L. Fullam & Co. v. Abrahams & Epstine

The opinion of the court was delivered by Valentine, J.: The only question involved in this case is as follows: As between a creditor of an insolvent partnership firm, (the individual members, as well as the firm, being insolvent,) and a creditor of a member thereof, who has the prior right to a fund belonging to such member and in the hands of his debtor — the creditor of the firm, who has first garnished the debtor, or the creditor of the member, who has subsequently garnished the debtor, where neither creditor has [727] yet obtained tbe possession of the fund? This question must be answered in favor of the partnership creditor. But before we proceed further, we think it will be proper to state some preliminary matters. In this state, “all contracts which by the common law are joint only, shall be construed to be joint and several;” and “in all cases of joint obligations and joint assumptions of copartners or others, suits may be brought and prosecuted against any one or more of those who are liable.” (Comp. Laws 1879, p. 209, §§ 1, 4.) And ■“judgment may be given for or against one or more of several plaintiffs, and for or against one or more of several defendants.” (Civil Code, § 396; see also Alvey v. Wilson, 9 Kas. 405; Williams v. Muthersbaugh, post, p. 730.) And the gar- ' nishment lien attaches when the garnishee is served with notice of garnishment. (Civil Code, § 206.) As between creditors of a partnership firm and creditors of the individual members thereof, we suppose that the rule is well settled, where other things are equal, that the property of the partnership must first be applied to the payment of partnership debts, and that the property of the individual members must first be applied to the payment of the debts of such individual members. (Switzer v. Smith, 35 Iowa, 269; Rodgers v. Meranda, 7 Ohio St. 179; Glass Co. v. Ludlum, 8 Kas. 41, 50; Northern Bank of Kentucky v. Keizer, 5 Am. Law Reg. 75; Davis v. Howell, 33 N. J. Eq. 72; Toombs v. Hill, 28 Ga. 371; Kuhne v. Law and Sniffer v. Sass, 14 Rich. [S. C. L.] 20; M’Culloh v. Dashiell, 1 Har. & G. [Md.] 96; McCormick’s Appeal, 55 Pa. St. 252; 5 Wait’s Actions and Defenses, 148, 149.) But this rule is often held not to apply as against the partnership creditors, where the partnership, or both the partnership and all the members thereof, are insolvent; and the rule never applies .as against the partnership creditors where they have obtained a prior lien upon the property of one of the individual members. (Allen v. Wells, 39 Mass. 450; Stevens v. Perry, 113 Mass. 380; Gillaspy v. Peck, 46 Iowa, 461; Cumming’s Appeal, 25 Pa. St. 268; Meech v. Allen, 17 N. Y. 300; Cleghorn v. Ins. Bank, 9 Ga. 319; Baker v. Wimpee, 19 Ga. 87; Dun728 ham v. Hannah, 18 ind. 270;. Wisham v. Lippincott, 9 N. J. Eq. 353; Howell v. Teel, 29 N. J. Eq. 490; Emanuel v. Bird, 19 Ala. 596; Barnwell v. Perry, 19 Vt. 292; 5 Wait’s Actions and Defenses, 148, and cases there cited.) Some of the foregoing authorities refer to attachment liens, some of them to judgment liens, and others to execution liens. In the present case, and under the laws of this state, the parC nership creditor had a right to sue the partnership or any one or more of its members, and had.a right to obtain an attachment in the case against any one or more of its members: (Williams v. Muthersbaugh, post, p. 730.) And he had a right to levy such attachment not only upon the partnership property, but also upon the individual property of any member of the partnership against whom the .attachment was issued, exhausting of course the partnership property first, before levying upon the individual property. (See authorities above cited, and Hershfeld v. Claflin, 25 Kas. 166.) And when the attachment was issued and served by giving proper notice, including the notice to the garnishee, the firm creditor obr tained a lien-upon the fund of the member .then in the hands of the garnishee; and this lien cannot be destroyed by any subsequent action, or subsequent attachment, or subsequent garnishment proceedings, by any creditor of such individual member of the partnership. ■ While there may- possibly seem to be some slight infirmity in the reasoning that brings about this result, yet we think .the .reasoning is sound, and that it is sustained by an almost unbroken current of authority. If it be said that the .case of Switzer v. Smith, supra, is against this view, then we refer to the case of Gillaspy v. Peck, 46 Iowa, and the other cases above cited, as sustaining it. -The fact is, that while the rule first above mentioned is the general rule in equity, yet the rule is never carried to the extent of overturning the law or of .destroying equities; and it is never carried to the extent of abrogating -liens legally obtained. • As to the rule where the firm and all its members are insolvent, see Brock v. Bateman, 25 Ohio St. 609. In that case .the'firm-creditors were al [729] lowed to share equally with the creditors of each partner in the distribution of the individual assets of each partner, and this notwithstanding the fact thát the firm creditors were allowed to receive all the firm property. It was there held that there was a strong equity in favor of the firm creditors; that they not only trusted the firm, but that they trusted each and all the partners thereof to the full amount of their claims, and trusted each partner to the same extent that the individual creditor did who became a creditor of only one partner. In the light of this case, it would seem where the firm and all the partners thereof are insolvent, that no individual creditor of a partner has any higher equities to the separate property of such partner than any firm creditor has; although such a rule might result in the firm creditor receiving the full amount of his claim, and the individual creditor only a very small part of his. Whether this court would go to the extent of the Ohio supreme court, it is not necessary now to determine. Upon authority, and upon reason, too, we think, the firm creditor in the present case has, by reason of his garnishment lien, obtained a right to the fund in the hands of the garnishee prior to that of the private creditor. The judgment of the court below will therefore be reversed, and the cause remanded for further ’proceedings in accordance with this opinion. All the Justices concurring.