Palmer v. Myers — 43 Barb. 509

Majority

p. 509

Palmer vs. Myers and others.

Headnote

When a partner absconds, he abandons the business of the firm, and leaves the management of the affairs of the partnership with the remaining members ; and such act is to be construed as vesting in them full authority to do whatever is necessary to pay the debts and settle up the business of the firm.

Hence they may execute an assignment of the partnership property in trust, for the benefit of creditors, without the assent of the absconding partner.

THIS action was brought to set aside an assignment for the benefit of creditors, upon the ground that only two of the three partners, comprising the firm, actually executed the same, without the assent of the third. Other points were raised upon the trial which were not presented on this argument. The defendants relied on the defense that the partner who did not sign the instrument had, before its execution, absconded from the city. Upon the trial they offered to prove such absconding, and that the absconding partner, Johnson, had executed an assignment in Massachusetts, with

p. 510

out the consent of the other members of the firm, and that at the time of making the assignment by the defendants they were unable to procure the signature of said Johnson. The evidence offered was excluded, and the defendants excepted.

The following facts were found by the court, viz: That on or about the 1st of June, 1856, the defendants, Johnson, Brown & Snow, formed a copartnership under the firm name of Johnson, Brown & Company, and that such copartnership continued until the 21st day of March, 1857. That on the 21st day of March, 1857, the defendants, Brown and Snow, executed to the defendants, Myers & Lowrey, an assignment of all effects and property of the said firm of Johnson, Brown & Company, in trust to pay the debts of the firm, giving preferences as alleged in the complaint. That said assignment was executed without the knowledge, concurrence or assent of the defendant, Wm. H. Johnson. That the defendants, Myers & Lowrey, acting under said assignment, took possession of the property of the said firm of Johnson, Brown & Company, and held the same at the time of the commencement of this suit, and at the time of service upon them of the injunction in this action. That the judgments set forth in the complaint were recovered as therein alleged, and that such of the said judgments as were not recovered by the plaintiff, were sold, set over and assigned to him as alleged in the complaint, and that the amounts of said judgments, with interest thereon, are now due and owing to the .plaintiff. That executions upon the said judgments were issued and returned as alleged in'the complaint, and that transcripts of said judgments had been first duly filed in the office of the clerk of the city and county of New York, and in the office of the clerk of the county of" Kings. That the defendant, Wm. H. Johnson, was a resident of the state of Massachusetts, and not of the state of New York. On the above facts the court decided as matter of law, and adjudged: 1st. That the assignment set forth in and admitted by the pleadings was n.ot valid in law, and was

p. 511

fraudulent and wholly void. 2d. That said assignment did not pass to the defendants, Myers & Lowrey, any right in or title to any of the property of the said firm of Johnson, Brown & Company. 3d. That the plaintiff was entitled to a priority in the payment of the debts, judgments and indebtedness set forth in the complaint, over and before the other creditors of the firm; and that he had acquired a lien upon the property of the firm for the payment of the said debts and judgments. 4th. That the plaintiff was entitled to the relief demanded in the complaint, and the assignment made by the defendants was ordered to be set aside as fraudulent and void; and a receiver was directed to be appointed. The defendants appealed from this judgment.

L. A. Fuller, for the plaintiff.

C. A. Nichols, for the defendants.

By the Court,

That an assignment for the benefit of creditors made by a part of the members of the firm without the consent of the other member, where such partner is present, is invalid, has been settled by repeated adjudications. (Pettee v. Orser, 6 Bosw. 123 , affirmed in Ct. of Appeals, Dec. 1864. Robinson v. Gregory, Ct. Appeals, Dec. 1863. Wells v. March et al., Id. March, 1864.) And it is also settled that the mere absence of the partner from the state when the assignment is executed will not make the transaction valid. (Robinson v. Gregory, supra.)

The reason assigned for these decisions is, that such a transaction breaks up the whole business of the firm, and places the property in the hands of the trustees, through the act of a portion of the members of the firm, when all should be consulted and have an opportunity of taking part therein, and in the selection of the trustee.

Even in a case where the transfer was for the purpose of

p. 512

paying a debt, although a majority of the court sustained the transfer by one partner, it was seriously doubted by two of the judges. (Mabbett v. White, 2 Kernan, 442.)

In the present case, one partner had absconded, and upon the trial the defendants’ counsel offered to prove, that prior to making the assignment, Johnson, the partner who did not execute the assignment, “ had ceased to act as a member of the firm, and he had absconded, and had made fraudulent conveyances of the copartnership .property, Sse.; and that before and at the time of making the assignment the other partners used diligent efforts to obtain the concurrence of Johnson, but were unable to effect the same or have any communication with him.” This evidence was excluded as immaterial on the objection of the plaintiff’s counsel, to which the defendants excepted.

The question raised by this exception is, whether the fact that one of the partners has absconded, and ceased to act as a member of the firm, is-a sufficient excuse for the execution of an assignment by the other partners, so as to sustain such an instrument as a valid transfer of the property of the firm.

The case of Wells v. March, in Court of Appeals, March term, 1864, above referred to, is somewhat in point. In that case the assignment was executed by .one' partner only in his own name, and he signed the name of the firm. It appeared in evidence that the firm was Hace & Coe ; that Hace had taken and used the property of the firm and absconded, leaving a letter addressed to Coe, in which, after admitting his conduct, he said : “ Take charge of everything in our business—close it up speedily. I assign you my interest in the business of Hace & Coe.” This letter and the absconding was held by the court sufficient to authorizó the execution of the assignment by the remaining partner, and the judgment in favor of the defendant was affirmed.

When one of a firm absconds, he abandons the business of the firm, and leaves the management of the affairs of the partnership with those who remain behind, and such act

p. 513

should, in my judgment, be construed as vesting in the other members of the firm full authority to manage and settle up the business.

[New York General Term,

February 6, 1865.

It is, in fact, an .abandonment to them of the entire management and disposition of the property belonging to the firm, and vests in them full authority to do what is necessary to pay the debts and wind up the concern.

The letter, in the case last referred to, was but an expression in writing of what was without it the natural consequence of the absconding partner’s actá.

This was held in Kemp v. Carnley, ( 3 Duer, 1 ,) and in Deckard v. Case, ( 5 Watts, 22 ;) Kelly v. Baker, (2 Hilton, 531.) Where one partner dies, the surviving partners have the control and disposition of the property, and may make an assignment of the property of the firm for the benefit of creditors, without consulting the representatives of the deceased partner. (3 Paige, 517.) The same rule should be applied to one who abandons the interests of the firm, and absconds, to avoid the creditors, or for any other cause, leaving to.his partners the control of the business.

The evidence, I think, was admissible, and the judge erred in excluding it. A new trial should be granted ; costs to abide event.

Ingraham, Clerke and Sutherland, Justices.]

Cases cited

Pettee v. Orser 6 Bosw. 123 N.Y. Super. Ct. 1860-01-28 p. 511