Haynes v. Brooks — 27 N.Y. St. Rep. 478

Majority

p. 478

George A. Haynes et al., App’lts, v. John I. Brooks, Individually, and David S. Brown, as Assignee of John I. Brooks, Individually and as Surviving Partner of John I. Brooks & Co., Resp’ts.^[1]

(Court of Appeals, Second Division,

Filed November 26, 1889.)

Headnote

Assignment fob cbeditobs—Paying individual debts with fiem fbopebty.

After the death of his partner, John I. Brooks carried on the business-in the firm name, and became indebted to plaintiffs, they knowing that his partner was dead. Becoming insolvent he made an assignment of the firm property acquired beforehand after his partner’s death, and also of his own property preferring the creditors of the old firm, and directing that the balance be devoted to paying all other debts, etc. _ Held, that plaintiffs were in no position to avail themselves of the objection that the assignment devoted firm property to pay individual debts as they were not defrauded nor hindered, but would be benefitted by such a provision.

p. 479

Appeal from a judgment of the general term of the first, judicial department, affirming a judgment which dismissed the complaint, with costs, and was entered on the decision of a special term.

For several years before September 9, 1883, John I. Brooks and Edward C. Brooks were dealers in pork and lard,as partners, under the firm name of John I. Brooks & Co. They owned real estate paid for by the firm and used for its purposes, which was held under deeds running to John I. Brooks and Edward C. Brooks, as grantees. On the date named, Edward C. Brooks died intestate, and thereafter letters of administration were duly issued to his-widow. At this date the firm had assets and liabilities; but whether it was then solvent or insolvent does not appear. After the death of Edward C. Brooks, John I. Brooks continued to use-the assets of the firm in transacting a like business in the name of the firm, and acquired new assets and incurred new liabilities. The liabilities incurred and the assets acquired were treated by John I. Brooks as the property of the late firm, and as belonging to him as surviving partner.

In February, 1884, John 1 Brooks became indebted to the plaintiffs in the sum of $1,944.85, the price agreed upon for dressed hogs purchased in the name of John I. Brooks & Co.; but the plaintiffs knew when the goods were sold that Edward C. Brooks was dead On the 18th of- April, 1884, the plaintiffs duly recovered a judgment against said John I. Brooks for said indebtedness, on which an execution was issued and returned wholly unsatisfied May 29, 1884.

On the third day of March, 1884, John I. Brooks individually, and as the surviving partner of John I. Brooks & Co., executed a preferential general assignment to David S. Brown who accepted the trust. The assigned property consisted of (1) that-owned by John I. Brooks & Co. at the death of Edward C. Brooks; (2) that acquired after the death of Edward C. by the dealings of John I. Brooks in the name of the firm: (3) that owned by John I. Brooks individually and not acquired or used in connection with the business transacted by, or in the name of the firm.

The outstanding debts were (1) those incurred by John I. Brooks- & Co.; (2) those incurred by John I. Brooks in the name of the firm after the death of his partner; (3) those incurred by John L Brooks individually, but not in connection with the business carried on by or in the name of the firm. The assignment conveyed all of the property of the late firm and the individual property of the assignor. It directed the assignee to pay in full eleven creditors named in schedule A, whose claims aggregated $19,467.68, of which $11,264.83 was contracted by the firm before the death of Edward C. Brooks, and the remainder by John I Brooks since the death of Edward C., in the name of the firm, but they were, in fact, save one, renewals of obligations made by the firm before the-death of Edward C. Brooks. After providing for the payment in-full of said preferred creditors, the assignment provides that, “ the-said party of the second part, the assignee, shall pay and discharge

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all the other debts, demands and liabilities whatsoever, now exist' ing, whether due or to become due against the said firm of John I. Brooks & Co., or against said party of the first part as the survivor thereof.”

The court found that the preferred debts were justly due and owing to the creditors preferred and that the assignment was made in good faith and without intent to hinder, delay or defraud the plaintiffs,' or any of the creditors of the firm or John I. Brooks, which finding is not not challenged

George W. Van Slyck, for pl’ffs, app’lts; F. A. Paddock, for def’ts, resp’ts.

A sole surviving partner can without the assent of the representative of the deceased partner make a valid, general preferential assignment of the property which belonged to the firm for the benefit of its creditors. Williams v. Whedon, 109 N. Y., 333 ; 15 N. Y. State Rep., 265. The provision in the assignment which devotes the individual property of John I. Brooks to the payment of the creditors of the firm is valid. Crook v. Rindskopf, 105 N. Y., 476 ; 8 N. Y. State Rep., 66..

The plaintiffs assert that the assignment devotes property which "belonged to the firm to the payment of the individual debts of John I. Brooks, and is, for that reason, void. Assuming the rule laid down in Wilson v. Robertson, 21 N. Y., 587 , to be applicable to an assignment executed by a surviving partner under the circumstances disclosed in this record, the plaintiffs are not in a position, in this action, to avail themselves of this objection. It is the creditors of the firm who are injured by the provision which devotes firm property to the payment of individual creditors. The plaintiffs are the creditors of John I. Brooks, and became such with knowledge of the death of Edward C. Brooks. They are not defrauded, nor hindered nor delayed, in law or in fact, by the application of firm property to the payment of the creditors of John I. Brooks, but are benefitted.

A judgment setting aside the assignment, as to these plaintiffs, would afford them no remedy against the firm property, and they cannot prosecute this action for the sole benefit of the creditors of the firm, who do not complain. Bostwick v. Menck, 40 N. Y., 383 ; Royer Wheel Co. v. Fielding, 101 id., 510 ; Crook v. Rinds-kopf, 105 id., 488 ; 8 N. Y. State Rep., 66; Williams v. Whedon, 109 id., 333, 338; 15 N. Y. State Rep., 265.

The plaintiffs’ debt was contracted by John I. Brooks, as surviving partner of the firm, though in law it is his individual debt, and it is very clear that their claim was intended to be, and is embraced within the debts directed by the fourth clause to be paid by the asssignee.

The judgment should be affirmed, with costs.

All concur.