Tennant, Walker & Co. v. McKean

Ellison, J. Plaintiffs’ petition in this case was filed November 24, 1888, and alleged substantially the following facts : . That the plaintiffs as partners, in August, 1884, sold a bill of boots and shoes, of the value of $551, to Guenther fo Blackman; that the same became due February 1, 1885 ; that Guenther & Blackman were in partnership, engaged in merchandising; that in November, 1884, Guenther sold his interest in the stock of goods to the defendant, and subsequently, in December, 1884, black man also sold his interest in the stock to defendant; that on the third of August, 1888, plaintiffs obtained judgmentagainst Guenther & Blackman for the amount due'on their account; that, at the time of each [491] of said sales to McKean, said firm of Guenther & Black-man was largely indebted to various parties and firms for the stock of goods so sold and transferred to defendant, amounting in the aggregate to $3,600, including the amount due the plaintiffs ; that Guenther & Black-man are insolvent ; that the goods were liable for the debts of said firm of Guenther & Blackman, and that defendant took same subject to the lien of the partnership creditors of such firm; and plaintiffs asked to have an account taken and the plaintiffs’ judgment paid out of said goods, or the proceeds of those sold by defendant. The evidence introduced by plaintiff showed that defendant purchased the goods without any notice that Guenther & Blackman were indebted; that he paid full value; that, when he bought out Guenther, he did so with the full knowledge and consent of Blackman, and with the understanding that he was to take Blackman’s half of the goods in a short time, which he did in about two months ; that the defendant purchased in 1884; that plaintiffs did not obtain judgments against Guenther & Blackman until August 3, 1888, and that this proceeding was not instituted until November, 1888, four years after defendant’s purchase, and tended to show that none of the goods owned by Guenther & Blackman remained in defendant’s possession when this action was commenced ; but the same had been sold in the usual course of business to customers of defendant’s store; that Guenther & Blackman each agreed to the sale to the defendant, and that it was understood between said Guenther & Blackman, when sale was made, that they personally would jointly pay the partnership debts, although defendant did not know of . this understanding, or that there were any such debts. The finding was for the defendant, and plaintiffs have appealed. The judgment was the only one which could have been rendered under the petition and evidence. There [492] is lio charge or proof of fraud, which leaves the case standing squarely on the law as to the rights of partnership creditors as against those who purchased . the partnership property. The petition is based upon the idea that partnership creditors have a lien on the partnership effects. This is an erroneous notion. The creditors have no lien. Each partner has a lien on the whole effects, which he, as such partner, during the life of the partnership, can see is utilized to the payment or discharge of the partnership debts. For he, being liable for the whole debt, is entitled, as a right inherent in the relation he bears to the partnership and the property, to have the effects used for the payment of partnership debts. The right of the creditor is wholly derivative — is derived through the partners. And it is well understood that the partner can waive this right or lien. Sexton v. Anderson, 93 Mo. 373 ; Baker's Appeal, 21 Pa. St. 76; McNutt v. Strayhorn, 39 Pa. St. 269; Coover's Appeal, 29 Pa. St. 9. I apprehend that the lien is primarily for the protection of the partners, and whatever benefit is thereby conferred upon the creditor is by a sort of subrogation. If, therefore, one partner sells his interest to a third person, or the remaining partner, there is no equity attaching to the partnership effects in favor of the partnership creditors. Ex parte Ruffin, 6 Ves. 119 ; Case v. Beauregard, 99 U. S. 119 ; Baker's Appeal, 21 Pa. St. 76; Allen v. Center Valley Co., 21 Conn. 130; Fitzpatrick v. Flannagan, 106 U. S. 648 ; Huiskamp v. Wagon Co., 121 U. S. 310; Story on Part., sec. 358. The partner having parted with his own right by the sale, there remains nothing through which the creditor can work out his derivative right. An application of these principles to plaintiffs’ case destroys it. Here, one partner sold his interest to defendant; shortly afterwards the other partner sold to defendant. This left them without a lien on the partnership effects, and thereby destroyed or canceled the [493] creditor’s rights which depended upon such lien. The fact that the sale was by separate partners at separate times doés not affect the result. The second sale was in contemplation by both partners when the first was made. Kimball v. Thompson, 13 Metcalf, 283. II. Another equally well-established porinciple destroys plaintiffs’ case. The partnership creditor’s right is an administrative right, and can only be obtained by laying hold of the property — placing it in custodia legis, as upon death, assignment, bankruptcy or insolvency. In such case, there being no prior disposition, the partnership creditors are preferred to individual creditors, and they are permitted to obtain, and do obtain, preference by “working it out through the partner’s lien.” This has been permitted when the court has the property in custody by attachment for fraud. It was done in this state. Phelps v. McNealy, 66 Mo. 554. But that the property must be under control of the court follows from the peculiar nature of the 'creditor’s rights, and his relation to the partnership. Schmidlapp v. Currie, 55 Miss. 597, and authorities, supra. The partnership creditor, as such, has no more lien on partnership effects than the individual creditor has on individual effects ; and a bona fide sale of the partnership effects carries the title unaffected by claim of simple contract creditors. If such creditors wish to realize from the effects of a partnership which is a “going concern,” they ought to reduce these claims to judgment and seize the property under execution before a bona fide disposition is otherwise made. The judgment is affirmed. All concur.