Hewitt v. Hayes

204 Mass. 586 | Mass. | 1910

Sheldon, J.

The arrangement made in August, 1903, between Bangs and Wells was not in any sense a dissolution of their firm or a transfer of its assets or any of them to Wells. It was merely a device adopted to remove Bangs, at least for a time, from any active control or management of the business of the firm and to give the power of management exclusively to Wells. But the interest and ownership of each of them remained unaffected by the adoption of this device. The rule of Howe v. Lawrence, 9 Cush. 583, Case v. Beauregard, 99 U. S. 119, and Sargent v. Blake, 160 Fed. Rep. 57, has no application here. This case more nearly resembles Harmon v. Clark, 13 Gray, 114, but is yet stronger than that. Each of the partners remained the owner of a one half interest in the firm and in all its assets. The control which was given to Wells was to be exercised by him for the benefit of Bangs as well as of himself. And upon the averments of the bill it must now be taken that Bangs could at any time have intervened and put a stop to the arrangement that had been made, and have resumed his equal control and power of disposition over the business and assets of the firm. It follows that upon the death of Wells, Bangs as the sole surviving partner at once became the owner of all the partnership property, and charged with the duty of winding up the affairs of the firm, turning its assets into money, and applying such money to the payment of its debts. Thayer v. Badger, 171 Mass. 279. For this purpose he was entitled to demand and receive from the defendants, the executors of the will of his deceased partner, whatever property of the firm might come into their hands. Crabtree v. Randall, 133 Mass. 552. Holmes v. Gilman, 138 N. Y. 369. Wilson v. International Bank, 125 App. Div. (N. Y.) 568, quoting and following Williams v. Whedon, 109 N. Y. 333, and Secor v. Tradesmen's National Bank, 92 App. Div. (N. Y.) 294. Kutz v. Dreibelbis, 126 Penn. St. 335. Hawkins v. Capron, 17 R. I. 679. Fitzpatrick v. Flannagan, 106 U. S. 648. As was said by Colt, J., in Shearer v. Paine, 12 Allen, 289, 291, this right of the surviving partner is “a right incident to all partnerships, and one of which he cannot be deprived by the personal representative of the deceased partner, in the absence of any allegation of mismanagement or want of capacity,” and there is no such allegation here. The amount recoverable in a suit to enforce this right may depend upon the solvency or insolvency of the firm, upon the state of the partnership accounts, or other circumstances. Wilby v. Phinney, 15 Mass. 116. Bradley v. Brigham, 144 Mass. 181. Bird v. Bird, 77 Maine, 499.

This right extends also to all real estate of the partnership, in whosesoever name the legal title may have been, so far as may be necessary to wind up its affairs, pay its debts, and settle the partnership accounts. Burnside v. Merrick, 4 Met. 537. Dyer v. Clark, 5 Met. 562. Merritt v. Dickey, 38 Mich. 41. Shanks v. Klein, 104 U. S. 18.

The surviving partner takes the firm property as "its absolute owner, though subject to a liability to account for its proceeds and for their application to the payment of the firm debts and the settlement of the partnership accounts. Accordingly his own debts and demands and those due to or from the late firm may be joined in a single action or may be set off against each other. Holbrook v. Lackey, 13 Met. 132, and cases there cited. An allowance may be made to his widow from the firm assets as from his own personal estate, even though the firm be insolvent. Bush v. Clark, 127 Mass. 111. He may make a valid assignment of the firm property for the benefit of its creditors. Haynes v. Brooks, 116 N. Y. 487. He is in all respects dealt with as the owner of the property, though liable to account for its proceeds.

Accordingly it was held under our insolvent law that upon proceedings in insolvency by or against a surviving partner, his assignee will take both the separate property and the firm property of the insolvent debtor, to be distributed respectively in the manner prescribed by the statute. Burnside v. Merrick, 4 Met. 537. Howard v. Priest, 5 Met. 582. Rice, appellant, 7 Allen, 112. Durgin v. Coolidge, 3 Allen, 554. Merrick, J., said in the case last cited: “ It is therefore quite clear that, upon the death of one of two partners, the survivor may rightfully apply to the Court of Insolvency by petition, and that thereupon due proceedings may be had for the sequestration of the partnership property, and the disposal of it for the payment of the debts due to the partnership creditors.” The rule under the United States Bankrupt Acts has not been uniform. In many districts the doctrine declared in this Commonwealth has been adopted and followed. In re Stevens, 1 Sawyer, 397. In re Temple, 4 Sawyer, 92. Briswalter v. Long, 14 Fed. Rep. 153. In re Pierce, 102 Fed. Rep. 977. It has been denied. In re Evans, 20 Am. Bankr. Rep. 406. In re Bertenshaw, 157 Fed. Rep. 363. In other cases, although the question was not really raised and decided, the views taken by different courts have not been the same. Wright v. Nostrand, 94 N. Y. 31. Moses v. Pond, 4 Am. Bankr. Rep. 655. In re Sectional Dock Co. 3 Dillon, 83. Vaccaro v. Security Bank, 103 Fed. Rep. 436. In re Mercur, 122 Fed. Rep. 384. In re Forbes, 128 Fed. Rep. 137. Mills v. Fisher, 159 Fed. Rep. 897. In Adams v. Terrell, 4 Fed. Rep. 796, Woods, Circuit Judge, said that the only method by which after the death of one of the partners the property of a partnership could be brought into the bankruptcy court was by service upon the surviving partner, in whom was the title to all the partnership property. In the opinion of the Circuit Court of Appeals in the case of In re Stein, 127 Fed. Rep. 547, holding that the insanity of a partner will not bar the prosecution of proceedings in bankruptcy against a firm, it was said: “ And so it has been held that a copartnership may be adjudged a bankrupt after the death of one partner, upon an act of bankruptcy committed by the surviving partner, and that the adjudication of bankruptcy of a copartnership does not necessarily draw into the proceeding the estate of every individual member. There have been several adjudications in which the question has been fully considered, and in the result of which we fully concur.” And the court cited, beside cases already referred to, Chemical National Bank v. Meyer, 92 Fed. Rep. 896, affirmed upon appeal sub nom. In re Meyer, 98 Fed. Rep. 976; In re Duguid, 100 Fed. Rep. 274; In re Barden, 101 Fed. Rep. 553; In re Hale, 107 Fed. Rep. 432; In re Farley, 115 Fed. Rep. 359; In re Dunnigan, 95 Fed. Rep. 428.

We are of opinion, that the rule declared in our own decisions already cited has been approved by the weight of authority in the administration of the federal bankrupt act. It is not denied that it has been adopted by the federal courts of this district. The decision in the Bangs case, brought before us in the record of another case between these parties argued a few days after the case at bar, is decisive upon that point. The plaintiff will be held to account in the bankruptcy court for whatever assets of the late firm they may be able to get into their hands. It is desirable that all those assets should be administered and the affairs of the late firm adjusted, so far as may be, in one forum.

Accordingly we consider that the plaintiff has a right to maintain this hill for the purpose of compelling the defendants to turn over to him whatever assets and property of the late firm of Bangs and Wells have come into the hands of the defendants.

It is suggested however that much of the funds in the defendants’ hands which are the subject of this bill must be regarded as merely irust funds which ought not to be paid over to a trustee in bankruptcy. But the bill avers that the money which was drawn or received by Wells and used by him in the purchase of the stocks that are sought to be recovered included money of the firm and commissions to which it was entitled.

Demurrer overruled.