Davis v. Grove — 25 N.Y. Super. Ct. 635

Majority

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Joseph D. Davis and another, plaintiffs and appellants, vs. William Grove and others, defendants and respondents.

Headnote

1. An agreement between two firms, one doing business at Cuba and the other at New York, by which the former were to buy merchandise at the former place and ship it to the latter at New York and to pay for the same, so far as they could, by bills drawn by the Cuba firm on the Now York house to be by them accepted, constitutes the members of both firms partners as to any transactions under such agreement.

2. Any merchandise shipped under such agreement from Cuba, as well as the proceeds of any so shipped which might be in the hands of the New York house, were the joint property of such partnership, and the members of the Cuba firm had a right to have the same first applied in satisfaction of any joint indebtedness thereof, including any. bills drawn by them to pay for such merchandise, before the same could be employed to satisfy any debts due by the New York house alone, or of any individual member of either firm.

3. An assignment by the New York house, under such circumstances, of merchandise shipped under such agreement, and the proceeds of any so shipped, to an assignee for the benefit of the creditors generally of such firm, is fraudulent and void, as against the members of the Cuba firm, and may he set aside in

. an action brought by them to wind up the affairs of such partnership and apply its property to pay its debts, in which they are entitled to an order of injunction and receiver.

(Before Robertson, Ch. J., and Garvin and McCunn, JJ.)

Heard-, 1864;

decided --, 1864.

This was an appeal from an order made by Justice Monell,' on the 16th. of December, 1863, on an order to show cause why a temporary injunction, restraining the defendants from interfering with certain merchandise, and .the proceeds of other merchandise mentioned in the complaint, should not be made permanent, and a receiver appointed of the same.

The order was granted on a sworn complaint and an affidavit of one of the plaintiffs, and cause was shown by affidavits of the defendants.

The complaint alleged that the plaintiffs were copartners, doing business in Cuba, under the firm name of Davis & Toscano ; that the defendants Grove, Kohl and Allison were copartners; doing business in this city, under the firm name of William Grove & Co. That one of the defendants, Grove, made cer

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tain false representations to the plaintiffs ; and that induced by these false and fraudulent representations, and believing them to be true, the plaintiffs, under their firm name, “ Davis & Toscano,” entered into an arrangement with the defendants, Grove, Kohl and Allison, under the firm name of “ William Grove & Co.” to transact a business in sugars on joint account. The business was to be transacted as-follows:

Davis & Toscano were to draw bills of exchange at sixty days on William Grove & Co., who were to accept the same. These bills were to be sold, and the proceeds thereof were to pay for the shipments of sugars, so bought by Davis & Toscano.

Under this agreement, they allege that they shipped to William Grove & Co. sugars to the amount of near $65,000, United States currency, and $1187.49 .more than they had drawn bills against.

The Complaint further alleged that before the maturity of any of the bills so drawn and accepted, “ William Grove & Co.” failed (in October, 1853,) and made an assignment to the defendant Barmore, who took possession of the proceeds of the sugar sold, and such as-remained on hand and unsold. It also alleges that Barmore is now about to sell the balance, and to distribute the entire proceeds among the general creditors of William Grove & Co. without reference to these sugar transactions.

It then avers that such assignment is fraudulent and void, so far as it affects the sugars or the proceeds thereof, and concludes by a prayer for judgment against all the defendants (Barmore, the assignee, included) for' $1187.49, and also for half the profits, alleging the entire profits to amount to $20,000. That such assignment be adjudged fraudulent and void as to said sugars and the proceeds thereof, and that the defendants may be restrained, and a receiver be appointed. And that the holders of the bills, who bought the bills on the strength of the drawers’ and acceptors’ names, without the slightest reference to the shipments of sugars, be paid first out of the proceeds thereof, and that the plaintiffs may have such other relief as

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may seem proper to the court, and as the nature of the case may require.

None of the material allegations in such complaint, as to such agreement, shipment and assignment, were denied by the counter affidavits produced by the defendants, except as to any indebtedness by them to the plaintiff. They averred that the plaintiffs were indebted to the defendants, and insolvent.

. Upon such motion, a receiver was appointed of such merchandise and proceeds, and the defendants were directed to deliver to him so much of such merchandise and its proceeds as should be equal to $12,000, for the plaintiffs’ share of the profits of such partnership, and upon compliance with such order the injunction was dissolved.

From this order the plaintiffs appealed.

W. H. Anthon, for the plaintiffs and appellants,

Insisted, that the action was properly commenced in the names of the plaintiffs and all holders of the bills drawn by them under the agreement set out in the complaint, in order to compel the defendants to account therein, as trustees, for the benefit of such bill holders, of merchandise paid for by such bill's and any proceeds of sales thereof received by them.

But on the question of partnership he presented the following points :

I. The arrangement between “ Davis & Toscano ” and “ William Grove & Co.” to purchase, ship, and sell sugars, on joint account, was treated, in the order made at special term, as a partnership, and the receiver was directed to take charge of the share of “ Davis & Toscano ” of the partnership profits. This view of the case, though unquestionably correct, is not broad enough. The receiver should also have been directed to take possession of enough of the proceeds of the partnership property, (viz. the sugars,) to pay in full the partnership debts, (viz. the drafts.) All that can properly be held by the assignee of the insolvent partners in this transaction (William Grove & Co.) and applied to the payment of their separate debts, is

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their share of the profits arising from the consignments of the sugars, after the debts of such partnership are paid.

II. If one partner becomes a bankrupt, his assignees can obtain no share of the partnership effects, until they first satisfy all that is due from him to the partnership, and until after a settlement of the partnership accounts. (Collyer on Partn. 486. Lord Tenterden’s opinion, 8 Barn. & Cress. 618. Goss v. Dufresnoy, Davies’ B. L. 371. Nicoll v. Mumford, 4 John. Ch. 522. Rodriguez v. Heffernan, 5 id. 417. Buchan v. Sumner, 2 Barb. Ch. 165 .)

III. The right of the plaintiffs to demand that the proceeds of their joint account or partnership transactions in sugars shall be first applied to the liquidation of the joint account or partnership debts incurred in the purchase of those sugars, arises from the fact that they are themselves liable for the partnership debts, as guarantors of the drafts.

IY. The creditors of the partnership, the holders of these drafts, are proper parties to this suit, to enable the court, having all the parties before it, to make a final decree covering the whole matter.

V. Whether this transaction is a special pledge of the sugars for the payment of the drafts, or a partnership between William Grove & Co. and Davis & Toscano, the order appealed from should be modified, by extending its provisions as to an injunction and receiver, to the entire amount of the drafts, as set forth in the complaint, as well as to the plaintiffs’ share of the profits, and also to the sum advanced by them for the purchase of the sugars, ($1187.49,) over and above the amount of the drafts.

Titus B. Eldridge, for the defendants, respondents.

By the Court,

The inconsistency of the prayers for relief - and the mixture of different and separate causes of action in the complaint in this case is not only bad pleading,, but very embarrassing.

1. It asks for a judgment for $1187.49.

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2. It asks for a judgment for one half of the profits" on the enterprise, without any prayer for accounting.

3. That the assignment by the defendants, Grove & Kohl, to Barmore be set aside as fraudulent and void, and for an injunction and receiver; and

4. For a judgment in behalf of the owners and holders of the bills of exchange, strangers to the action, and mere creditors of the two firms of Davis & Toscano and William Grove & Co.

Under the first and second prayer in the complaint if the plaintiffs made out a case of ordinary indebtedness at common law, and their accounts had been adjusted, they would be entitled to judgment for the amount proved; but in that event, they are certainly not entitled to an injunction or receiver until after judgment.

To the third prayer, for a judgment setting aside the assignment, the answer is that they cannot, in this action and before judgment, obtain such relief.

To the fourth prayer, my view is that the holders of these bills of exchange are mere creditors of the two firms of Davis & Toscano as drawers, and William Grove & Co. as acceptors, and cannot be joined in this action;. they having purchased said bills on the strength of the makers’ and drawers' names without reference to these shipments, are mere creditors and must seek separate remedies.

It cannot be pretended or maintained that in such a case as this any number of creditors can join in one action and prosecute separate claims in that suit against a debtor (unless all the claims be assigned to the plaintiff;) besides, the Code provides that actions must be prosecuted in the name of the real parties in interest.

If these drafts had been drawn and accepted, and the consignments had been made to meet the same, then, perhaps, the rule in the case of Scheldt v. Sturges, Shaw & Co. would have held good, and the holders of the drafts could have enjoined the disposition of the sugars, and the court would have decreed a liquidation of said bills of exchange out of the pro

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ceeds thereof; but-so far from this being the case, the drafts were drawn by the makers, and accepted by-the acceptors, and disposed of in the market to third parties, on the strength of the drawers’ and acceptors’ names, without the slightest regard or reference to these shipments. Indeed, the drafts were sold (as appears by the schedule annexed to the case,) and on their way to maturity, before the shipments of sugars were purchased in Cuba.

If the adventure of these sugars had been brought to a final close, and the amount ascertained, or an account had been stated between the plaintiffs and defendants, then an action for a money demand on contract for the over advance and profits, if any were found due, would lie, but in that event they would be entitled to neither an injunction nor receiver.

If, instead of an action in this form, a complaint had been filed, alleging this to be a partnership transaction; that the credit of both parties was involved; that the joint names and credit of the two firms, Davis & Toscano, and William drove & Co., the one as drawers of the bills, and the others as acceptors, were the means by which they procured the moneys that bought these sugars ; that the same were bought on joint account as partners in this transaction; that a large amount of the sugars and the proceeds thereof were on hand; and that a joint indebtedness was outstanding, a proper remedy would have been obtained.

The next question to be considered is, can the complaint in the action as it now stands be viewed in such a light as to • afford the plaintiffs relief, by way of injunction and receiver, and for an accounting as partners in this transaction ?

No allegation in the complaint warrants the granting of this kind of relief, unless the allegations “to transact business on joint account,” “and that the profits upon such shipments after deducting all charges will amount to at least the sum of $20,000, and that half of said profits absolutely belong to said plaintiffs, and the last portion of the final prayer, for such further relief as may seem proper to this court, and as the nature of the case may require,” can be so construed.

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It is admitted on the part of the plaintiffs and defendants, that this was a joint partnership transaction, and although the complaint in the case is very inartistically drawn', yet the relief, which the court may grant, under section 375 of the Code (taking into consideration the allegations of the complaint just quoted) may not he inconsistent with the allegations contained in the complaint.

The case of Marquat v. Marquat, (2 Kernan, 336,) justifies such a construction of the complaint in this action. In that case the defendants, as husband and wife, borrowed money from the plaintiff, to enable them in part to purchase certain lands, and agreed to give a mortgage, to secure the money so borrowed, on the wife’s real estate, it being the property for which the money was paid. The complaint, after setting up these facts, besides demanding judgment “that the defendants for the purpose of carrying the said agreement, execute a mortgage upon the real estate of the wife, asked for such further relief as the court should deem proper.” And the court held that they might give judgment against the husband for the amount borrowed under the ordinary money counts, although it dismissed the action as to the wife.

On the whole, the complaint in this case is broad enough to enable the plaintiffs to obtain their relief, and the receivership in the case ought to have extended to all partnership assets in the hands of the assignee Barmore, and the injunction order should have covered all such assets. In order to ascertain the amount of such assets, there should be a reference to ascertain the same, unless the amount can be agreed upon. No costs are allowed on the appeal to either party.

Order modified accordingly.

Cases cited

Buchan v. Sumner 2 Barb. Ch. 165 N.Y. Ch. 1847-04-06 p. 638