Walsh v. St. Paul School Furniture Co.

START, C. J. Assuming, without so deciding, that the property in controversy was personal property, still the mortgage thereon was valid between the parties thereto, although it was not filed in the proper office. We held in the case of Berlin Machine Works v. Security Trust Co. (decided at the present term) supra, p. 161, 61 N. W. 1131, that the receiver in the case did not represent the creditors of the copartnership, so that he could have a chattel mortgage set aside, otherwise valid, because it had not been filed. That decision is decisive of this case. The fact that this action was brought after the order of the district court for creditors to prove their claims was made, and that the one cited was brought before, does not distinguish them, for the principle is the same in each case. The equitable jurisdiction which courts exercise over partnerships is a necessary outgrowth of the jurisdiction over accounting, and the remedies of dissolution and receivership are incidents necessary to final and complete relief. When the court has once acquired jurisdiction in an action by one partner against his copartners for an accounting and settlement of the affairs of the partnership, it will extend its jurisdiction to the whole controversy and distribute the assets to creditors, in case of insolvency, pro rata, in accordance with the rule that equality is equity. Therefore, after the court has obtained possession of the assets of the partnership, by its receiver, it [400] will not permit any creditor to obtain a preference by a levy on the-assets in its possession, or to acquire a lien thereon by a creditor’s bill. , To this extent only does such receiver represent creditors, for when he takes possession of the assets he stands, as to the past transactions of the firm, in the shoes of the partners, precisely as an assignee at common law for the benefit of creditors would. An assignee for the benefit of creditors, in the absence of a statute to the contrary, takes only the rights which the assignor had in the trust estate when he made his assignment. He is not a bona fide purchaser for value, and his title to the assigned estate is subordinate to the lien of an unrecorded chattel mortgage which is good between the parties thereto. Flower v. Cornish, 25 Minn. 473; Stewart v. Platt, 101 U. S. 731; Burrill, Assignm. § 324; Jones, Chat. Mortg. § 241. The cases of Innes v. Lansing, 7 Paige, Ch. 583, and Van Alstyne v. Cook, 25 N. Y. 489, relied upon by appellant, are not in point, for they involved questions arising under the statute of New York with reference to limited partnerships, which prohibited preferences when the partnership was insolvent. The receiver, in the case of Farmers’ L. & T. Co. v. Minneapolis E. & M. Works, 35 Minn. 543, 29 H. W. 349, was held to represent creditors, so as to avoid an unfiled chattel mortgage, by virtue of the provisions of the statute, which provided for the sequestration of all of the property of an insolvent corporation. The proceedings thus authorized by statute are in the nature of an attachment or execution on behalf of creditors. So, also, an assignee or receiver, under our insolvency law, represents creditors, by virtue of the express provisions of the statute. Merrill v. Kessler, 37 Minn. 82, 33 N. W. 117. It does not follow that, unless it is held that a receiver, in proceedings to close a partnership has the powers of a receiver in insolvency proceedings under the statute, creditors are without any remedy to reach property fraudulently transferred by the partnership, for the jurisdiction of a court of equity to dissolve a partnership, like any other legal or equitable remedy, is subject to legislative control, and it must yield to the statute; hence, creditors have an ample and complete remedy under the insolvency law of 1881. The receiver in this case derives none of his powers from the statute; neither he nor the court appointing him has any jurisdiction over the individual property of the members of the partnership; [401] and he cannot have set aside any securities or payments given or made as preferences, for, outside of insolvency proceedings, they cannot be attacked. Mackellar v. Pillsbury, 48 Minn. 396, 51 N. W. 222. He can enforce no claim which the partnership could not. Order affirmed.