46 Me. 250 | Me. | 1858
As between the principal respondent, Wm. D. Crooker, and the orator, this is a case where the latter seeks, by his bill, to compel the adjustment of the affairs of a co-partnership of long standing between them, but which was dissolved June 19, 1854. The bill seeks to do this by causing the co-partnership property, both real and personal, to be applied, through the agency of a receiver, to the payment of the partnership debts. The said Wm. D. Crooker having failed, after notice to appear and answer, the bill is to be taken pro confesso as against him. The decree, however, to which the orator is entitled, cannot properly operate upon property, even though it belong to the co-partnership, in which other persons have acquired a better right or higher equities; and a receiver, if appointed, can only take the co-partnership effects as subject to all such superior claims.
Of the other numerous respondents, declared against in the bill, nine only have appeared. The others, upon whom due notice has been served, by neglecting to appear and answer, are properly to be regarded as consenting to such a decree against them as is sought in the bill.
The principal question, therefore, which arises, is whether those respondents who have appeared and filed their several demurrers to the bill, ought in equity, in view of all the facts alleged in the bill, and admitted by the demurrers, to be restrained in their legal efforts and attempts to satisfy certain judgments, which they have, or may hereafter obtain against the said Wm. D. Crooker for his sole debts, out of the parcels of land which are described in the bill and claimed as partnership property. The solution of this question depends upon the facts and the principles of equity jurisprudence applicable thereto.
The bill charges, that a co-partnership between Charles and Wm. D. Crooker was formed in 1826; that it was engaged from time to time in the buying and selling of merchandize, the building and sailing of ships, the cutting and marketing
In regard to the established principles of equity jurisprudence applicable to partnership property, it is now well settled that the creditors of a co-partnership, in case of insolvency, are to be deemed as having a priority of right to payment out of such property, which may be enforced before the claims of the creditors of a separate partner. The interest of the co-partnership in such property is joint, while each individual partner, as such, is entitled only to his share of
It is also true that each partner is regarded as having an equitable lien upon the whole partnership property for the payment of the partnership debts. Commercial Bank v. Wilkins, 9 Maine, 28. This lien, Or, as it is sometimes more appropriately called, implied trust or pledge, reaches the whole partnership property, whether it consists of lands or stock or chattels or debts. Real estate, purchased with partnership funds and for partnership uses, is, for the purposes of equity, regarded as standing upon the same footing as personal estate. Peck & al. v. Fisher, 7 Cush. 386.
Each partner is entitled to regard the whole estate as held for his indemnity against the joint debts, and as security for the ultimate balance which may be due to him for his own share of the partnership effects. Story on Equity, vol. 2, § 1243; Hoxie v. Carr, 1 Sumner, 173; Buchan v. Sumner, 2 Barb. Ch. R. 198-199.
In relation to real estate, when it is a part of the partnership effects, it is to be treated in equity, to all intents and purposes, as a part of the partnership funds; and, whatever may be the form of the conveyance, it will be held subject to all the equitable rights and liens of the partners, which would apply to it if it were personal estate; and this rule prevails notwithstanding the legal title may, by the death of the particular party holding it, have been cast by descent upon his heirs at law. 1 Story’s Eq., § 674, and cases there cited; Dyer v. Clark, 5 Met. 562. Such is the rule, also, notwithstanding the estate may have been conveyed to the partners by such a deed as, under our R. S. of 1841, c. 91, § 13, and the revision
No reason is perceived why that same equity which may be invoked for the protection of a partner in cases of actual insolvency, may not also be successfully invoked in cases of threatened insolvency, when it is apparent from the facts that, unless the contemplated acts which are threatened are restrained, the result must be an actual insolvency. Deveau v. Fowler, 2 Paige’s Ch. R. 400. In cases of this kind, we have no doubt that the equity powers of the Court may as properly be exercised to prevent a wrong, as for the purpose of making an equitable appropriation of such effects as may remain after the wrong has been perpetrated, or has in any way happened. As between these partners, then, we find no difficulty, upon the principles of general equity and the facts conceded in the case, in coming to the conclusion that the bill is well sustained; and, under our Revised Statutes of 1841, c. 96, § 10, and the revision of 1857, c. 77, § 8, by which equity jurisdiction is conferred upon this Court in all cases of partnership, the orator is well entitled, upon the facts, to a decree against the said William D. Crooker, such as is sought by the bill; and would be equally so entitled if the said William D. Crooker had appeared and demurred to the bill.
While such are the equitable rights and remedies which exist between Charles and William D. Crooker, as partners, and such the power of this Court' to enforce these rights, as between them, it is equally clear, in view of the authorities which have been cited, and many others that might be, that, at law, the title to the real estate attached by the sole creditors of William D. Crooker, was in him at the time of the attachments. In fact, the bill admits that he was seized as tenant in common with said Charles Crooker, of the legal
It is now contended by the several counsel in defence, for the first time in this State, that, notwithstanding the lands attached may, in fact, belong to the co-partnership, and may be needed for the payment of outstanding co-partnership debts and for any balance which may, upon the final adjustment of the affairs of the firm, be found to be due to either partner; and notwithstanding they may, in equity, as between these partners be treated as co-partnership assets; still the legal estate, being apparently held as the individual estate of each of these partners, and so appearing upon the records in the registry of deeds, is liable to attachment and levy upon execution by any judgment creditor of either partner, for his sole debts, to the extent of such partner’s apparent legal interest
But so long as the partnership debts are unpaid, and the partners severally have a right to have the partnership property appropriated for the purposes of the co-partnership, and the fulfillment of such obligations as necessarily spring from that relation, if all or either of the partners have the sole custody or legal title in them of any property, which, in equity, belongs to the co-partnership, there is, as all the authorities show, a resulting trust in relation to such property, which, under appropriate circumstances, may be enforced by any particular member or by the creditors of the firm, the latter working out their security through the equities of such member. It is this trust which this Court, sitting as a Court of equity, will enforce; and no reason is suggested or perceived why tenants in common, whether made so by force of the statute or otherwise, may not take an estate in trust, where the trust results from implication of law, as well as
Whenever, therefore, there is, as in the case before us, a resulting trust in favor of any person or persons, growing out of any conveyance of partnership property, whether it be made in severalty or to tenants in common, such trust will be respected and enforced in the same manner as similar trusts in other cases, notwithstanding the record may show an absolute legal title in the grantee, unless the estate has been alienated in such a way by the trustee as to cut off the trust, or unless the law has, in some other mode, provided for its extinguishment. So long as such trust exists in relation to the partnership property, where the co-partnership is insolvent, or evidently to be made so by a levy upon the property, a judgment creditor of one of the partners in the firm cannot levy his execution, except upon the contingent interest of such partner in the partnership effects. Smith v. Barker & al. 10 Maine, 458. This rule is, in itself, so proper, so advantageous to commercial interests, and so conducive to the safety of creditors and persons entering into the partnership relation, and so much in accordance with natural justice, that it ought not to be broken in upon for slight reasons.
Do then our statutes, in relation to the attachment and levy of executions upon real estate, so far affect the rights of the cestuis que trust, in cases such as we are considering, that a creditor, who has legally attached such estate as the property of the trustee, acquires, by force of his attachment and the record title of the land, a better right or higher equity than the cestuis que trust possess ? In other words, does such a creditor, by his proceedings, acquire such a right to proceed and complete his levy upon the legal interest of the trustee, for his sole debt, that the Court is thereby deprived of all power to compel the execution of the original trust ? Ordinarily the attachment of property, whether personal or real, in which the debtor has the legal interest, creates a lien which
On the other hand, where there are outstanding equities or trusts, which a court of equity will enforce, the attaching creditor is not regarded as acquiring, by force of his attachment, merely, any right which is in its nature higher than the equitable rights which exist. These will be regarded as subsisting until the attachment is perfected by a judgment and levy, notwithstanding the creditor may have had no knowledge of their existence when his attachment was made. Thus, in cases of foreign attachment, when the funds in the hands of the trustee have been equitably assigned, prior to the service of the writ, even though both the creditor and the trustee were in fact then ignorant of the assignment, still such funds will be protected against the attachment, upon notice from the assignee to the trustee, being stated in his disclosure, at any time before judgment; and the reason is, because the outstanding equities are regarded as higher in their nature than the legal estate.
The provisions of the present statute in relation to trusts,
In the case of a creditor without notice of the trust, it is the levy, and not the attachment, which gives him protection against the trust. The respondents, therefore, by virtue of their attachments, have acquired no such rights in the lands, which we find, in view of the facts, to be held by Charles and Vm. D. Crooker as tenants in common, in trust for the partnership purposes, as can properly prevent this Court, when sitting as a court of equity, from interposing to protect the orator, and, through him, the partnership creditors, against an appropriation of the partnership property which will be to their injury, and in violation of the trust; and this rule, we think, is in harmony with the principles of general equity. 3 Kent’s Com. 65; Evans v. Chism & al., 18 Maine, 220.
In the case of the Commercial Bank v. Wilkins, before cited, the outstanding equities of a co-partnership and its creditors were held to be a justification to an officer for not selling upon execution, personal estate, which had been attached by such officer at the suit of a creditor of one of the partners. Why, then, should not equity intervene to prevent a misappropriation of such property to the injury of any partner or the creditors of the firm ?
That, in such cases, the equities springing out of the co-partnership are superior, and properly held “ to bear down the letter of the law,” when invoked at any time before the
No reason is perceived why the same rule should not be extended to real estate. It is the law of other States. In the case of Peck & al. v. Fisher, 1 Cush. 386, before cited, the contest related to the title to real estate, which had been held by two partners, as tenants in common, and levied upon as the individual property of such partners; and then, subsequently, for a partnership debt. The action was a writ of entry, and it appeared that the creditors of the individual partners held, or claimed to hold, by the earliest attachment. But, notwithstanding such creditors had an indefeasible title at law, which might be defeated in equity, and, as it was understood an equity suit was pending, the Court suspended the case to await the result of that suit.
So, in New Hampshire, a subsequent attachment by the creditors of a firm overrides the earlier attachment of a creditor of one of the members of the firm. Tappan v. Blaisdell, 5 N. H., 190; and, in the case Of Jarvis & al., Adm'rs, v. Brooks & al., 7 Foster, 37, the facts are found to be, in many respects, very similar to the facts in the case now before us, and yet it was held that a levy upon real estate belonging to a. co-partnership, and held by its individual members as tenants in common, in trust, not by deed upon its face, but by implication of law, for the firm and its creditors, was valid against a prior attachment of the same property, as the individual property of the separate members of the firm. “ The pai’tnership creditors, having precedence, nothing more is requisite than that they should have a valid execution properly levied, in order to avail themselves of their right of priority, and this follows as a necessary result of the principle, that their claim is superior to that of the creditors of the individual members of the firm.” No rights were therefore acquired by the previous attachment which was not defeated by the subsequent levy made by the creditors of the firm. If such a levy would protect the rights of the partnership cred
In the case of Tillinghast v. Champlin als., before cited from the Rhode Island Reports, Ames, C. J., while treating of the equitable lien which is created upon partnership property, in favor of partners and co-partnership creditors, in a case where the deed was precisely like the deeds before us, a deed to the partners, as- tenants in common, and contained no reference to their relation as partners, says, “this lien is, we think, familiarly administered in equity, in favor of those respectively entitled to it, upon their own direct application, and as their own equitable right. Even the courts of law administer it in New England, under our attachment laws, in case of quasi insolvency, by giving to the creditor of the firm, though subsequently attaching the firm property, a priority of lien and payment upon and out of such property, over the separate creditor of one of the co-partners first attaching it, thus setting aside the legal right of prior attachment in favor of the equitable lien of the co-partnership creditors, upon the co-partnership property.
In view of our statute authorizing the attachment of real estate, we do not think it was intended, when taken in connection with the statute for the protection of trust estates, resulting from implication, which has been cited, to overthrow and destroy the equitable rights arising therefrom, provided the cestuis que trust took the proper steps to secure their rights before a levy upon execution.
Thus we are brought to the conclusion that the equities which attach to partnership property, whether personal or real, are not absorbed in the legal estate, until such property has been transferred to a bona fide holder, ignorant of the trust, either by a sale or upon execution. Equity will therefore enjoin or restrain the appropriation of such. property to the payment of the debts of an individual partner, until the partnership debts are paid, and the indemnity to which the other parties are entitled is obtained, and the attaching cred-'
The other objections to the bill, such as want of due diligence, and certainty in its allegations, in the judgment of the Court, are not sustained. The result is that, upon the facts as stated, the orator is entitled to a decree, not only as against his co-partner, Vm. D. Crooker, but also against the attaching creditors, named as respondents in the bill, to be made in accordance with the principles of equity before stated; and the exceptions which are taken to the pro forma rulings of the presiding Judge at Nisi Prius, all of which were made without examination, and only for the purpose of presenting such questions of law and equity as might arise in the case, to the full Court, are sustained; and the case is remanded to the Court within and for the county of Sagadahoc, where the respondents whose demurrers have been overruled, can answer further if they shall desire.
Exceptions sustained.