleased'. The business appears to have been profitable, and $11,350.06 was divided according to the articles during the first year, $7,769.27 the second, and $10,871.54 the third year. At the close of-the partnership some of the enumerated debts had not been paid. All the firm debts h;rd been paid, however. The enumerated debts were the debts of Davis. The debt of Fagan & Son, as before stated, had been paid, partly by Davis and partly by money advanced him by Zell for that purpose. Certain assets'of the firm remained. after the dissolution, consisting principally of stock, &c., which were retained by Zell, who claimed to apply them to his enumerated debt and the amount he had advanced to pay the Fagan debt. The articles provided for the case of dissolution as follows: “ At the end of the copartnership, if there be no agreement otherwise, the said Zell shall take such of the plates not purchased by the firm as his own, with liberty to continue publication therefrom without any charge therefor or any account to be made to the said Davis; as to such of the plates sold to the firm, the same shall become the individual property of the party giving the most therefor. If all the debts enumerated are paid, then the assets of all kinds shall be equally divided; but if any are unpaid, an adequate portion of the assets shall be appropriated for their payment, and only the surplus divided.” [547] This is a very plain contract between the partners, to apply the assets remaining at the time of the dissolution to the payment of the individual debts of Davis enumerated in the articles. Davis was heavily in debt at the formation of the co-partnership, and the above agreement was shown to and; known by his creditors. It was made for their benefit, and they have a clear right to enforce it, although not parties to the contract; and, under such circumstances, the party to be benefited may maintain his action, at law to recover it: Torrens v. Campbell, 74 Penna. St. Rep. 470; Kountz v. Holthouse, 85 Id. 235; Wynn's Adm’r v. Wood, 97 Id. 216. The claim of appellant to retain for his own enumerated debt, to the exclusion of others, is not sustained. It was a preferred debt as to the interest, but no further. So far as the principal is concerned, it is not preferred, because the agreement does not say so. So far we agree with the Master and the court below; but we think there was error in not giving the appellant a preference for the amount advanced by him to Davis to pay Fagan’s enumerated debt. It was clearly the right of Davis to draw out of the profits to pay any one of the enumerated creditors. It was at his option when to pay and whom to pay. He saw proper to pay Fagan, and not being able to draw out enough to pay it in full, he induced appellant to advance the residue for that purpose.' Davis elected to pay this debt in full, and .having done so, the appellant in our view is clearly entitled to be reimbursed out of the remaining assets of the firm the amount advanced to Davis for this purpose. This does the remaining creditors no injustice. They have no ground to complain that Fagan received his whole debt, and they are in no worse position now, if we allow appellant to reimburse himself. What remains after the appellant’s advances to pay the' Fagan claim are repaid is properly distributable among thé enumerated creditors pro rata, including appellant’s claim of $15,050. But the account will have to be re-stated, so as to allow the appellant the amount, with interest, so advanced by. him. The decree is reversed at the costs of the ap-. pellee, and it is ordered that said decree be so amended as to conform to this opinion.