4 Barb. 571 | N.Y. Sup. Ct. | 1848
Although the plaintiff does not, in his bill of complaint, directly impeach the sale from the defendants Tisdall & Hickman to the defendant Bailey, yet he calls for a full disclosure of all the particulars of that transaction. As a creditor’s bill is for discovery as well as relief, the plaintiff is at liberty to avail himself of any objections to a proceeding on the part of the defendants affecting his rights, although they may not have been specified by, or even generally charged, in the bill. The rule results from the necessity of the case; as a creditor cannot be supposed to be thoroughly acquainted with the conduct of his debtor towards third persons ; especially when, as is generally the case in fraudulent transactions, efforts are made to conceal the circumstances from the public. The call for an account of the disposition of the promissory notes given on the sale, and the objections raised to the manner in which it was alleged by Hickman and Bailey they had been satisfied, cannot be construed into an admission by the plaintiff of the fairness of the sale, or its conclusiveness as to his rights. A transfer of goods for the use of the persons making the same, although void as to their creditors, is yet valid as between the parties. The notes given for the purchase money, to the vendors, are choses in action belonging to them, and until they are passed to an innocent holder, for a new consideration advanced by him, may be reached by a creditor’s bill. True, the goods, while in the hands of a fraudulent vendee, may be seized and sold under an execution of one who was a creditor of the vendor at the time of the fraudulent sale. But when, as in this case, the goods are subsequently exposed for sale for a considerable period of time, and many of them doubtless sold, and the residue, if any, so far mingled with other goods that they cannot be identified, and especially when an ■execution actually issued has-proved unavailing, the creditor’s only remedy is for the value of the goods, in some shape or other. A voluntary assignee for the benefit of the creditors
Was this fraudulent design known to Bailey, and did he aid in its accomplishment ? He had every opportunity of becoming fully acquainted with the circumstances of Tisdall & Hickman previous to, and at the time of, the sale. He had been on intimate terms with Hickman from the year 1833. They boarded in the same house, in 1840. Hickman married Bailey’s sister in 1841. Bailey resided in Hickman’s family from August, 1842, until the time of the sale. During that period Bailey w'as almost daily in the store of Tisdall & Hickman, often
The question is, whether Bailey can be permitted to turn these circumstances to his own advantage so as to obtain a preference over the fair and honest creditor of the fraudulent debtors 1 It would be most unconscientious—it would be a disgrace to the administration of our laws—if he could be permitted to do so. It is a clear principle of equity and justice that no man shall be allowed to profit by his own fraudulent acts, or the fraudulent acts of another in which he knowingly participates. This would be a sufficient reason why Bailey should not be allowed to interpose his demands against Hickman individually, if they had been clearly proved, nor the payment of money to him to carry out the fraud, so as to prevent the plaintiff from enforcing his claim for so much of the proceeds of the goods of the firm as has not been paid to the firm or its creditors. For this reason alone the plaintiff would be entitled to the relief called for by his bill.
But it may be well in a case circumstanced like the present, to consider the facts and the principle on which Bailey seeks to protect himself from the payment of any part of the plaintiff’s judgment. Bailey claims that he had, at the time when the bill was filed, several demands against the firm, which should at all events be credited to him. And he also alleges that he had at the time of the sale several claims against Hickman individually, and that the two notes which were allotted to Hickman were satisfied partly by those claims, and the residue by money paid to him at the time.
But as far as relates to Bailey’s demands against Hickman individually, I am by no means convinced that they remained unsatisfied at the time of the sale. Those demands were, 1st. the amount of a note alleged to have been given by Hickman to Bailey for money lent, dated February 3d, 1841, for the principal sum of $183,87, and 2d. the amount of an account for goods purchased by Bailey for Hickman and his wife in England, and for which he paid $113,50. I am inclined to think that the note was actually given for money supposed to be due at the time it bears date. Bailey and Hickman both swear positively to the fact, and there is no direct evidence to contradict them in this particular. The circumstances stated by them are unusual, but they may be explained by the intimacy existing between them, and the confidence which they reposed in each other. Besides, the note was produced in evidence and its genuineness was proved. So also I think the evidence is sufficient to prove the account for purchases made in England. But the great and insurmountable objection to the allowance of these charges is, that it is no where stated, in the language of several of our statutes, and as it should have been averred, if true, in a matter surrounded by so many suspicious circumstances, that they were due “ over and above all discounts.” It seems singular that the requisite question to elicit information on this point was not asked, but notwithstanding, I think the statement would have been volunteered if it
If Bailey in fact paid money to Hickman, and the payment was made in good faith, and without any intention to defraud the creditors of the firm, it should be sustained. But I am not
It was contended on the argument, by the counsel for Hickman and Bailey, that copartners have a right to appropriate, by mutual consent, their joint property to the payment of debts owing by them individually, leaving those of the partnership unsatisfied. That may be true where the firm is solvent, and sufficient is left to satisfy the joint debts. Nothing like insolvency was disclosed in the cases of Laverty v. Burr, (1 Wend. 529,) and Vallet v. Parker, (6 Id. 615,) nor affected the point in controversy in Everingham v. Ainsworth, (7 Id. 326,) which were cited by the late assistant vice chancellor when this cause was decided by him. But the rule in England in cases of bankruptcy is uniform, that the primary distribution must be made to the joint creditors. I cannot see why the same practice should not prevail in this state, in cases of insolvency. It would be manifestly just, and in accordance with well settled principles. The funds of the partnership belong to the firm, to the extent of its liabilities. When the liabilities exceed the effects, the whole are joint property. It is clearly settled that the joint creditors have then the first equitable claim upon the whole, for the satisfaction of their debts. The creditors of the partners individually have such claim only upon their property as individuals. That is only the surplus, where there is any, and where there is none, there is nothing to which it can attach. In all cases of coercive measures, whether at law or in equity,
If, as some of the authorities indicate, the prior lien of a joint creditor can be enforced only through the medium and for the benefit of a dissenting partner, then it would seem to follow that an assent by all the partners to transfer their property to pay an individual, in preference to a partnership, debt, might give validity to the transaction. It could not be successfully attacked by the joint creditors. But although one object of establishing the rule may have been to protect the interests of the partners, yet I conceive that it was designed for other and paramount considerations. Why should a rule for the distribution of property have reference to the partners, who, when insolvent, have in reality no interest in it, rather than to the creditors, who, according to acknowledged equitable principles, should be alone interested in its proper destination? Chancellor Kent says, (3 Kents Com. 65,) “ The basis of the general rule is, that the funds are to be liable on which the credit was given. In contracts with a partnership, the credit is supposed to be given to the firm ; but those who deal with an individual member rely on his sufficiency.” Another reason is, that the partnership funds are generally benefited, sometimes created, by the partnership debts; seldom by those due from individual partners. Until I am overruled by the highest authority, I shall hold that the right to the priority in question is, as it should be, for the benefit of the partnership creditors, and can
If there is no precedent in favor of the rule restricting the action of partners and their separate creditors under such circumstances as exist in the present case, the principle is so evidently just and equitable that I am disposed (in the absence of any well settled rule to the contrary) to make one. If sustained I cannot entertain a doubt but that it will be productive of good.
So much of the decree of the late assistant vice chancellor as directed a dismissal of the bill with costs as to the defendants Hickman and Bailey, must be reversed, with costs. A receiver must be appointed in the usual manner, and with the usual powers. Bailey must pay over to the receiver the sum of two hundred and seventy-three dollars and thirty cents, with interest from the 13th of April, 1843, to be appropriated on the plaintiff’s judgment against Tisdall and Hickman. And the defendants must pay the plaintiff’s costs.