Rommerdahl v. Jackson

Winslow, J. The so-called Bank of Antioch was a partnership, and not a corporation, and hence the certificates of stock which were issued were not in fact certificates of corporate stock in any true legal sense; but nevertheless there was nothing to prevent the partners, if they so agreed, from using such certificates to indicate the proportionate interests of each partner in the firm. Durkee v. Stringham, 8 Wis. 1. It is well understood that a partner may sell or mortgage his interest without consulting his copartners, but that the assignee does not become a partner thereby, but acquires [448] only a right to receive, upon settlement of the partnership business, that sum which would have been due to his assignor or mortgagor. 1 Lindley, Partnership (2d Am. ed.), 363 et seq. In the absence of an agreement to that effect, the assignee of a partner’s share does not become a member of the firm nor the owner of any of the firm property, “ but he comes into nothing more than an interest in the partnership, which cannot be tangible, cannot be made available, or be delivered, but -under an account between the partnership and the partner, and it is an item in the account that enough must be left for the partnership debts.” Bank v. Carrollton Railroad, 11 Wall. 624. In the present case the undisputed testimony is that the original parties to the partnership agreed that the certificates of stock should not be transferable. Thus the assignees of Lewis, who received the certificates of stock either by way of purchase or as collateral to an indebtedness, became entitled thereby to a mere right to demand an accounting and to receive their proportionate shares of the net firm property after such accounting. This intangible right, however, they did become entitled to, as against the remaining partners, unless, indeed, there is ground for holding that such transfers, which were made by way of collateral security for debts, amounted to chattel mortgages, and hence were void as to third'persons because not filed in the office required by law. This claim, however, is not tenable. The chattel mortgage statute refers only to personal property capable of delivery, as its words clearly indicate, and not to a defeasible assignment of a mere right or chose in action. This principle is well settled. Jones, Chattel Mortgages (4th ed.), § 218, and authorities cited. As said in the quotation from the United States supreme court hereinbefore contained, the right which these assignees obtained is one which cannot “ be tangible, cannot be made available, or be delivered.” It has been held that assignments, by way of security for debt, of mere rights or choses [449] in action, such, as rights under a lease, or an insurance policy, or certificates of corporate stock, or a legacy, or a judgment, or an open account, are chattel mortgages in effect, but are not the chattel mortgages which are covered hy the registry statutes, because these statutes only apply where the mortgaged property is capable of manual delivery. Stats. 1898, sec. 2313; Lawrence v. McKenzie, 88 Iowa, 432, and cases cited in opinion. The inevitable conclusion is that the transfers made by Lewis of his certificates of stock to the various interpleaded defendants, whether absolute or as collateral security, gave to each assignee the equitable right above defined, and that such transfers were good, even as against attaching creditors of Lewis, though not recorded as chattel mortgages. The money representing Mr. Lewis’s original half interest in the banking firm having been deposited in court by the garnishee, and the assignees having all.been brought into court and answered, claiming shares in the fund, and the plaintiff, the only other adverse claimant to the fund, being also in court and claiming the fund, no reason is perceived why the rights of all parties should not be finally settled as they were by the trial court. There is no need of an accounting, because all parties have, by claiming their interests in the fund in court, in effect ratified the transaction by which the value of the Lewis interest in the firm has been liquidated and turned into cash. The garnishee says, in substance: “ I bought the Lewis interest-in the firm out, and agreed to pay $6,000 for it; and I now pay this money into court.” The various claimants under Lewis come into court, and make their various claims to this money; thus beyond doubt ratifying the transfer to the garnishee, and electing to consider the money as standing in place of any interest or right in the firm assets. By the Oowt.— Judgment affirmed. Maeshall, J., dissents.