Appeal of Scull

Mr. Justice Sterrett delivered the opinion of the court January 24th, 1887. Appellants’ contention is that they and other attaching creditors of Howard D. Thomas & Co. have a lien on the fund for distribution, superior in right to that of the appellees who are execution creditors of Howard D. Thomas alone. The fund in court, $28,437.07, represents personal property which was first taken in execution, as the separate property of Ho Ward D. Thomas, on writs of fieri facias in favor of appellees, then attached by appellants and others, under the Act of 1869, as the partnership property of Thomas, Skeffington and Reinstein, partners, etc. in the name of Howard D. Thomas & Co., and subsequently sold by the sheriff under said executions and also under orders of the court in the attachment cases'. The fund thus produced was claimed by appellants, by virtue of their lien as attaching creditors of the alleged copartnership, and also by appellees, under their respective executions, as proceeds of the individual property of their debtor, Howard D. Thomas. If there was any attachable interest in the property thus sold, appellants had an undoubted right to be heard on the question of distribution. The fact that-their claim was not in judgment could not deprive them of their right to present it and insist upon participating in the distribution by virtue of the lien of their attachment. Whether they were entitled to th¿ fund or any part of it was a question which they had a right to raise and have adjudicated. Their position is analogous to a mechanic having a lien on property sold by the sheriff. He has a right to assert his claim, on the fund realized by the sale, without having first reduced it to judgment, or even without having filed a lien therefor, provided the time for doing so had not expired before the sale. When, as in this case, no issue is demanded by either party, the Auditor entrusted with the distribution has jurisdiction to determine the validity as well as the amount of the claim. The learned Auditor’s findings of fact are very clearly and [148] fully set forth in his report. One of the conclusions drawn by him is, that in fact no partnership relation ever existed between Thomas, Skeffington and Reinstein in respect of the property in question or anything else; that the business was conducted, by Howard D. Thomas alone, in the name of Howard D. Thomas & Co.; that Skeffington and Reinstein were merely salaried employees of Thomas, having no interest whatever in the goods or property connected with the business, and that the property out of which the fund was realized was owned by Thomas individually. This conclusion is so manifestly coi-rect that it has not been seriously controverted by appellants. Any attempt therefore to further fortify it by reference to the facts or otherwise would be a work of supererogation. ■ Assuming the correctness of the foregoing conclusions, in connection with the admitted fact that the liens of appellees’ executions were prior in time to the attachments, we have a state of facts which brings the case within the rulings of this court in Dorner v. Steuffer, 1 P. & W., 198; Baker’s Ap., 21 Pa., 76; York County Bank’s Ap., 32 Pa., 446, and other-cases affirming the same'principles. In the case last cited, Keys and Moore executed articles of copartnership in which they agreed, among other things, that Keys should be the exclusive owner of the capital stock until Moore should contribute thereto certain sums of money, which he failed to do. An execution, issued against Keys by a separate creditor, was levied on the stock. Afterwards, another execution against the firm was levied on same goods, and they were sold on both writs. In a contest, between these execution creditors, it ivas held that the former was entitled to the proceeds on the ground that the equities of the firm creditor could be worked out only through the equities of the partners themselves; and Moore having no equity against Keys, the joint creditor could have none against the prior individual creditor of Keys. Mr. Justice Thompson delivering the opinion of the court in that case said: “Between partners themselves the assets of the firm constitute a fund for the payment of their joint liabilities, and each member has an equity which he can enforce to accomplish this result, and consequently a lien to that extent: (6 Ves., 119; 11 Id., 3; Story’s Part., Sec. 360,) provided he has an interest in the assets......When a joint creditor levies on property of the firm, his execution fixes and attaches to this right to the same extent that it existed in the partners, and hence the preference over a separate execution creditor in the distribution. But this is predicated solely of the fact that there is joint property. Where there is no joint property, there is of course nothing on which the rule can operate. The mere. nominal ownership is not enough; there must be an [149] equity. If that equity never existed a creditor’s execution could not attach to any right, amounting to a lien, to have the assets appropriated to a partnership debt. That Moore bad no interest in the firm property is found by the Auditor. That this was a necessary conclusion from the article of co-partnership and a failure to comply with it cannot be doubted. .....The property was all individual property, and priority of seizure gave priority of right in the distribution. To the complaint that the property was in appearance firm property, and that it is a fraud on a creditor of the .firm not to hold so in fact, notwithstanding it is in reality not so, it may be answered that a creditor can seize no more than belongs to the debtor, and succeeds only to his rights as defined by the law, and that he can blame no one but himself for becoming a creditor. But, if the rule were not so held, the separate creditor might with more reason complain. He might point to' the fact that the property was separate, not joint, and claim that as he was first in lien and seizure, he ought not to be last in distribution, because the property was but partnership in appearance while separate in fact. He might with propriety complain, if a fiction should prevail over the reality.” In view of the conclusive finding of the learned Auditor that the property from which the fund in court was realized was the separate property of Howard D. Thomas and not the property of the alleged firm, the reasoning of the learned judge in the case quoted from applies with great force in this case. Some of the cases relied on by appellants take a different view of the subject, but we regard the doctrine of our own cases as more consonant with reason and the weight of authority. It follows from what has been said that the controlling fact in the case is that the property represented by the fund for distribution was the separate property of Thomas and not the joint property of the alleged firm, composed of Thomas, Skeffington and Reinstein. But, assuming for the sake of argument that it is not so, and that the ease turns on the question whether Skeffington and Reinstein are not estopped by the advertisement, their own acts, etc., from denying that they were Thomas’s partners, we think the conclusions of the learned Auditor, as to that question, are correct. The advertisement signed by Thomas alone, wherein he announces that, “Having bought the interest of David S. Brown, Jr., in the above business, I will continue it under the firm of Howard D, Thomas & Co., admitting Nathan Skeffington and Frederick K. Reinstein to interests from this date,” did not warrant the inference that they were admitted as partners. It is entirely consistent with what the Auditor found the [150] facts to be, viz : that their “ interests ” were not those of partners, but merely contingent interests in profits, dependent on the realization of net profits in excess of $25,000. The fixed salary of the former was $2,500 and that of the latter $2,000, payable in monthly instalments, coupled with the additional contingency of seven and a half per cent, on the excess of net profits over $25,000. The announcement was that Thomas himself would continue the business in the name of Howard D. Thomas & Co. At most, this was calculated to prompt a prudent man to make inquiry. If so, it was the duty of appellants to inquire what was meant by admitting Skeffington and Reinstein “ to interests.” If they had performed that duty they would have ascertained that the parties named werq merely employees and not partners. There is nothing in the acts shown to have been done by Skeffington and Reinstein in the course of their employment that would estop them from denying the alleged copartnership relation. While Thomas’s declarations, made in their absence and without their knowledge, might estop him, they were not bound thereby. The existence of a partnership may be proved by the separate declarations of each of the alleged partners, but neither of them is bound by tjie separate admissions of the others of which he has no knowledge. But it is unnecessary to pursue the inquiry further. The learned Auditor has clearly shown that the evidence is insufficient to estop either of the two parties named from denying that they were partners of Thomas. Decree affirmed and appeal dismissed at the costs of appellants.