Majority
p. 498Addison and others v. Burckmyer and others. Jan’y 28 ; March 16, 1847.
Headnote
A. in New Orleans, and B. in New York, entered into an agreement, by which A. bought cotton, and shipped to B. on joint account, paying its price with the proceeds of discounted bills of exchange, drawn by A., and accepted by B. The bills were protested, and B. failed, and assigned all his property for the benefit of his creditors, including half the cotton so shipped by A. Held, that A. waa entitled to have the proceeds of all the cotton applied to the discharge of the acceptances.An assignee, under a voluntary assignment, receives the property transferred, subject to all the equities which attached to it, in the hands of the assignor.
The bill was filed in July, 1846, by A. L. Addison & Co., merchants, residing at New Orleans, against C. Burckmyer & Sons, of New York; together with Theodore Yietor and George F. Duckwitz, stating that the latter were the assignees of Burckmyer & Sons. The cause was heard on bill and answer, and on a stipulation, by which certain facts were agreed upon. The case established by the pleadings and proofs, was as follows, viz.
In February, 1846, at the request of Burckmyer & Sons, Addison & Co. bought 361 bales of cotton in New Orleans on joint account, which was to be shipped to the former, at New York, and sold on joint account. In order to pay for the cotton, which was bought for cash, A. & Co. drew on B. & Sons, two bills of exchange at sixty days sight, amounting to $11,200; which were discounted in New Orleans, and the proceeds applied to such payment. The bills were accepted by B. & Sons, and when due, were protested for non-payment, and remained unpaid, except as after set forth.
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The 361 bales of cotton were duly forwarded to, and received by B. & Sons, who were equally interested with A. & Co. in the profit and loss on the adventure. On the Sth of May, 1846, B. &> Sons failed, having previously sold 51 bales, and on the 11th of May, made an asssignment to T. Vietor, of all their property, (including their interest in half of 307 bales of cotton,) in trust for the payment of their creditors. They had on hand at the time, 307 bales of the cotton, which they delivered to the firm of Vietor & Duckwitz, with instructions to sell the same, and pay half the proceeds to Addison & Go., and half to Vietor, as assignee of B. & Sons. Vietor & Duckwitz proceeded and sold all but 20 bales, and paid half the proceeds on the bills drawn by A. & Co. The residue V. claimed, as assignee, in trust for B. & Sons creditors. The remaining 20 bales were sold by V. <fc D., after the suit was commenced. V. & D., when they received the 307 bales, knew the same had been purchased on joint account by A. & Co.; and they so applied half of the proceeds upon the drafts drawn on B. & Sons.
On learning of the assignment and the delivery of the cotton to V. & D., A. & Co. applied to them, requiring them to apply all the proceeds of the cotton to the payment of the drafts; which Vietor, as assignee, declined to do. B. & Sons were insolvent. The bill prayed for an account, an injunction, and a receiver, insisting that the proceeds of the cotton must first be applied to the discharge of the debt incurred in its purchase. The defendant, Duckwitz, made no claim under the assignment.
G. C. Goddard, for the complainants.
1. The bill states, and the answer admits the purchase, shipment and receipt, of certain parcels of cotton, on the joint account, and for the equal profit and loss, of the complainants and the defendants Burckmyer & Sons; and that it was paid for by the complainants.
2. The two commercial houses were co-partners in the transaction, and in relation to it were subject, inter se, to all the incidents, rights and liabilities of co-partners. (Compton v. McNair, 1 Wend. R. 457; Reid v. Hollingshear, 4 Barn. & Cr.
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867; Post v. Kimberly, per Spencer, J., 9 Johns. 496 ; 3 Kent’s Com. 29 ; Colly, on Part. 26; Devoe v. Fowler, 2 Paige, 400; 2 Story’s Eq. Jur. 500.)
3. Being co-partners, the complainants are entitled to have the co-partnership property applied to pay the co-partnership debts.
4. The defendants, Burckmyer & Sons, having assigned the property to the defendant Vietor, in trust to pay the creditors of B. & Sons, and having delivered it to Vietor & Duckwitz to be sold; the complainants are entitled to the relief sought by the bill, with costs.
N. D. Ellingwood, for the defendants.
I. Assuming a partnership to exist between the complainants and the defendants, it is one in the profits and losses, to arise in the adventure; and not a partnership in the cotton itself.. (Myer v. Sharp, 5 Taunt. 79.)
II. Though such a partnership did exist as to the cotton itself, the claim set up in the bill, is not a partnership debt.
1. The cotton was paid for in cash, and no claim can be set up on that account.
2. The indebtedness, then, arises upon the drafts alone; upon which the parties are separately liable as drawers, and acceptors, but not as partners. The drafts in question can in no wise be deemed joint liabilities.
3. A partnership debt, strictly speaking, is a debt contracted after the partnership was formed ; which in the present case was not formed, (if at all,) until after the cotton was purchased.
HI. But admitting that the complainants and the defendants were partners, as to the cotton itself, and that the drafts in question were partnership liabilities, yet the defendants were dormant partners only; and the principle or rule does not hold good in the case of dormant partners, that there exists a prior right in the partnership creditors to be paid out of the common property, in preference to the separate creditors of either of the partners. (See French v. Chase, 6 Greenleaf, 169; Commach v. Johnson,
1 Green’s Ch. Rep. 167 to 171.)
IV. The rule that partnership property must be first applied
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to partnership debts, exists only in cases of open partnerships, publicly avowed, and where a separate debt of either of the partners is sought to be enforced against the partnership property, or otherwise secured. But when one of the partners, in the case of a dormant partnership, makes the partnership property his own individual property, and assigns it for the payment of his individual debts, without fraud, and during the existence of such partnership, he has such an entire property in the whole goods as to enable him to do it. (4 Barn. & Cress. 878 ; 6 Greenleaf, 168; 1 Green’s Ch. Rep. 167 to 171.)
V. In the present case, the defendants, Burckmyer & Sons, have acted in perfect fairness towards the complainants, and at the same time with justice to their creditors. They caused to be paid to the complainants, the one-half of the proceeds of the cotton in question, and the remaining half, (being the proportionate interest of those defendants,) they have divided equally among their creditors, including the holders of the drafts in question.
The right of this case is very plain. Burckmyer & Sons having in their possession, property bought on the joint account of themselves and Addison & Co., with funds raised on bills for which both were liable, assigned the properly for the benefit of their separate creditors.
It is not like a sale to a purchaser for value, who buys on the faith of the apparent ownership of such property in the seller’s possession. Nor is the assignee’s claim as strong as that of a creditor of Burckmyer & Sons would have been, who had given them credit for money or goods, on the faith of such apparent ownership.
As assignee, Vietor received this property subject to all the equities which attached to it in the hands of Burckmyer & Sons. In their hands, I am satisfied, it was subject to an equity in favor of the complainants, that the proceeds of its sale should, in the first instance, be applied to the payment of the acceptances, which were in truth obligations given for its purchase money.
The proceeds in the hands of Vietor must be applied accordingly, and if necessary to accomplish that object, there must be
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a receiver. An account will be taken of the purchase, sales and payments. The assignee cannot charge commissions as against the joint adventure, but will be entiled to retain them out of the profits belonging to B. & Sons.
Yietor must pay the complainants costs, and charge them to his trust. No costs are given for or against Duckwitz. He answered fully with the others. If he had simply disclaimed, he might have been entitled to costs.
Decree accordingly.