Dana v. Lull

The opinion of the court was delivered by Bennett, J. It appears by the bill of exceptions, that, on the trial of this cause' in the county court, several questions were reserved, which it will not be necessary to consider, much less to decide. The property now in question belonged to Messrs. Moulton & Hutchinson, and, immediately before the service of the attachment by the defendant’s deputy, the property had been assigned by Moulton, one of the firm, for the payment of certain debts; and this action against the sheriff is grounded upon his neglect of duty, in not keeping the property attached, that it might be taken in execution. If the assignment, made only by Moulton,, which is made a part of the bill of exceptions, is inoperative upon its face, the jury did not receive such instructions as should have been given them, and the judgment of the county court must be reversed. I, as an individual member of the court, think that Moulton had no power, as a partner, to make such an assignment as this, which can bind the firm. There is nothing in the case to show, and it is not even pretended, that Hutchinson had in any way assented to, or authorized, the assignment at the time of the attachment, unless his'assent is to be — 394 — implied from the partnership. No doubt, one partner may assign partnership property to a creditor of the firm, to secure or pay a partnership debt. This power rests upon the ground of an implied authority to' perform such acts, as are incidental to their common business. Rut to say that one partner has the power to make a general assignment to a trustee, for the benefit of preferred creditors, is quite a different thing. It,- in effect, puts an end to the partnership, and transfers the legal title in the property to a trustee, and clothes him with power, as an agent of the firm, to close up the business. This was the object of the present assignment; and, if sustained, such would be its effect. The power to make sale of the partnership effects, and to pay or secure debts by an assignment of the property to a creditor, resides in each partner, as long as the partnership exists; and the power flows from the principle, that each one is the agent of the whole. But his agency extends only to such acts, as are incidental to the carrying on the business of the firm, and not, as I think, to the appointment of a trustee to close up the business, arid distribute the proceeds of the partnership effects in unequal proportions among the creditors, and thereby exclude the other partners from participating in the distribution, or in the de-cission of the question, in regard to what creditors should have a preference, if any. In Pierpoint v. Graham, 4 Wash. C. C. Rep. 232, Judge Washington evidently inclined to the opinion, that one partner had no such inherent authority, arising out of the partnership, as would enable liim to assign the partnership effects in such a manner as to terminate the partnership, though he did not find it necessary to express any decided opinion upon the question. In Hitchcock v. St. John, 1 Hoffm. Rep. 511, it was held by the Vice Chancellor, that no authority resided in one partner, to make a general assignment to a trustee, giving preferences to particular creditors of the firm. It was considered, that such an assignment superseded all the business of the firm, as such, and took from the control of each of the partners all the property, with which the partnership business was conducted, and was of itself a virtual dissolution of the partnership. The transfer of property by one partner to an acknowledged creditor is within his powers, as incidental to the business of the firm ; and this is a power probably necessarily surviving, after a — 395 — dissolution, in whatever way that shall have been brought about. But upon an assignment of the property to a trustee, a complication of duties and powers is involved. One partner thereby appoints an agent to control and dispose of the whole business, of whose integrity, capacity and fitness he alone is the judge. In Havens v. Hussey, 5 Paige 30, this point came directly before the Chancellor, and he held that one partner had no such implied authority. In the case of Egberts v. Wood, 3 Paige 317, the assignment was direct to the preferred creditors, in payment of their debts. So in Mills v. Barber, 4 Day’s Rep. 428, the assignment was direct to a creditor of the firm, to secure the payment of his debt. In the case of Harrison v. Sterry, 5 Cranch 289, the complainant claimed title, as assignee, under an assignment executed by Robert Bird, one of the firm of Bird, Savage & Bird, who did business at New York under the firm of Robert Bird & Co., and at London under the firm of Bird, Savage & Bird. Robert Bird was the only partner, who resided in this country, and he had necessarily the whole business of the firm in the United States committed to him. The •assignment was only of a certain specific portion of the partnership property, for the purpose of raising funds to carry on the business of the firm,, and to save their credit. Though, under the particular circumstances of this case, it was held, that Bird had power to make this assignment, yet this, in my view, is far from holding that an assignment of the whole partnership effects, by one partner, to a trustee, to wind up the business and distribute the avails among preferred creditors, is valid. I understand my brother Redfield fully to concur in the opinion, that Moulton had no implied authority, as a partner, to make the assignment in question; while the other members of the court, now present, are not prepared, at this time, to adopt that opinion. The assignment is very inartifieially drawn; and probably haste was somewhat necessary, that it might be prior in time to the attachment. The words are, “ we assign and surrender to Samuel Ford, as our assignee, the possession of all the wool,” &e. The description of the property intended to be assigned is of the most general character, being “all their wool, cloths, &c., in their factory at Bridgewater and at Woodstock, and all other property, which they owned or possessed in said towns.” There is no schedule of — 396 — the property annexed to the assignment, and no estimate of its value. There is no list of the names of the preferred creditors, or schedule of the sums due to them; but they are referred to as being brought under different classes, and designated in general terms. It is to be inferred, from the face of this assignment, that Moulton & Hutchinson were greatly insolvent •; and we are to understand it as a general assignment of all their effects. Thére is no allusion in the assignment to the fact that they were owners of property in other towns, not designed to be embraced in this assignment, and we are not to intend it, — and especially, as it appears from the recitals in this assignment, that it was made “ to save a great sacrifice and waste of property.” There is no pretence that this assignment makes a provision for all the creditors of Moulton & Hutchinson. Certain executions, and certain debts, upon which attachments had been issued, and which had been levied upon a portion of the property assigned, w'ere first to be paid, and then the assignment provides, that the residue of the property shall be applied to the paying of other debts. The workmen, and such as may have paid them, are first preferred, and then such as may have signed and endorsed notes, as surety for the firm, which were still outstanding, or such as have sold them wool. There is no provision that the surplus shall be paid to the general creditors; and though the assignment does not provide that the trustee shall pay the surplus, if any, back to the debtors, for their use, still there would be a resulting trust for the benefit of the debtors, if this assignment is sustained; and its performance would be equally imperative upon the trustee, as if the surplus had been expressly reserved in the assignment. Though probably the better opinion is, that the want of schedules, annexed to show the particulars of the property assigned, and the names of the creditors, and the amount of debts due them, is not conclusive evidence of fraud, so as to render the assignment inoperative upon its face, yet it becomes a more important enquiry, to determine what shall be the effect of a resulting trust, apparent upon the face of the instrument, which may enure to the benefit of the debtor, to the expense of the creditors. It has been supposed, that, though a trust be reserved in the deed to the use of the debtor, yet if the deed was not made intentionally to delay, hinder and defraud — 397 — creditors, such a reservation would not affect the residue or main purpose of the assignment. The case of Estwick v. Caillaud, 5 T. R. 420, also Riggs v. Murray, 2 Johns. Ch. Rep. 580, and Murray v. Riggs, 15 Johns. 571, strongly countenance such a position; but we think such a reservation should have a more decided effect, and that sound policy requires that it should render the whole assignment fraudulent and void. This we understand to be according to the later authorities. Mackie v. Cairns, 1 Hopkins Rep. 373. S. C., in the Court of Errors, 5 Cowen 566. Harris v. Sumner, 2 Pick. 129. Burd v. Fitzsimons, 4 Dallas 77. Passmore v. Eldridge, 12 Serg. & Rawle 198. The case of Grover v. Wakeman, 11 Wend. 187, which was much discussed, goes even farther than this. It was there held, that, to enable a debtor, by an assignment of his property in trust, to prefer one creditor, or a set of creditors, to another, he must devote the whole of the property assigned to the payment of his debts, and that the assignment must be unconditional, without any reservation for his benefit, or any clause in it, making the preferences to depend upon the preferred creditors executing releases to the debtor of all claims against him. Though, as has been already remarked, there would be but an implied trust, in this case, resulting to the debtors, for the surplus, which might remain in the hands of the trustee after the payment of the creditors specified in the assignment, yet its legal effect upon the assignment must be the same as if expressly reserved. It is no answer to this objection to the validity of the assignment, that, in the end, it turned out that there was not sufficient property assigned to pay the preferred creditors.. The objection goes to invalidate and render void the assignment upon its face. If there had been an express reservation of the surplus, after payment of preferred creditors, it by no means follows, that there would, in the end, be a surplus. There might be, and this entitles the other creditors to pronounce the assignment per se fraudulent, and to act at once accordingly. If it should be said that the surplus, after the payment of the preferred creditors, might be reached by the general creditors; while in the hands of the assignee, by the trustee process, still the effect would be, to effectually lock up the surplus property, until the preferred creditors were paid, and thus materially hinder and delay the — 398 — general creditors in their legal remedies to enforce satisfaction of their debts, and compel them to look to a person, to whom they had not given credit. When a debtor fails, from whatever cause, the whole of his property, in moral justice, belongs to his creditors; but ' there is a class of cases, which permit him to prefer, in payment, such creditors as he shall please, upon a general assignment of all his effects, provided the whole is devoted to his creditorsand this seems to be giving him power enough. But these cases are quite distinguishable from one, in which, as to some creditors, there was no provision, and no attempt to dispose of the whole property for the use of creditors, but a reservation of what might be a surplus after the payment of certain specified creditors, whether such reservation was express, or resulted to the assignor as an implication of law. In such case the act becomes fraudulent, and it is not competent for the debtor to prescribe terms to his creditors; but the law is open to them, and they are allowed the right of pursuing their debtor in the way which the law points out, without any obstruction from such an assignment. o The result is, that, with these views, a majority of the. court concur in reversing the judgment of the county court and remanding the cause to that court.