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Doane v. Lindsay

42 N.Y. Super. Ct. 399 10 Jones & S. 399 Court N.Y. Super. Ct. Decision date 1877-05-08 English

Delivered by *408 By the Court.—Speir, J.

Contents

Majority

p. 399
ELIJAH DOANE and another, Plaintiffs and Appellants, v. WILLIAM LINDSAY, Assignee, Defendant and Respondent.

Headnote

I. PARTNERSHIP.
. 1. ATTACHMENT ISSUED, IN AN ACTION AGAINST CO-PARTNERS UPON A FIRM DEBT, AGAINST ONE OF THE FIRM.
(a) What can be seized under.
1. Only the right and interest of the partner against whom the attachment issued, in the partnership goods; which is the surplus remaining after the partnership debts have been paid.
(b) Agreement between attaching creditor and subsequent assignee of the firm, whereby in substance the assignee was to sell the attached goods; and the applicability of the proceeds to be determined by the court or otherwise, as the parties might agree.
1. Effect of. It places the attaching creditor in the position of a jiurchaser of the attached interest at a sheriffs sale thereof.
Held—
it appearing on the trial of an action brought by the attaching creditor, based on such agreement, that at the time of the levy of the attachment the firm was insolvent, that no part of the proceeds was applicable on the judgment obtained in the action in which the attachment issued, and therefore the complaint, was prop- ■ erly dismissed.
Before Curtis, Ch. J., and Speir, J.
Decided May 8, 1877.
Appeal from a judgment in defendant’s favor, entered upon findings of fact and law, made by the judge who held the court at special term, before which it came and was tried without a jury.
On December 21, 1875, the plaintiffs were copart
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ners doing business under the firm-name of Doane & Gott, and on the same day John Winans and Jared Flagg were copartners doing business in the same city under the firm-name of John Winans & Company. On that day said firm of John Winans & Company were indebted to the plaintiffs in the sum of $864.10 with interest thereon, for goods sold and delivered to them by plaintiffs herein; and on said day and for a long time prior thereto the said Winans was, and had been a non-resident of the State of New York, but said Flagg was a resident of the city of New York. On said day plaintiffs commenced an action in the supreme court of the State of New York, against said Winans and Flagg as such copartners to recover said sum of $864.10 for goods sold and delivered them as aforesaid by said plaintiffs, and on said day obtained a warrant of attachment directed to the sheriff of the city and county of New York, and commanding him “to attach and safely keep all the property of the said defendant Winans within your county or so much thereof as may be sufficient to satisfy -the plaintiffs’ claim of $864.10 with interest as aforesaid, together with the cost and expenses.”
By virtue of said warrant said sheriff on said day took into his possession under said attachment a large amount of merchandise, being of the value of $2,000 and upwards, and being all the stock in trade of said John Winans & Company. Said Winans and Flagg were partners and owners of said stock in trade, and Winans had at least a half interest therein.
The summons arid complaint in said action were served simultaneously with the levy under said attachment on both of said defendants. On the same day, but several hours after said levy, and before any judgment was entered in said action, said firm of John Winans & Company made a general assignment of their property for the benefit of their creditors, to the
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defendant in this action. Such proceedings were had in said action, that judgment for failure to answer was duly entered in favor of the plaintiffs and against said Winans and Flagg, on January 11,1876, for $965.56.
On December 81, 1875, the parties to this action made and entered into the following agreement in the action in which the attachment issued.
“N. Y. Supreme Court.
“ Doane and Gott,
v.
“John Winans & Company.
“It is hereby agreed that the assignee of the above-named defendants may sell the attached property herein, and that he retain in his hands the proceeds of such sales, such proceeds to take the place of such attached property and to be applicable to the payment of the plaintiffs’ claim in this action, if the court shall so order; and shall in all respects be applicable to the same extent as the property if unsold would be applicable to the payment of any judgment recovered by the plaintiffs herein. The question of such applicability to be hereafter determined by the court or otherwise, as may be agreed upon by the respective parties hereto; and said assignee hereby agrees to hold said proceeds to be disposed of as aforesaid; and-it is further agreed that any goods in the hands of said assignee which were consigned to defendants by plaintiffs, be sold in the same manner and the proceeds be held subject to such further order and determination as may be had in the premises by the. respective parties hereto, and said assignee hereby agrees to hold said proceeds and the proceeds of any of said consigned
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goods which have heretofore been. sold, subject to such order or determination.
“Dated, December 31st, 1875.
[Sd.] William Lindsay, Assignee,
[Sd.] Isaac L. Milleb, PI’fife Atty.”
The defendant herein in pursuance of said agreement sold said attached property, from which he received and now holds in accordance with said agreement the sum of $2,200.
It was admitted that the debts of the firm at the time of the attachment were about $3,000.
The judgment appealed from is based on the above agreement.
Isaac L. Miller, attorney, and of counsel, for appellants, urged :
I. The sheriff was not only justified, but it was his duty to take manual possession of the copartnership property under the attachment, and the defendant in this action, as assignee, could not have retaken the same by replevin (Smith v. Orser, 42 N. Y. 132 ; S. C., 43 Barb. 187 ; Goll v. Hinton, 8 Abb. Pr. 120 , and cases there cited). The court will observe that these decisions are in actions brought against one or more members of a partnership by private creditors, and not on a copartnership indebtedness ; while the original action brought by plaintiffs, and in which the attachment was issued, was a suit against all the members of a copartnership, and on a copartnership indebtedness.
II. The possession of the sheriff being lawful, the plaintiffs, by virtue of the levy under said attachment, ceased to be creditors at large of said firm of John Winans & Co., but became creditors, having a specific lien on the goods and chattels attached (Richney v. Stryker, 31 N. Y. [4 Tiff.] 140 ; Frost v. Mott, 34 Id. [7 Tiff.] 253 ; Heye v. Bolls, 2 Daly, 231 ).
III. It having thus been demonstrated, (a) That the
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sheriff was lawfully in possession of the property attached ; (b) that, by virtue of the levy, plaintiffs ceased to be creditors at large, and became creditors having a specific lien on iSie property thus attached ; we come to the real questions at issue, viz : 1. Is the interest of a member of a partnership in partnership effects, property capable of being attached ? 2. If such interest is attachable, what rights, if any, did plaintiffs acquire by virtue of said levy, under the attachment ? (Winans had, at least, one-half interest in the partnership stock in trade seized under the attachment.) 1. The interest of a partner is “property” capable of attachment (McKay v. Harrower, 27 Barb. 463 ; approved in Smith v. Orser, supra). Partners are joint tenants in the stock and all the effects. They are seized per mi et per tout (Phillips v. Cook, 24 Wend. 389 , 393, cited and approved Smith v. Orser, supra; Mabbett v. White, 12 N. Y. [2 Ker.] 442, 454, 455 ; Wells v. March, 30 N. Y. 344 , 350 ; Baldwin v. Tynes, 19 Abb. Pr. 32 ). The corpus of the effects is partnership property (Menagh v. Whitwell, 52 N. Y. 146 , 158 ; Parsons on Partn. 150; Brinkerhoff v. Marvin, 5 Johns. Ch. 320 , 328 ; Berry v. Kelly, 4 Rob. 106 ,125). These decisions appear to establish beyond all controversy that a partner’s interest in partnership effects is property, and the conclusion seems to follow naturally and inevitably that as such it, can be taken under attachment and held to await the final decision of the case. 2. As to the right acquired by plaintiffs by the levy made under the attachment. It being admitted, that the defendant, as assignee, has in his possession $2,200 proceeds realized from the sale of the attached property, and that said Winans was interested in said property to at least the extent of one-half, and as plaintiffs are fully protected by the stipulation, it seems to be perfectly obvious in the light of the decisions under subdivision one of this point, that plaintiffs are entitled
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to judgment against defendant as such assignee to the full extent of their claim with costs. But at this stage of the case plaintiffs are met with the following objections, viz., a partner is interested only in the surplus remaining after the payment of the firm indebtedness ; that plaintiffs could only attach that interest; that Winans & Co. were insolvent, therefore nothing could remain after payment of firm indebtedness, and that, therefore, plaintiffs attached nothing, and the following cases are cited in support of this theory (In re Smith, 16 John. 126 ; Allen on Shff. [Ed.] 1845, 154). In re Smith maybe considered as overruled by Smith v. Orser, supra, see opinion of Lott, J. With reference to this objection it should be noticed that the authorities holding the interest of a member of a partnership in partnership effects to consist merely in the surplus remaining after the debts of the firm have been paid, will be found to be at the suit of a private creditor (3 K. C. 78, note b, 11th Ed. ; Menagh v. Whitwell, Smith v. Orser, Goll v. Hinton, supra). By a critical examination of the opinion of Rapallo, J., in Menagh v. Whitwell, it will be seen that though he appears to state this rule more broadly (see p. 158), yet in reality he refers to actions brought by private creditors of one or more members of the copartnership or by parties claiming under one or more. The reason of this rule is twofold: 1. For the protection of copartnership creditors, i. e., partnership debts have in equity an inherent priority of claim to be discharged from partnership property (Menagh v. Whitwell, supra). 2 . For the protection of the other members of the co-partnership, i. e., in order that partnership assets may not be used in the liquidation of private indebtedness of one partner to the prejudice of the remaining copartner.
IV. This case was dismissed. The court following ‘‘ "with some doubt ’ ’ Berry v. Kelly, supra. The
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court in that case did not and could not hold as stated in the special term opinion rendered in this case, that “ an attachment by a firm creditor of the goods of one of the firm, in an action against the firm, on a firm indebtedness, did not enable the sheriff to levy on a greater quantum of interest in firm property than if the plaintiff was a creditor of the defendant in the attachment individually,” for the following reasons: 1. 'Said firm of Carroll & Mead was insolvent and unable to pay its debts. 2. That being the case, if plaintiffs occupied no better position than individual creditors of the non-resident defendants, against whom the attachment was issued, they only attached the interest that said non-resident defendants had in the surplus remaining after the payment of the partnership indebtedness (Menagh v. Whitwell, Smith v. Orser, supra), and the partnership being insolvent, there would be no surplus or interest therein remaining, consequently nothing attachable. 3. The sale, therefore, to Berry would have transferred all the right, title and interest of the partnership to the goods so sold, and the plaintiff Berry would have been entitled to recover against the sheriff, not one-third of what the said attached goods were worth, but the full value thereof, which was not pretended. The court in Berry v. Kelly did state that the individual partner’s right to appropriate partnership property to pay partnership debts could not be levied on by attachment. It not being property in any sense of the word, but a mere incident upon the relation of - partnership. It is assumed that by the phrase, “right of appropriation,” the court meant that the only interest that each partner had in partnership effects was the right to use or “appropriate” the same in liquidation of partnership debts. Plaintiffs attack this proposition on the following grounds : 1. The court at special term proceeded upon the theory that the plaintiffs in the attachment suit
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acquired certain rights under and by virtue of the levy under said attachment, and awarded damages against the sheriff. The general term affirmed- the judgment against the sheriff, upon the theory that the sheriff had no right to sell the whole of the attached property. Having thus decided, the case was disposed of, and the remarks as to the “right of appropriation,” and as to such right not being attachable and not being property, are not only dicta, but are in conflict with the decision, for as before shown if the non-resident-partners interest was not attachable, plaintiff was damaged not only to the extent of one-third, but to the full value of the property, and he, having appealed, should have been awarded a new trial in order to give him an opportunity of proving damage. 2. Said proposition is also in conflict with that portion of the , opinion on page 125, holding that whatever may be the state of the partnership accounts, whatever may be the state of the firm as to solvency, each partner has a property and interest in the partnership assets, coequal to his share in the firm ; and also on page 128, holding that the plaintiff buying the goods subject to the attachment on the shares of the two partners, his right, therefore, was subordinate to that of the sheriff. Plaintiffs submit, that, if the non-resident partners had but the “right of appropriation, which right is not property, being only an incident and not attachable,” then the plaintiff Berry did not buy the goods subject to any lien thereon, by virtue of the levy under the attachment, and that his rights were not only prior to those of the sheriff, but that the sheriff himself was technically a trespasser, there being no “property” that he could levy on by virtue of the attachment. 3. Plaintiffs insist that as matter of law so much of said opinion as speaks of the interest of a partner in partnership effects as a “right of appropriation,” as a “mere incident of the partnership,” as
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“not being property in any sense of the word,” is unsound and in conflict with the well settled law of this State, partners being seized per mi et per tout, and without further amplifying this point, refer to the authorities cited under the third point.
V. Plaintiffs claim that by virtue of the attachment they acquired a lien on the interest of John Winans in the stock in the trade belonging to the firm of John Winans & Co. That said interest was at least one-half the value thereof. That plaintiffs are fully protected by the stipulation made by the assignee. That said assignee holds the proceeds realized from the sale of said stock subject to the rights of plaintiffs herein, and that the claim of the plaintiffs should be satisfied therefrom.
John L. Lindsay, of counsel, for respondent, urged:
I. The interest of Winans alone in the firm assets was attached, and only his individual interest could be attached; his interest was what was left over after the firm’s debts were paid (Berry v. Kelly, 4 Rob. 113 ; Smith v. Orser, 42 N. Y. 132 ; Goll v. Hunton, 8 Abb. Pr. 120 ). He had no interest liable to attachment; for the debts of the firm at the time of the attachment greatly exceeded the value of the firm’s assets; the debts being $12,000, and the firm assets only $3,000. The general assignment followed the attachment and preceded the judgment. Upon the assignment the firm property became vested ih the assignee, and could not be levied upon under the execution against the property of the debtors. Had the sheriff under the execution sold to a stranger the interest of Winans, the purchaser would be entitled simply to an accounting and to such an amount as Winans would be entitled to after the firm debts were paid (Berry v. Kelly, Smith v. Orser, supra). The judgment should be affirmed.

The question presented is, what title or interest superior to that of the assignee, the plain biffs had in the goods sold under the agreement.

It is obvious, that whatever title or interest they had resulted from the levy of the attachment. We must, therefore, see what title or interest that levy gave.

In Berry v. Kelly ( 4 Rob. 106 ), it is determined that under an attachment issued under like circumstances, only the right and interest of the partner, against whom it was issued, in the partnership goods could be attached. That right and interest is the surplus remaining after the partnership debts have been paid.

If, under an execution issued by plaintiffs upon a judgment obtained by them in the action in which the attachment issued, the sheriff had sold the right and interest of the partner against whom the attachment issued, in the partnership property (his interest in which was seized under the attachment), then as to the plaintiffs the sum for which such right and interest was sold would represent the value thereof and be applicable on their judgment; but as to the purchaser such sum might well not represent the value of such interest. Its value to the purchaser would depend upon the state of the partnership affairs ; if the firm was insolvent its value would be nothing, and it would increase in value in proportion as the affairs of the firm approached to solvency.

In this case there has been no sale under execution in consequence of the agreement between the plaintiffs and the assignee of the firm. The substantial effect of that agreement is to place plaintiffs in the position of purchasers, for a nominal sum, of the right and interest of the partner against whom the attachment issued. It follows that the actual value of that right and

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interest, as dependent on the condition of the partnership affairs, is the measure of their interest in the goods themselves and in the proceeds thereof arising from the sale by the assignee.

It appeared on the trial, that the firm were largely insolvent, its indebtedness being $12,000, while its total assets were only $3,000.

The interest of the partner against whom the attachment issued in the goods, his interest wherein was wholly valueless, and, in fact, nothing.

No right or interest in the goods was therefore seized under the attachment, and consequently plaintiffs have no interest in and are not entitled to any portion of the goods. It results that the complaint was properly dismissed.

Judgment affirmed, with costs.

Curtis, Ch. J., concurred.

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