Friedburger v. Jaberg

—Three grounds are advanced as reasons for declaring the assignment invalid:

First. That it is not executed by both partners of the insolvent firm.-

Third. That there was fraud in the misapplication of assets by one of the firm a few days before the assignment was made and delivered, and that there was a fraudulent concealment of assets in making the schedules.

As to the first ground suggested, it is claimed by the defendant that under the peculiar circumstances of this case, the actual participation or assent of Stadelman, one of the partners, was not necessary; that he was insane at the time the assignment was made, and could neither join in its execution or sanction it.

It is well settled that one partner cannot make an assignment of co-partnership property to a trustee for creditors without the assent of his co-partner. The case of an absconding partner is an exception. Welles v. March, 30 N. Y., 344 ; National Bank v. Sackett, 2 Abb. N. S., 286. A subsequent ratification is sometimes equivalent to an original authorization (Adee v. Cornell, 93 N. Y., 572 ), but in this case the non-assenting partner was not in flight, nor did he ever ratify the instrument, but on the contrary he expressly repudiated it and brought suit to have its invalidity declared by the court.

Assuming that the evidence of Dr. Wildman and Dr. Nichols, medical experts, and that of the witnesses who were called to testify to peculiar conduct of the non-assenting partner at and about the time the assignment was made, establishes the fact that he was non compos mentis at that time, did that fact of itself confer the power upon and authorize one member of the firm alone to convey the partnership property to a trustee?

I have not been referred to nor am I aware of any case in which this precise question has been presented, but as one of first impression it seems to me that insanity not declared by inquisition can no more be urged as a reason for dispensing with the assent of the partner than can his incapacity to concur arising from any other cause, such as absence or serious illness. Insanity does not dissolve a partnership. The prevailing opinion is that it only gives “a good and sufficient cause for a court of equity to decree a dissolution.” Story on Part., § 295, and note; Collyer on Part., vol. 1, note, § 101. If it does not dissolve the partnership, it cannot give the right to the partner not affected with it to dissolve arbitrarily or at will. Whether a dissolution shall be decreed must rest in the sound judgment of the court expressed after hearing all the facts and in view of the disability being temporary or permanent.

But the execution of a general assignment operates practically a dissolution of the firm. It was said in Welles v.

But whatever the courts might decide in a case of insanity on inquest and office found I am not disposed in this case to hold that the insanity authorized one partner to execute the assignment. The disability here seems to have been acute mania of short duration, for the sufferer was discharged from the asylum within four weeks from the first day of his confinement, and shortly after his release he began suit to set aside his partner’s act.

It can scarcely be held under this state of facts that during this period of incapacity all the power and authority of both partners inhered in Jaberg, and that by reason of the temporary disability Jaberg became vested by law with an authority to create a trust which placed beyond reach all the assets of the concern, and virtually extinguished all the interest of the disabled partner in the business. The second ground of opposition to the assignment does not require consideration under the view I have taken- of the insufficiency of the instrument.

On the third ground—namely, acts on the part of Jaberg, committed about the time the assignment was made', showing an intent to hinder, delay and defraud creditors—I think a case has been made out entitling the plaintiffs to have the instrument set aside. Jaberg was the only actor in making the assignment, and three days before it was made, and when he knew of the insolvency of his firm, he transferred merchandise of considerable value belonging to the firm to his individual creditor, for his individual debt, and that creditor he selected to be the assignee of the firm property. He knowingly took this merchandise from the firm creditors, and it was done in such close proximity of time to the fact of the assignment that its purpose cannot be doubted, and the making of the general assignment to the very person to whom he had given the merchandise is a circumstance of great significance.

When the schedules were made this property was omitted, and it is manifest that it was intended to conceal the transfer from the firm’s creditors. The subsequent attempt at restoration of the proceeds of the sale of that property does not affect the intent of the assignor in making the assignment.

I think it is clear from the whole atmosphere of the case, without further reviewing the testimony, that the assignment was intended to hinder and delay creditors.

Judgment must be for the plaintiff.