53 N.E. 459 | Ind. | 1899
On and prior to the 12th day of December, *454 1896, William S. Jett and George W. Johnson were equal partners engaged as merchants in the sale of hardware and implements at Lebanon, Indiana, under the firm name of "Jett Johnson." On that day, the firm being insolvent, these partners made a voluntary assignment of its assets and property to the appellee, George C. Shirley, under the provisions of the insolvent laws, for the benefit of all of the creditors of said firm. The deed of assignment was duly recorded on that day, and appellee, as the trustee thereunder, assumed and entered upon the discharge of the duties of said trust. On the 11th day of December, 1896, George W. Johnson executed to appellant, his wife, a chattel mortgage upon the undivided one-half interest in this stock of hardware and implements. On the same day he also executed a chattel mortgage upon the same interest to his brother, James M. Johnson, a co-appellant herein. Both of these instruments were executed to secure antecedent debts owing by said mortgagor in his individual capacity, such debts being in no manner liabilities against the firm of Jett Johnson. The mortgages were duly recorded on the 12th day of December, 1896, in the recorder's office of Boone county, Indiana. The debts secured by these mortgages aggregate $3,306. The mortgages upon their face, do not purport to be executed by the firm of Jett Johnson, nor is there anything therein to indicate or show that they have any connection whatever therewith. They each recite that George W. Johnson, of Boone county, Indiana, etc., does "hereby sell and convey" to the mortgagee therein named "the goods and chattels described as follows, to wit: The undivided one-half interest in the stock of hardware merchandise, consisting principally of hardware, cutlery, firearms, nails, stoves, woodenware, implements, farm machinery," etc. The situs of the stock of hardware mentioned in the mortgage is stated, and it is provided in the instrument that, in the event Johnson, the mortgagor, paid the debt secured, etc., then the conveyance was to be void, and it was further provided therein that he was to retain *455 possession of the property until the maturity of the indebtedness, etc. On the same day that Johnson executed this mortgage, his co-partner, Jett, also executed similar mortgages upon his undivided one-half interest in this stock of hardware to secure an antecedent indebtedness of his own.
Appellee, as assignee, presented a petition to the lower court for the purpose of obtaining an order for the sale of the partnership property assigned to him by this firm, the proceeds of such sale to be applied first in the payment of the debts of the late firm of Jett
On the issues joined upon the pleading, the court, upon hearing the petition and the matters in issue, ordered that the property be sold by the assignee, including that embraced in the mortgages, free from all liens, and that the proceeds arising out of the sale be applied as follows: First, to the payment of the costs and expenses of the assignment; next, to the payment in full of the claims and debts of the firm of Jett Johnson; and that the remainder of such proceeds be applied one-half thereof pro rata to the indebtedness secured under appellants' mortgages, etc.
Appellants each moved for a modification of the judgment to the effect that the court order that one-half of the proceeds accruing from the sale of the property be applied first to the payment of the expenses of the assignment, and that the remainder of said one-half be applied to the payment in full of the claims held by appellants against George W. Johnson, and secured by the mortgages in question; and, if any portion of the undivided half of such proceeds remained after the *456
payment in full of these individual claims, that it be applied upon the indebtedness of the firm of Jett
The contention of the learned counsel for appellants is that the chattel mortgages in controversy are shown to have been executed to appellants by George W. Johnson, of the firm of Jett
It is contended that there is nothing in either of the mortgages in dispute to indicate that they were intended to cover the corpus of the firm property. Counsel say: "Each of the mortgages is executed by George W. Johnson in his individual capacity, and neither attempts in any way, upon its face, to be a mortgage by the firm upon firm property, or a mortgage by the individual member of the firm, with the consent of his co-partner, upon the corpus of the firm property." While in fact a partnership is composed of individual members, still a firm so constituted is recognized as a distinct legal entity different and distinct from the persons who compose *457
it. Henry v. Anderson,
There is another well recognized governing rule pertaining to the law of partnership, which is to the effect that the property of the firm is impressed with an equity for the payment of the firm debts and liabilities, and the latter are given priority over the debts and liabilities of the individual members of the partnership. The authorities, in referring to this equity, sometimes in a general way term it the lien of the firm creditors upon the partnership assets or property. This is a misnomer, as the creditors of the firm, in the true sense of the word, have no lien upon the firm property but have merely an equitable preference or right which a court of equity will enforce in their favor. Warren v. Farmer,
In the light of the principles asserted, we may proceed to consider their application to the questions involved in this appeal.
The firm of Jett Johnson, as heretofore stated, was composed of William S. Jett and George W. Johnson as equal partners, the latter being the mortgagor under whom appellants claim. It is evident, under the circumstances, when tested by the rule previously asserted, that the only interest that George W. Johnson had in the stock of hardware which he could individually mortgage to secure his own indebtedness was one-half of the surplus remaining after the payment *459 of the firm indebtedness and an adjustment or settlement of the partnership matters or accounts between him and his co-partner, Jett. But counsel for appellants contend that the lien of these mortgages attached to the corpus of the partnership property by virtue of an agreement between Johnson and his co-partner. There is evidence showing that on the day the mortgages in question were executed, and previous to their execution, Johnson informed his co-partner, Jett, that he was about to make mortgages to appellants on his (Johnson's) one-half of the partnership stock, and that Jett said: "That is all right. You are willing for me to make mortgages to my brothers to secure them for some notes they are on for me." This consent of Johnson's partner, under the circumstances, can not be accepted as controlling. The mortgages, as we have seen, were each executed by Johnson in his individual capacity and they each expressly purport to embrace only his undivided one-half interest in this stock of hardware. Neither of these instruments professes or indicates that the execution thereof is in any manner the united action of the members of the firm of Jett Johnson, or that the mortgagor contemplates or intends to mortgage or affect in any manner the corpus of the property mentioned. It is the undivided one-half interest, declared to be covered by the mortgage, which, in legal effect, as we have seen, is one-half of the surplus of the firm property remaining after the payment of the partnership debts and the settlement of accounts between the mortgagor and his co-partner. In fact, appellants, by their cross-complaint, seemingly themselves place the proper construction upon these mortgages, as it is therein alleged that Jett consented to the execution of the mortgage by "George W. Johnson upon the undivided one-half of said Johnson in the property heretofore described."
In the case of Conant v. Frary,
In the appeal of Menagh v. Whitwell,
The mortgages in the case at bar neither were, nor did they purport upon their face to be, the act of the firm by virtue either of any express or implied consent of Jett, the co-partner. The interest which Johnson attempted to mortgage was his undivided one-half, and nothing more; hence the alleged consent of his co-partner, under the circumstances, cannot avail to render them operative upon thecorpus of the firm property so long as there are partnership claims which demand its application to their payment. Ewart v. Nave- *461 McCord, etc., Co.,
In Reyburn v. Mitchell, supra, the mortgage was executed by a member of the firm to secure an individual debt, and purported to be upon "his right, title, and interest in the property." The court construed this to include nothing more than the interest of the partner in the surplus remaining after the payment of the firm debts and an adjustment of the partnership matters.
In Still v. Focke, supra, it was held that if the instrument of conveyance or assignment is by one of the partners only, in his name, he assuming therein to be the sole owner of the property, only his interest will pass to the assignee, and the property may be seized by a firm creditor in payment of his debt.
The judgment of the lower court directing the application of the proceeds arising out of the sale of the property in controversy, is amply supported by the evidence, and is in harmony with the law, and is therefore affirmed.
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