Turner v. Smith — 1 Abb. Pr. 304

Majority

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TURNER against SMITH.

New York Common Pleas ;

Special Term, May, 1866.

Headnote

Injunction.—Execution against one Paetneb.

An action will lie by a partner, to enjoin an individual judgment creditor of the copartner of the plaintiff, from selling upon execution the interest of the copartner in the partnership assets, where it is made to appear by the complaint that the co-partner whose interest has been seized has no interest in fact in the assets, and the plaintiff offers to submit to an accounting to show this to be the case.

It seems, that since the abolition of the distinction between legal and equitable forms of procedure, the court out of which the execution was issued should stay proceedings thereon, under such circumstances, without putting.the parties to an action.

Motion to dissolve an injunction.

The action was brought by Alfred W. Turner against Bernice B. Smith, James Turner and John Kelly, the sheriff of the city and county of Eew York, to enjoin the defendants, Kelly and Smith, from selling, on execution against James Turner, the interest of the latter in the property of the firm of James Turner & Son, of which the plaintiff was the junior member.

The allegations of the complaint were as follows:

•That the plaintiff is engaged in the business of selling oils at wholesale, at 3STo. 78 Maiden lane, in the city of Kew York, in company with James Turner,' under the firm name of “James Turner & Son.” That said Turner & Son now have on hand

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at their said place of business, at Ho. 78 Maiden lane, a quantity of oils [designating the hinds, and total value], which, is all the property owned by said firm.

That said firm is indebted for liabilities incurred in the prosecution of their said business to the full value of the goods on hand, on good and valid debts due against said copartnership.

That said James Turner, this plaintiff’s partner, is justly indebted to said copartnership, for money drawn from said firm for his support and maintenance, over and above all profits, interests and gains in said copartnership, and over and above all interests in any- of the copartnership property, in the sum of more than four thousand dollars, and that upon a fair and just accounting, and closing up of said partnership affairs, it would be found that said James Turner has no interest, either at law or in equity, in any of the assets or property of said firm; but, on the countrary, his indebtedness to" said firm exceeds his interest in said partnership assets and property, to the amount of more than four thousand dollars.

That said firm, notwithstanding the embarrassments of said James Turner, is in good credit, and is constantly receiving and selling goods, and have reasonable prospects of doing a good trade in the future, and of making money.

That said defendant Smith, in December, 1862, recovered a judgment in the Supreme Court of the State of Hew York, against said James Turner, for one thousand two hundred and seven dollars and seven cents, on a demand in no way connected with the partnership matters of said firm. That on the 20th day of February, inst., the said defendant, Smith, caused an execution to be issued against said James Turner, and on the 21st day of February, inst., directed the sheriff of the city of Hew York to levy upon the goods of said firm, which the said sheriff did.

That the said defendant, Smith, now threatens to have said goods of said firm advertised and sold, and has caused to be placed in the store of the said firm at Ho. 78 Maiden lane, aforesaid, a person who forbids this plaintiff, or any one acting •under him, from selling, or disposing of, or meddling with, said goods.-

That the said defendant, Sheriff Kelly, aforesaid, threatens to proceed under the directions of his co-defendant, Smith, to sell the said goods of said firm.

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This plaintiff further says, that said firm has notified the plaintiff, or his attorney, of the willingness of said firm to submit their books, papers and affairs to the inspection of said Smith, to the end that he may ascertain whether the said James Turner has any interest in said firm that could be taken, either at law or in equity, to pay the individual debts of said James Turner.

And this plaintiff alleges, on information and belief, that it is the purpose and. aim of said Smith to harass and vex and injure the business of said firm unnecessarily, because of the inability of one of said firm to pay his individual debts.

This plaintiff further says, that it will work irreparable injury to this plaintiff, and destroy the credit and business of said firm to have said goods of said firm sold on such execution, or to have the same removed or interfered With by- said sheriff for the purpose of working out any supposed interest of the said James .Turner under said execution of said Smith.

Wherefore this plaintiff prays this honorable court to restrain and enjoin the said defendants, their agents, attorneys or employees, from selling or meddling with said goods, or in any manner interrupting the business of said firm, until an account can be taken in equity, to the end that it may be ascertained whether the said James Turner has any interest in said copartnership goods which could be applied on said execution.

The plaintiff also prays that all proceedings on said execution, so far as any attempt may be made to sell the property of said firm, may be stayed.

The plaintiff prays, also, such other and further relief in the premises as shall be deemed just and equitable.

. The plaintiff makes no personal claim against said sheriff for any damages, nor for any costs in this suit.

Upon this complaint, the plaintiff obtained a preliminary injunction. The sheriff answered, admitting the execution, and that he levied pursuant to its directions, the property being the only property of the judgment debtor known to him in the county; and denied any" intent to harass, and any knowledge, etc., of the other allegations.

Upon these pleadings, the defendants now moved to dissolve the injunction.

Brown, Sail & Yanderjooel, for the sheriff; and Arthwr Gardner, for the defendant Smith, in support of the motion.

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Amos G. Hull, opposed.

I. The defendants are premature in their motion. It cannot be made until all the defendants have answered ( 1 Barb. Ch., 639 ; 1 Paige, 164; 2 Johns. Ch., 149 ).

II. The separate estate or interest of the copartner, in any of the copartnership property, is only his share of that part of the copartnership effects, or of the proceeds thereof, which remain after the debts of the firm, and the demands of his copartners as such are satisfied (Buchan v. Sumner, 2 Barb. Ch., 165 ; Muir v. Leitch, 7 Barb., 340 ). The correct practice to be pursued in a case like this, is, to do as the plaintiff has done, viz.: to obtain an order staying proceedings on the execution until an account can be taken in equity (Scrugham v. Carter, 12 Wend., 131 ). If the parties desire it the partnership accounts should all be liquidated before any sale on the execution (2 Ves. & Beame, 300. See also the cases of Williams & Gibbs v. Canning, 2 Johns., 280 ; Watson v. Taylor, 2 Ves. & Beame ; 15 Ves., 559, 560).

TTT- The equities of the complaint not only are not denied, but are admitted. Sheriff Kelly admits that it was his purpose to sell the interest of James Turner. That is precisely what we allege, and it is to prevent that, until an account in equity can be taken, that we invoke the power of this court. The answer denies only on information and belief. We allege the facts in our complaint positively.

A complaint made upon information and belief will not support an injunction (Hecker v. The Mayor, 18 Abb. Pr., 369 ). Now if information and belief will not sustain an injunction, then information and belief will not sustain an answer that "seeks to dissolve it.

The complaint in this action alleges substantially, that the partner whose interest has been seized under execution, has no interest in fact in the assets of the copartnership, and the plaintiff is willing to refer the subject at once, that it may be investigated and- determined. This seems to me to be a very reasonable mode of procedure, more particularly when, as.in this case, the plaintiff has filed a consent that the reference be proceeded with at once. Injunctions in these cases do not meet with favor from the courts.

In Mowbray v. Lawrence (13 Abbott’s Pr., 317; S. C., 22 How.,

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107 ), it is said that authorities in this State are adverse to the interference of a court of equity by injunction to restrain the sale of the interest of one partner in copartnership property, on judgment and execution against him, to collect an individual debt; but the refusal to grant the injunction in that case was predicated of the fact that it did not appear by the averments in the complaint that the debtor had no interest which the creditor should be allowed to reach by a sale on his execution. The case of Philips v. Cook ( 24 Wend., 389 ), cited by Justice Leonard in the case mentioned, is not, however, an authority against the exercise of the equity power invoked by this action. It was an action of trespass, and the court held that it could not be maintained against the plaintiff for seizing the partnership property to satisfy an execution against -one of the partners, and delivering the property sold to the purchaser. The subject under consideration was elaborately discussed by Justice Cowbn, and the power and practice of courts of equity in such cases to some extent exemplified.

He said there is no doubt of the equitable rule in England, Hew Toik, and most of the States, that though the sheriff may, at law, levy on and sell the right of the individual partner, which shall pass absolutely to the purchaser, yet he takes subject to an account between the partners, which, if it eventuate against him, his purchase may go for nothing; That, however, is his own look out. It is no reason why the creditor should be deprived of his legal right to sell, or the purchaser of his legal right to buy. •

The case of Moody v. Payne ( 2 Johns. Ch., 548 ), is not authority, as I understand it, against the exercise of the equity power. The Chancellor seems to have entertained the opinion that the creditor could only sell the interest of the individual partner, subject to the rights of the joint creditors, and not the property itself; the rule being in equity that the partnership accounts- should all be liquidated before- a sale on execution (Watson v. Taylor, 2 Ves. & Bea.; Walter v. Muth, 16 Johns., 107 w), and he expressed the opinion, therefore, that if any sacrifice was made by the sale of the interest of one partner by reason of the uncertainty, it affected only that partner.

It was said by Chief Justice Savage, in Scrugham v. Carter ( 12 Wend., 134 ), that if the sheriff by virtue of an execution against one of several partners, takes possession of the property,

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an action at law does not lie against him. The court from which the execution issued would stay proceedings upon it to give time to have an account taken in equity. In Parker v. Piston (5 Bos. & P., 288), the defendant was one of two partners, and the creditors applied to extend the return of the fieri facias, the object being to prevent the partnership goods from being sold until an account could be taken of the several claims upon them. The court were of the opinion that there was no ground for this interposition; that the safest line of conduct for the sheriff to pursue, was to put some person in possession of the defendant’s property as vendee, leaving him and the parties interested to contest the matter in equity, when a bill might be filed, stating that he had taken possession of the property and praying that it might not be disposed of until all claims were arranged.

In Chapman v. Koops, reported in the same volume of Bos. & P., 289, a similar application was denied, but Lord Alvanley, Ch. J., said, among other things: “ We are desired to restrain the plaintiff’s execution because it is alleged that he stands in the shoes of a partner, who would not have a right to molest the other partners' until all accounts between them had been settled. But if the other partners wish to take advantage of this circumstance, they ought to file a bill in equity against the vendee of the sheriff, or they may buy in the property when put up for sale.

said the short objection to this application is that the court cannot direct a partnership account to be taken without assuming a jurisdiction that does.not belong to it.

The case of Philips v. Cook, supra, being a determination of the right of the sheriff to sell the property of the co-partnership on an execution against one of the partners, and deliver it to the vendee, makes the interposition of equity in a proper case eminently just. The right mentioned does not commend itself to our best consideration. It does not seem to be fair that property owned by several should be taken away on a process against one, where that one, in consequence of his relation to the others, financial and otherwise, may have little or no interest in it. The firm creditors have superior right and equity, and the partners stand in better position towards the property as against each other than the individual creditor. The interest of each is only the share that remains

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after the partnership accounts are taken. There is little doubt that the right under discussion is one asserted by the courts of law to avoid encroachment upon equity jurisdiction, and it is not the only instance in which the division of jurisdictions, legal and equitable, has led to useless and absurd circumlocution. There is no doubt that equity had ■ the power to interfere in a case like this, and would do so, and since the blending of the different tribunals in one under our present system, there is no reason why a stay should not be granted on an - execution, as stated by Justice Willabd, in accordance with the suggestion of Savage, Ch. J., in Serugham v. Carter, supra.

The plaintiff has, however, brought his action in equity, and alleges that there is nothing to be sold.

Assuming that to be so, it would be very unjust to allow the partnership property to be sold and delivered, leaving the plaintiff to pursue the vendee, .who would not be obliged to give security, and might not only dispose of the property, but be utterly insolvent.

I think there are reasons why the. right to sell and deliver should never have been given. The right to sell the interest, leaving the purchaser to ascertain what it was, and a rule requiring a reference to be submitted to by all partners would have subserved the ends of justice better than the existing rule.

In this case I think the plaintiff entitled to an injunction, and the defendant to the reference which the plaintiff tendered, if they feel disposed to require it at the present stage of the action.