Sage v. Woodin — 66 N.Y. 578

Majority

p. 578

Albert G. Sage, Appellant, v. John H. Woodin et al., Respondents.

(Argued June 7, 1876;

decided September 19, 1876.)

Headnote

The personal representatives of a deceased member of a firm may adjust and settle the partnership affairs with the surviving partners, and, in the absence of fraud or mistake, the settlement is conclusive upon the parties, and upon all persons claiming through them, including the creditors of the deceased partner.

In March, 1866, plaintiffs obtained judgment by default against 0., and levied upon his interest in a stock of goods of a copartnership of which he was a member; by stipulation the judgment was opened, and 0. allowed to come in and defend, all proceedings on the execution to be suspended “until otherwise ordered;” directions to that effect were given to the sheriff, and the firm continued its business without interference. 0. died in July 1867; his administrators had an accounting and settlement with the surviving partners, who did not know of the levy, and O.’s interest in the firm was, for a good consideration, transferred by the administrators to W., one of the survivors. The administrators were substituted as defendants in O.’s place in said action. In March, 1868, judgment was perfected therein in favor of plaintiff, whereupon the sheriff, by direction of plaintiff’s attorney, sold the interest of 0. in the partnership assets, and plaintiff became the purchaser. In an action brought by him against the surviving partners for an accounting, held, that the execution had, by the conduct of the plaintiff,_ and the delay of the sheriff under his directions, become dormant as against tona fide purchasers, in which position W. stood; and that the settlement and transfer made by O.’s administrators were conclusive upon plaintiff.

It is not necessary in such case that the execution creditor should have acted in bad faith, or with intent to defraud in delaying the execution, to make it dormant as to third persons.

Apt-gat, from judgment of the General Term of the Supreme Court in the fourth judicial department affirming a judgment in favor of plaintiff, entered- upon the report of a referee.

This action was brought for an accounting and to recover the interest of Charles E. Case in the assets of the firm of Case, Woodin & Conger, in which firm said Case was a partner

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at the time of his death, and which interest plaintiff claimed to have purchased on execution sale.

The facts sufficiently appear in the opinion.

S. W. Dada for the appellant.

The delivery of an execution to the sheriff in the lifetime of the defendant binds his personal property and authorizes a sale after his death, although no actual levy was made previous to his death. (Becker v. Becker, 47 Barb., 498 ; Salden v. Walls, 29 N. Y., 490 .) Plaintiff, by the purchase at the sheriff’s sale, became a tenant in common with defendants of the partnership effects, and upon the dissolution of the firm acquired all the rights and was subject to all the equities of C. E. Case in the firm. (Col. on Part., §§ 112-162; Story on Part., §§ 311, 312; 3 Kent’s Com., 59 ; Smith v. Owen, 42. N. Y., 132.) Defendants are bound to account to plaintiff for the profits realized in the business up to the time of trial. (Col. on Part., §§ 325-336; Crawshay v. Collins, 15 Ves., 218 ; Featherstonhaugh v. Fenwick, 17 id., 298; Brown v. Da Tastel, 1 Jacobs’ Ch., 284; Cook v. Coolingridge, id., 608; Ogden v. Astor, 4 Sandf., 311 ; Story on Part., § 349; Washburn v. Goodman, 17 Pick., 519 ; Dyckman v. Valiente, 42 N. Y., 549 ; Sigourney v. Munn, 7 Conn., 11 .) Surviving partners are not entitled to compensation for collecting the debts, adjusting the accounts and winding up the affairs, of the concern. (3 Kent’s Com., 64; Col. on Part., § 199; Story on Part., § 331; Washburn v. Goodman, 17 Pick., 519 .)

George G. French for the respondents.

Plaintiff had no right to treat the stay of the execution as a nullity. (Starr v. Francis, 22 Wend., 633 ; Roosevelt v. Gardinier, 2 Cow., 463 ; Jackson v. Jackson, 3 id., 73; Bouv. L. Dict., 542.) The settlement as to the partnership and transfer of the interest of C. E. Case, deceased, between his administrators and defendants, was conclusive upon the rights of plaintiff herein. (Newell v. Doty, 33 N. Y., 83 , 93; Jones v. Osgood, 6 id., 233 ,235 ; Goodrich v. Thompson, 44 id., 325, 335; Taylor v. Ketchum, 5 Robt., 520; 35 How. Pr., 302 ; Ogden v. Astor,

p. 580

4, Sandf., 312, 332-335.). Tire • pretended. levy of, December, 24,1866, created no lien as against defendants., (2. R. S., 366, §17; Birdseye v. Ray, 4 Hill, 158 ; Millspaugh v. Mitchell, 8 Barb., 333 ; Bond v. Willett, 1 Keyes, 377; 29 How. Pr., 47 ; Camp v. Chamherrlam, 5 Den., 198 , 202; Both v. Wills, 29 N. Y., 471 , 485; 489; Westervelt v. Pickney, 14 Wend., 123 ; Price v. Shipps, 16 Barb., 585 ; Menagh v. Whitwell, 52 N. Y., 146 -158; Pars. on Part., *360 [2d ed.] ; Ingalls v. Lord, 1 Cow., 240 ; Hall v. Sampson, 35 N. Y., 274 ; Harris v. Murray, 28 id., 574, 576 ; Hickok v. Coates, 2 Wend., 419 ; Kellogg v. Griffin, 17 J. R., 274; Ball v. Shell, 21 Wend.; 222 ; Knower v. Barnard, 5 Hill, 377 ; 379; Price v.Shipps, 16 Barb., 585 .) Evidence as to the business of the-, firm between its members and with others was competent, (A. & A. on Corps. [9th ed:], § 248; p. 225; 1 Phil. Ev. note, 177*, pp. 602, 603 [5th ed., 1868]; Dalton y. Daniels, 1 Hilt., 472; Reab v. McAllister, 8 Wend:, 109; Mer. Bk. v. Spicer, 6 id., 443 ; 2 Wait’s L. and Pr., 389; 1 Greenl; Ev. [12th ed:, 1866], § 206:);

The death of' Charles E. Case- operated as a dissolution of the firm of Case, Woodin & Conger, and the administrators of his estate upon their appointment became tenants in common with the survivors of ■ the partnership property, subject to. the right of the surviving partners to. its possession and management for the purpose - of1 closing np the partnership affairs. (Pars, on Part., 440:) The-representatives, of Case, a? Ins..successors in,interest, wereven titled to an accounting with .the surviving partners .and to. receive -his share of .the, surplus,assets.. In-taking the account-the..interest of Qase would be chargeable not only with hjs .sh.are of the partnership debts, but-wpuld be subject ..to, a, lien in .favor. of the other ¡partners for. any debt, .owing by,him to- the fi-ym, and to any charge -createdby the partnership articles,in their favor or in favor; of ¡either, of them upon his interest ¡ip-the partnership. (1 Lindley on Part., 702; Story op Part.; §.348,; West v. Skip, 1 Ves., 139; Barker v. Goodwin, 11. Ves., 85)

p. 581

It was, however, competent for -the ‘representatives of Case and -the surviving partners to -adjust and 'settle -by 'agreement between themselves -the partnership affaiis without an accounting'or resort to legal proceedings. -Such a settlement, in the absence of fraud, would be binding -upon the parties to it, subject i» be opened 'for the correction of -errors or mistakes, in accordance with :the practice -and principles of courts of equity. (Parsons on Part., 511, 513 ; Ogden v . Aster, 4 Sand., 312.)

The referee -finds that in'the fal of 1867, after the death of . Case, there Was-an 'aeebuiiting between Ms-representativCs-and Woodin'and Conger of the'affairs of the firm of Case, Woodin -& Coiiger and the previous firms Of which Case -and Woodin Were members, and an adjustment and settlement of their respective rights and liabilities. The basis,-and to a considerable extent the details, Of‘the settlement are set out in the report.

It is sufficient here to 'state -in general terras that the interest of Case in the firm of Casé, Woodin & Conger -remaining after payment of the "debts was ascertained. This ‘interest was transferred by the 'administrators to Woodin in consideration of Ins assuming and paying the debts of Case 'and Woodin, for 'wMeh both Were liable, and dischaiging the estate of Case from Ms individual indebted--mess ’to -Case, Woodin & Conger and to -the previous firms. In addition, 'and ass part Of "the settlement, the administrators of Case paid to Woodin $268.74, that being the excess Which, on the accounting, was found to be dúo from the estate "to Mm, aftei- applying Case’s interest in thé firm -as stated. The referee -also found that, by the partnership agreement of Case, Woodin and üóhgér, made on the Organization of that firm in 1866, it was agreed that the interest of Case in the heW firm should be charged with the payment of his liabilities as a partner in the previous firms. The settlement, -in the absence of fraud or mistake, was confelusive upon the parties and upon all persons claiming through them. The general creditors of Case Were bound by it as the -act of his legal rep resentatives.

p. 582

The plaintiff, on the 21st day of December, 1866, recovered a judgment in the Supreme Court against Case. Execution on the judgment was issued December 24, 1866, and the sheriff, on the same day, by virtue of the writ, levied upon the interest of Case, in the goods of Case, Woodin & Conger, in the store occupied by the film. In March, 1868, fifteen months after the levy, the sheriff advertised and sold the interest of Case in the partnership assets under the execution, and" the plaintiff became the purchaser for the sum of thirty dollars: The sale was subsequent to the death of Casé, and also to the settlement between his representatives and the surviving members of the firm. The plaintiff, claiming by this purchase to have acquired the interest of Case, Woodin & Conger as it existed December 26, 1866, brings this action for an accounting, and insists that the settlement made in the fall of 1867, between Case’s administrators, and the survivors of the firm does not conclude or bind him, for the reason that the interest of Case was bound by the levy, and that the title of the creditor, when perfected by a sale on the execution', rendered null and void the settlement and the transfer made by the representatives of Case to Woodin. The plaintiff claims to stand in the same position and to have the same rights as if the settlement and transfer had not been made, and to be entitled to an accounting, de nova, as to Case’s interest in the partnership, and of the profits on his share in the business after his death.

The defendant Woodin, upon the facts found by the referee, was a bona, fide purchaser of the interest of Case in the partnership. Dpon the faith of the settlement, and in consideration of the transfer to him of that interest, he assumed liabilities against his estate, and discharged claims in his own favor, growing out of the previous partnerships, and neither he or Conger had any notice or knowledge of the execution or levy at that time, and not, as the referee finds, until the sale in March, 1868.

The plaintiff insists that the evidence did not authorize the frndrng of the referee, that Woodin was a purchaser without

p. 583

notice of the levy. The deputy sheriff, who held the execution And made the levy, testified that he notified the defendant Woodin of the levy January 24,1867. This was contradicted by Woodin; and both defendants testified that they had no notice until after the death of Case. The sheriff did not claim that he gave notice at any time, except in January, 1867. The sheriff had then been directed by the attorneys for the plaintiff to suspend further proceedings on the execution, until otherwise ordered, and the direction was not withdrawn until March, 1868. The conduct of the officer when the alleged levy was made, indicates an intention to conceal the fact from the partners of Case, and in view of all the circumstances, we think the referee was justified in his conclusion upon the question of notice, at least we cannot say that there was no evidence to support it.

It is not, however, alone sufficient to support the title of Woodin as against the lien of the execution, that he was a bona fide purchaser without notice of the levy. The title of a bona fde purchaser of goods from the execution debtor, after execution issued without notice and before actual levy, is protected by statute (2 R. S., 366, § 17); but if the purchase is after the levy, the lien of the. execution is paramount.

But we are of the opinion that the execution had by the conduct of the plaintiff, and the delay of the officer under his direction, became dormant as against bona fide purchasers of Case’s interest in the partnership, intermediate his death and the execution sale in March, 1868. The judgment of the plaintiff against Case was by default. In January, 1867, the plaintiff’s attorney, upon the request of the attorney for Case, opened the default and allowed him to answer on payment of costs, and thereupon, in pursuance of a stipulation between the parties, directed the sheriff to suspend all further action or proceedings upon the execution until otherwise ordered. Issue was joined in the action and judgment was obtained by the plaintiff after trial in March, 1868, and then the sheriff was directed to proceed on the execution on the original judgment. From January, 1867, to this time, no step had

p. 584

.been taken by the sheriff ,on ¡the. execution. The firm of 'Case, Woodin & Conger continued to carry .on .their store as usual, gelling goods .and making new .purchases, without interference ,of the sheriff. After the death of .Case,, the surviving partners continued the business until the settlement with -the administrators, and thereafter conducted ft in the name of Wooclin,& Conger, The delay in .executing the -writ was in consequence ¡of the voluntary intervention and ¡direction of the plaintiff, JS[o order opening the default or staying proceedings on the .execution was obtained. The plaintiff put himself in a position where he.eouldnot enforce the writ for-an indefinite period, and -Whether it;eould.ever be enforced was uncertain, .depending .on •thecontingency of his obtaining ¡a second judgment in hisfavor. Meanwhile, the firm was allowed to go on ¡selling the .goods levied on, and dealing with the public and each .other .as if no execution had been issued. To hold, under these circumstances, that the execution remained in life s.o .as .to .defeat the title of an intermediate Iona -fide purchaser of the property, Would operate as a fraud. It is not necessary -that the .execration creditor should .have acted in bad faith, or with an intern tian to defraud in. delaying the execution of the writ to make it dormant as to third persons- An unreasonable delay directed by the plaintiff in -the execution., .although from motives of humanity, will let in and give precedence to a subsequent .execution, ,(Storm v. Woods, 114 J. R., 110; Benjamin v. Smith, 4 Wend., 332 .) And where -an execution is dormant as against other creditors, it is dormant also as to Iona fide purchasers, (Hickock v. Coates, 2 Wend., 419 ; Butler v. Maynard, 11 id, 552; Ball v. Shell, 21 id., 222.) We ¡are of opinion, therefore, that the conduct and direction of the -plaintiff operated as a supersedeas to the execution, .so far as third persons are concerned (Savage, Ch., J., Hickook v. Coates), and that the Settlement and transfer made in October, 1867, between the defendants and the administrators of Case, is conclusive upon fh§ plaintiff,

■The referee held that the plaintiff, by his purchase on the execution sale, acquired whatever right the administrators of

p. 585

■ Case had to open the settlement for .the correction of errors in the.accounts, and judgment was awarded to the plaintifE for the amount of certain erroneous charges found to have been made against the estate of Case at that time. It is claimed that, proceeding upon this theory, other allowances should have been made. But there are no findings or exceptions which present this question, and we are not called upon to critically examine the voluminous evidence to ascertain whether the referee .omitted any allowances which should have been made.

The conclusion reached on the principal question renders it unnecessary to consider particularly the exceptions to the admission of evidence. Much .of the evidence to which objection was taken, is wholly unimportant in view of the point upon which we dispose of the case, and after examining the exceptions, we find none which require a reversal of the judgment.

The judgment should be affirmed.

All concur.

Judgment affirmed.