Emanuel v. Bird

DARGAN, C. J. At common law when a partnership wás dissolved hy the death of one of its members, the creditors of the firm had no remedy against the representatives of the deceased partner, but were compelled to look to the survivors alone for the payment of their debts; and it seems that at one period the same rule prevailed in equity, and that the joint creditors, neither at law nor in -equity, had any remedy against the separate estate of the deceased partner. — Story on Part., § 862. But it is now the well settled doctrine, that in equity all partnership debts arc to Ibe considered joint and several, and thus [602] considered, the joint creditors bare the right to proceed in equity against the estate of the deceased partner, if the survivors arc-insolvent. — Story on Part., § 362; Coll, on Part., § 580, Note, Indeed, it is said, in many cases, and by writers of high authority, that the joint creditors may proceed immediately against tbs estate of the deceased partner, whether the surviving partners are solvent or insolvent. — Story on Part, 362; Coll. § 580, But it is not necessary for us to decide in this case, that the joint creditors may proceed against the estate of the deceased partner, if the survivors are entirely solvent, and I therefore decline to express any opinion upon it; for it will be seen upon, a close investigation of this question, 'that it is surrounded with much difficulty and embarrassment. But where the surviving partners are insolvent, and there is no joint fund against which die joint creditors can proceed, all difficulty is removed, and the-■partnership debt being considered in equity as .joint and several, the creditor may at once proceed- against the estate of the deceased partner. Haring the right thus to proceed against the-representative of the deceased partner, the question arises, how shall the assets be distributed between a joint creditor and an individual creditor of the deceased, when there is not enough to-po, y both 1 The principle is unquestionably settled, that in the administration of the copartnership- assets, the partnership debts are to be 'preferred, and are entitled to priority over the individual debts 'of the partners. On account ©f this preference of partnership debts over individual debts, in the administration of the partnership assets, necessarily, in my opinion, results the rule, that the separate creditors are to have priority over the joint creditors, in the administration of the separate estate, so-long as there is a joint fund to which the joint creditors may-resort for .payment; for if wo were to allow the joint creditors to-cóme in and take pari passu with the separate creditors, the fund may be exhausted, leaving the separate creditors unpaid, when all the debts could bo paid in full by compelling the join! creditor first 'to exhaust his remedy against the joint estate, which Í3 primarily liable to pay the partnership debts. The general doctrine, however, whether‘founded on this reasoning or not, is this, that the joint creditors have a priority of right to payment out of the joinfestate, and the separate creditors have the like right of priority out of the separate estatw — S-tery on [603] Part., § 863. Bat when there is no joint estate, and the surviving partners are insolvent, then there can be -no reason why the separate creditors should bo entitled to priority over creditors of the firm; for the debt, though joint at law, is considered joint and several in equity; it is therefore a debt that the deceased partner separately, as well as jointly, owed, and the only .ground on which such a debt could he postponed must be, that there W3,s another fund bound for its payment. But when tins ground is removed and there is no other fund that can be reached by the joint creditors, there can be no reason in allowing separate creditors priority over them. It appears to be the well settled doctrine, that in cases'of bankruptcy, where there is no joint estate and no solvent partner, the joint creditors may prove their debts against the bankrupt’s estate and receive payment pari passu with his individual creditors. — Story on Part., § 363; 14 Ves. 447; Ex parte Janson, 3 Maddox, 229; 15 Ves. 62. There can (in my opinion) be no other ground on which the joint creditors can he allowed to prove their demands against the estate of a bankrupt and to receive payment pari passu with the separate creditors, than this, that in equity the joint demand must be considered as the separate, as well as the joint debt of the bankrupt, and there being no other fund out of which it can be paid, justice requires it should be paid pro rata with all the other debts of the bankrupt. This reasoning applies with equal force under our statutes regulating the distribution of insolvent estates, for by them all debts are placed on an equal footing, and all are entitled to paymentpro rata. Whenever,therefore, it is ascertained that the claim constitutes a debt that could be enforced against the estate, if solvent, it must he paid pro rata, if insolvent, unless there is a fund to which the particular creditor could resort for its payment, but to which the general or individual creditors could not. Applying these general rules to the case before us, and independent of our statutes that make all partnership debts at law-several, as well as joint, we think the Orphans’ Court erred; for the testimony shows that the surviving partners, Green & James, are insolvent, and that there is no partnership fund to which the plaintiff can resort. It may not be improper to say, that we have decided this case upon its own facts, and upon the general principles to which we [604] have adverted, without intending to decide whether a partnership .creditor could be permitted to participate in the administration of an insolvent’s estate and receive his pro rata dividend, if the surviving partner was solvent and fully able to pay. Lot the decree be reversed pud the cause remanded.