Conroy v. Woods

13 Cal. 626 | Cal. | 1859

Baldwin, J. delivered the opinion of the Court—

Terry, C. J. concurring.

Bill states that on the 22d of April, 1857, plaintiffs sued out attachment against Bonny, Brooks & Moore, a mercantile firm in San Francisco, and had it levied on certain goods; that shortly afterwards, plaintiffs got judgment in their suit, which has not been paid, and execution issued with directions to the Sheriff to levy on the property attached; that the debt of plaintiffs was for goods, due by this firm at and before the 9th of April, 1857, and this property attached had belonged to and been in possession of said firm; that about this last date, these defendants dissolved partnership, by Brooks and Moore selling out to the defendant, Bell, who bought subject to the payment of the debts of the firm; that no notice was given of this dissolution to plaintiffs until the 16th of May, 1857; that Bell bought for Bonny, and after-wards transferred his rights to Bonny; that at the time of this sale, all these parties knew of this indebtedness to plaintiffs; that on the 10th of April, 1857, defendant, F. H. Woods, commenced a suit in this Court against E. Bonny, and attached the property as his individual property, and afterwards obtained judgment. Execution issued and levied upon the property and it was advertised for sale as Bonny’s. The bill then charges various matters of fraud in the sale to Bonny, and in the note and suit of Woods and Bonny.

Several parties appeared as intervenors, claiming to be entitled to come in as judgment creditors of this firm, and alleging substantially the same facts as the plaintiffs. Woods demurred on several grounds, which will be noticed hereafter, and, the demurrer having been overruled, answered. The answer denies that the plaintiffs attached the property or any part of it, or took it in execution; also denies that on the 9th of April, 1857, the partnership of Bonny, Brooks & Moore existed, says it was dissolved on the 4th of April, 1857, the dissolution was notorious and plaintiffs had notice of it. On the 10th April, 1857, defendant commenced suit against Bonny, and attached property, recovered judgment, and caused property to be taken in execution. At this time defendant had no knowledge of the claim of the plaintiff; the property was that of Bonny, and in his possession, and defendant, by his attachment, acquired a lien on it. Defendant was, at the time of his suit, the sole owner of the note sued on by him, and that it was all justly due and owing to defendant by Bonny; of the amount, eleven hundred and thirty dollars, was a debt due from Bonny, Brooks & Moore; denies that he aided in bringing about the dissolution of the firm; and also all fraud or connection with any; or all knowledge of any trust or lien, or condition for benefit of creditors, in the sale to Bonny by the parties; and denies it to be the fact that it was so transferred; that one Alison brought suit for the property; that this defendant pleaded that the property was the individual property of Bonny and his attachment alien on it; that the suit was decided in favor of defendant; and that the plaintiffs had notice of these facts, and made no claim to the property; denies that Bonny, Brooks & Moore have not property sufficient to satisfy claim of plaintiffs.

A great deal of proof was taken, oral and documentary. The Court below found that the material allegations of the complaint were proven.

The ground upon which the learned Judge places his decree, in favor of the plaintiffs and intervenors, is, that the lien of the firm creditors of Bonny, Brooks & Moore is paramount to that of the individual creditor of Bonny. It has been seen that Bonny bought out the other two partners and agreed to pay the firm debts. We say he agreed to buy them out; for the mere disguise of this process—by means of the sale to Bell, and his transfer, a few days afterwards, to Bonny—is, when taken with the facts and the answer, too thin to permit us to doubt that Bell acted merely as the agent of Bonny in this transaction. Bonny then held the firm assets; and the question is, having got the title to them in this way, whether they stood anywise differently as respects the firm creditors than if the firm had continued ? If the firm had continued, it is not disputed that the rights of the firm creditors would have been prior and paramount to those of an individual creditor; and it is not easy to see any substantial difference in respect to the principle we are considering, between one partner’s buying out his associate’s share, on agreement to pay the debts of the firm, and suffering the firm name to continue. This was partnership property bound for partnership debts when the firm was in existence, and it continued to be bound for those debts after the sale to this partner, especially when he assumed, as a part of the transaction, of purchase, the payment of those debts. Story on Partnership, Section 97, thus lays down the rule: “In short, as between the partners themselves, the debts and liabilities of the firm to creditors and third persons are a fund appropriated, in the first instance, to the discharge and payment of such debts and liabilities, and there is, properly speaking, as between them, a lien thereon, or at least an equity, which maybe worked out through the partners in favor of the creditors, although it may not directly attach in the creditors by virtue of their original claims, in all cases. Each partner also has a specific lien on the present and future property of the partnership, not only for the debts and liabilities due to third persons, but also for his amount or share of the capital, stock, and funds, and for all moneys, advanced by him for the use of the firm, and also for all debts due to the firm for moneys abstracted by any other partner from such stock and funds beyond his share. It follows from this principle, that if any partner takes the whole or a part of his share out of the partnership stock, the stock so taken, if identified, is applicable to the payment of what shall, upon an account taken, be found due from him to the partnership, before any of it can be applied to the payment of his debts, due to his own separate creditors; for such partner has an interest in the stock only to the amount of the ultimate balance due to him, as his share of the stock. The same rule will apply to any other propi erty, into which the partnership property may have been converted, so far and so long as its original character and identity can be distinctly traced. Hence it may be stated, as a general corollary from the foregoing considerations, that no separate creditor of any partner can acquire any right, title, or interest, in the partnership stock, funds, or effects, by process or otherwise, merely in his character as such creditor, except for so much as belongs to that partner, as his share or balance, after all prior claims thereon are deducted and satisfied.” (See, also, Story’s Eq. Juris. Sec. 1253.)

In Greenwood v. Brodhead, (8 Barb. 594,) the rights of creditors in such a case are discussed. The Court say, there is no doubt that joint creditors can, under certain circumstances, have a right of priority of payment out of partnership property, in preference to the private creditors of any separate partner, and Wilder v. Keeler, 3 Paige, 167; Hale v. Hale, 2 McCord, Ch. 302; Story's Eq. Sec. 1253; 1 Sand. Ch. 348, are cited.

The section of Story’s Equity referred to holds: “ The creditors, indeed, have no lien, but they have something approaching to a lien; that is, they have a right to sue at law, and by judgment and execution to obtain possession of the property, and in equity to follow it as a trust.” So it is said in 8 Barbour: “ The' creditor must proceed to obtain a lien on the property before he can interfere to control it. If it be real estate, he obtains the lion by judgment; if personal property, liable to execution, by levy under process ; and if dioses in action, by the return of an execution unsatisfied after filing a complaint.”

In this case, the plaintiff had, before the filing of his bill, a lien by attachment and a judgment. We see no necessity for the levy of an execution. It would have answered no beneficial purpose; it was not necessary to give alien; that had already accrued from the levy of the attachment; and it was not necessary for a sale, for a sale was not desired. The interveners also had attachments levied; that gave them a lion; and if they had waited for the filing of their bill until judgment was obtained, it might have been too late. At the time of the trial, they had obtained and produced their judgments. The authorities do not place the right to go into equity upon the ground that the plaintiffs must show themselves to be creditors by judgment; but they go on the ground that they must show a lien on the property; and this lien exists as well by the levy of an attachment as by execution.

It is true, it is said in 8 Barbour, “ that until such lien is obtained, the partners have power to make any bona fide sale of the property they think proper. But when such lien exists, the creditor may claim the aid of the Court to restrain the disposition of the property by injunction, to have it placed in charge of a receiver, and to compel its equitable application.” But we do not understand by the bona fide sale here spoken of) a sale, directly or indirectly, to one of the partners, accompanied with a stipulation that he shall pay the firm debts.

Indeed, this very question was decided in Sedam v. Williams, (4 McLean, C. C. R. 51.) But it scarcely needs authority to prove that if this equity existed against the three partners, or the firm property, when owned by the three, that it lost none of its force from the mere fact that the sole title to the property became lodged in the hands of one of them, no credit having been given by individual creditors on the strength of an apparent sole ownership in the vendee.

Woods seems to have had notice of these facts; and if he had not, the mere fact of his getting his separate judgment and issuing execution, and making a levy, gave him no title to this property as against the superior equity, of these firm creditors.

2. We think that a Court of Equity has jurisdiction of this case. Ho action against the Sheriff would lie for a levy, and the property would, perhaps, be lost by a sale of it to different purchasers. {Place v. Sweetzer, 16 Ohio, 142; 19 Vermont, 286.)

The other points are not well taken.

Woods is the only Appellant here, and he can complain of no error not to his prejudice.

Decree affirmed.

See Heyneman et al. v. Dannenberg et al. 6 Cal. 376; Scales v. Scott, ante.