Stanwood v. Owen

These cases were decided in June 1860. Dewey, J. 1. The objections to the allowance of these claims as debts entitled to a pro rata distribution of the assets of the estate of William A. Moody, represented as insolvent, and admitted to be actually so if these claims are allowed, are, as it seems to us, quite insuperable. It would operate greatly to embarrass the obvious purpose of our legislation, having in view the speedy settlement of the estates of persons deceased, and the proper distribution of the assets among the various existing creditors. Upon the decease of an individual, his assets, as then existing, are to be taken into the custody of the proper legal representative for administration. New adventures in business are not authorized, nor can any new liabilities be created, chargeable upon the assets. Contingent liabilities arising out of former transactions may exist, for which provision should be made, and these are recognized and provided for by our statutes. But beyond these the policy of our law is, tho< [198] everything is to be adjusted upon the status of the property and liabilities then existing. The whole assets then applicable to the payment of debts are to be strictly applied to existing liabilities, absolute or contingent. The creditors of the deceased are not to have the payment of their debts postponed to await the result of future adventures by a surviving partner, over whom they have no control. Whatever may be the effect of a stipulation of this character upon the claims of heirs at law for their distributive shares, or of legatees under a will of a testator who has made such a contract, the court are clearly of opinion that the claims of the creditors of the deceased partner, existing at the time of his death, are paramount to the claims of new creditors whose debts have accrued by reason of contracts made by the surviving partner, acting under such a stipulation for the continuance of the copartnership, and after full knowledge by such new creditors of the death of such former member of the firm. Such new creditors know full well with whom they trade, and to whom they give credit. They may resort to the surviving partner, and perhaps to the assets in his hands as surviving partner, but not to the private estate of the deceased partner in competition with creditors existing as such at the time of his death. This precise question is a novel one in Massachusetts, and has not, so far as we know, been the subject of a judicial opinion. In the early history of the law in other countries, there, will be found conflicting views as to the validity and effect of such contracts. It has been so on the mere question of the authority of the deceased partner to enter into a stipulation in favor of his heir, that he should be admitted into the partnership upon the death of the ancestor. The law, as held formerly on this subject, may be found fully stated in 3 Kent Com. (6th ed.) 56. We can readily perceive a distinction between the case where the heir asserts a right against a surviving partner to be admitted into the copartnership, and the case of a person who is seeking to enforce a claim against the deceased partner by reason of his contract with the surviving partner to continue the copartnership, and making such contract the basis of a claim to [199] share pro raía with his creditors who were such at the time of the decease of such partner. Cases have arisen upon provisions for such continuance of the copartnership contained solely in the testament of a deceased partner. To some extent certainly effect has been given to such provision, as in the case of Hankey v. Hammock, Buck, 210, and 1 Cooke B. L. 67. That case was supposed to be much qualified, if not overruled, by the case of Ex parte Garland, 10 Ves. 110, in which the evils of giving effect to such provisions are strongly stated by Lord Eldon, and a decided opinion expressed against allowing debts thus arising to be made a charge upon the general assets. See also M’Neillie v. Acton, 4 DeGex, Macn. & Gord. 752. A similar opinion to that stated in Ex parte Garland was held by the supreme court of Connecticut in the case of Pitkin v. Pitkin, 7 Conn. 307, in which it was held, that the general assets of a deceased partner were not liable for debts of a creditor who became such after the death of the partner, although under the provisions of a will authorizing a continuance of the partnership after the decease of the testator. Edgar v. Cook, 4 Alab. 588, is to the like effect. It is however often stated in books of authority, and held m adjudicated cases, that by virtue of an express agreement made between the parties, a partnership may be continued after the death of one of the parties. Gratz v. Bayard, 11 S. & R. 41. Scholefield v. Eichelberger, 7 Pet. 586. Burwell v. Mandeville, 2 How. 560. Story on Part. § 201. But there seems to be a strong disposition in the courts, in the cases cited, to confine the effects of such agreement to a lien upon the partnership assets. Without going beyond this principle, or expressing any opinion further than upon the question arising upon the facts existing in the present case, the court are of opinion that the debts contracted after the death of Moody, and now sought to be allowed as debts to share pro rata in the estate of Moody with the debts existing against him at the time of his death, were properly rejected by the commissioners. [200] 2. In the second case the appellant seeks also to have allowed, as claims against the estate of Moody, the first two items of his bill or account, which were contracted in the lifetime of Moody. As to these, the administrator of Moody replies that they have been fully paid and discharged by moneys received and credited to the firm on account of payments by Harrod, the survivor. The question is merely one of application of the payments. The court are of opinion that they must be taken to be moneys realized by Harrod from the assets of the late firm in his hands, and generally on the account of Harrod & Moody, and must be applied to the oldest debts. Thus applied, the payments will exceed the two items. Decisions affirmed.