13 Gratt. 683 | Va. | 1857
The first assignment of error raises the question as to the validity of the deed of trust of April 6th, 1850, made for the benefit of William McArthur & Co.
As preliminary, however, to the examination of the first of these questions, we have to ascertain the sense in which the term “insolvent” has been here used by the legislature.
On the part of the appellants it is contended that the legislature were looking to insolvency in the technical sense of the term, or open and notorious inability to pay; and in support of this view we have been referred to the cases of United States v. Hooe, 1 Cranch’s R. 73, and Prince v. Bartlett, 8 Id. 431, in which the Supreme court of the United States have so defined the term in construing certain acts of congress fixing the priority of the United States over other creditors, of its debtors, claiming under conveyances, assignments, &c. made by the latter.
On the other hand, the counsel for the appellee contends that the statute is analogous to a bankrupt law;
I have examined these cases, but I have been unable to perceive that any of them furnish a rule to guide us in the decision of this. No such resemblance is shown between the statute under consideration and the law of congress on the one hand, or the English bankrupt law on the other, on which the decisions referred to were founded, as to justify the supposition that the legislature, in using the term in question, had a reference to the sense given to it in any one of said decisions. Showing however as they do that the word has received various and widely different interpretations, dependent on the character and object of the laws in which it is found, these decisions do serve the purpose of negativing or of tending to negative the conclusion that there is any well ascertained, generally received technical meaning so attached to the word as to require the courts to adopt it rather than its primary meaning, or some other sense to be gathered from the circumstances and connection in which the word is used.
In England limited partnerships; of the kind sanctioned by our act of 1837, (unless they have been
One of the objects and designs of such provision is to secure in case of the failure of the partnership a fro rata distribution of its property among all its creditors. To declare that open and notorious bankruptcy is the true and only test of insolvency, would, as was argued by the counsel for the appellees, defeat in most cases the design of the law, inasmuch as the desire of a firm in failing circumstances to sustain itself as also to prefer its special friends, would generally result in sales and assignments of most of its property, made to insure those ends, before such bankruptcy would occur. To say on the other hand that the firm shall be held to be insolvent whenever from any cause it may fail to meet its engagements in the
The leading design and policy of the acts of 1887 and 1849 would seem to be essentially the same; and I have been unable to discover any good reason for supposing that the legislature, in declaring in the former, certain assignments made by such partnerships “ when insolvent,” to be void, intended any thing more or less than that which they have plainly manifested in the latter, by the declaration that such assignments shall not be valid “ if made by the partnership at a time when it has not sufficient property or effects to pay all its debts.”
Taking the insufficiency of its property to pay its debts to be the true test of the insolvency of the partnership, I do not think that any serious doubt can be entertained as to the’insolvency of the firm in this case at the date of the deed. The commissioner’s
The deed was made at a time when the concern was confessedly greatly embarrassed. It contains a sweeping conveyance of the whole of the partnership property. It is made to secure the large debt of twelve thousand dollars — a debt nearly large enough (as the result has shown) to absorb the entire residue of the proceeds of the property, after discharging prior liens. Most if not all of the items of which the debt was composed, were then due. By the terms of the deed a sale is to be made whenever there shall be a failure to pay any part of the debt due or to become due, and McArthur & Co. shall require a sale to be made. It is said,.it is true, that there was an expectation that McArthur & Co. would make further advances, by the aid of
There is, however, I think, no pro'of of any assurance or promise by McArthur & Co. upon which a prudent firm could have reasonably built the expectation of further acceptances or advances by them. In this state of things, it is difficult to suppose that the parties did not contemplate as a probable result the events which speedily ensued the execution of the deed, viz : the stoppage and failure of the concern. I am satisfied that the deed was not only made at a time when there was an insufficiency of property to pay the debts of the firm, but was also made with the expectation of a winding up of the concern, at no remote period; with a deficiency of assets to pay' its engagements ; and so in contemplation of insolvency.
The deed, as has been already stated, conveys all the property of the partnership; and it provides for the payment of the debt of McArthur & Co. and for the payment of that debt alone. From these facts, and what has been already established in respect to the character and design of the deed, the further conclusion follows naturally, that the deed was made with the intent to give to McArthur & Co. a preference over other creditors; and that the judge of the Circuit court properly decreed the deed to be void as to them. That the Circuit court also decided correctly in declaring that the judgments confessed by the firm in favor of
The twenty-second section of the act declares that every special partner who shall violate any provision of the twentieth and twenty-first sections, or who shall concur in or assent to any such violation by the partnership, or by any individual partner, shall be liable as a general partner. The execution of the deed was suggested by McArthur, and he is a party to it. That he ivas at one time liable as a general partner is therefore obvious.
The twenty-third section provides that in case of the insolvency or bankruptcy of the partnership, no special partner shall under any circumstances be allowed to claim as a creditor until the claims of all the other creditors of the firm shall be satisfied; and it was contended in the court below that inasmuch as the debt of twelve thousand dollars Avas due to a firm of which McArthur was a partner, such debt could not participate in the distribution of the assets of the concern of Penman, Thompson & Penman. The Circuit court very properly held, I think, that the section did not intend to exclude from such participation debts due to concerns of which the special partner might be a member. A debt due to McArthur & Co. is not a debt due to McArthur individually. The rights of McCrery, the other partner of the concern of McArthur & Co. stand obviously out of and beyond the reach of
Upon the general principles governing the jurisdiction of courts of equity, and upon the reasoning of the chancellor in Innes v. Lansing, 7 Paige’s R. 583, I think the jurisdiction taken by the Circuit court in this case is clear. We have had no controversy here, and the record discloses no evidence of any in the court below, between those judgment creditors, if any, who may have obtained their judgments in invitum, and those who obtained theirs by confession. Theje being thus no question in the case in respect to legal priorities, except such as have been shown to be void as to creditors, I do not perceive that there was any difficulty in the way of the court’s proceeding, as it has done, to decree a ratable distribution of the assets of the firm among all the creditors.
And as the court had jurisdiction of the case for the purpose of protecting and distributing the assets, it had, in my opinion, a right to go on and give complete relief, and, to that end, to render such personal decrees as the rights and liabilities of the parties required. And if McArthur still remained liable as a general partner, I can see no objection to a decree against him to enforce that liability. The case of Haggerty v. Taylor, 10 Paige’s R. 261, cited by the counsel of the appellant, in his written note, does not seem to me to conflict with this view; as, in that case, it was held that the complainants had shown no right to any share of the assets which they were seeking to sub
The court held that the creditors of the firm, previous to the period fixed for the expiration of the partnership, were entitled to a preference, and should be paid ratably out of the property which then belonged to the limited partnership, and refused to appoint a receiver at the instance of the complainants. And as to any personal responsibility which the complainants had a right to assert against the defendants on account of transactions subsequent to the termination of the original partnership, they were remitted to their remedy at law. The distinction between the two cases is obvious. In Haggerty v. Taylor, the only relief to which the plaintiffs were entitled, if any, was one of a legal nature; whilst in the one before us the plaintiffs succeeded in establishing a right to the jurisdiction of the court on equitable grounds: And having done so the question for the court was whether it should go on and end the controversy, or put tlie parties to the expense and delay of numerous suits at law to fix a personal responsibility growing out of the same transaction, and to be established by the very proofs on which was founded the equitable relief sought by the plaintiffs and given by the court.
A doubt, however, has been suggested whether the judgment creditors, by proceeding at law against the other partners alone, have not thereby lost the right which they at one time had (as has been shown) to hold McArthur liable as a general partner. In order to solve this doubt, a further reference to the pro
In the fourteenth section it is declared that suits in relation to the business of the partnership may be brought and conducted by and against the general partners in the same manner as if there were no special partners; and the special partners shall be liable to and suable by the firm for debts contracted with it in the same manner as if they were not partners. The eighth section, however, it will be seen, after providing that no such partnership shall be deemed to have been formed until the certificate and affidavit in respect to the nature of the business of the firm, &c. réquired in previous .sections, shall have been made and recorded, declares that, if any false statement be made in such certificate or affidavit, all the persons interested in such partnership shall be liable for all the engagements thereof as - general partners. And we have already seen in case of a concurrence by the special partner in the violation of the twentieth and twenty-first sections by the execution of the assignments, &c. therein prohibited, he is made liable as a general partner by the twenty-third section.
Without stopping to note the many points in which the relation borne by the members of such an association towards their associates and the public varies from that which exists in an ordinary partnership, it is suf
In the case of an ordinary partnership, a creditor is required to sue all the members of the firm in respect to any claim against the concern. And if he omits any one of the members, he may be met and defeated of his action by a plea in abatement. In the case of a limited partnership, he is expressly authorized to proceed against the general partners alone, in relation to any business of the partnership, in the same manner as if there was no special partner. And it is only when it is sought to make the latter liable personally on account of some violation of the statute which renders him liable as a general partner, that the creditor has any right to proceed against him.
In all cases where the creditor takes a judgment against one or more of the members of a general partnership, omitting others, he loses thereby all recourse at law against the latter, even though they be dormant partners, and unknown at the time to the creditor. The joint contract is held to be merged in the judgment as to the members against whom it is obtained; and being so merged, is equally barred as to the others, since no joint suit can be maintained upon it. Collyer on Part. 659, and cases cited in notes; Ward v. Motter, 2 Rob. R. 536.
On the other hand, it is obvious that there may be cases growing out of limited partnerships, in which it would be absurd to hold that a judgment against the general partners could be pleaded as a merger of the liability of the special partner. For it may often happen that the general partners may violate the provisions of the twentieth section by the execution of conveyances and assignments therein prohibited after judgments obtained against them. In a suit brought
So again, a falsehood in the certificate of partnership in respect to the capital contributed by the special partner, may never come to light till after a creditor proceeding under the fourteenth section has obtained his judgment against the general partners. To declare that the judgment should bar a suit against the special partner, would not only be obviously unjust but in conflict with the terms of the eighth section, declaring all the persons interested in the partnership liable in such case as general partners. Yet in the case of a general partnership, (as has been already stated,) consisting of ostensible and dormant partners, a judgment against the ostensible partners completely bars all recovery at law against the dormant partners, though unknown to the plaintiff until after his judgment was obtained.
I deem it unnecessary to pursue the contrast further, as the points of variance already exhibited are sufficient to show that the technical rules, which so often embarrass and sometimes defeat the creditor in prosecuting at law his demands against the members of general partnerships, especially in cases where there are dormant partners, can have little application in regulating the remedies given by the statute against the members of a limited partnership.
In a case like the one before us, where the act, by the assent to which by the special partner, his liability as a general partner was incurred before the creditors had obtained their judgments, I do not doubt that the creditors might have united all of the partners in their several suits. The general partners were bound as such as well by their contracts as by their violation of the
It is obvious that the remedy upon the contract cannot be merged in the cause of action arising out of the wrongful act of the partners. And it seems to me that the question, -whether in such case the creditor, by instituting his action against the general partners alone, and upon the contract, had elected to waive his remedy against the special partner for the violation of the act, would turn not upon the doctrine of technical merger, but upon the proofs in respect to his real intentions. The only case in which the analogy to be drawn from the law in respect to the remedies against general partnerships would seem to apply, would be when the creditor should, by the frame of his pleadings, show that he was proceeding on a cause of action arising out of the violation of the statute, and for which all the partners were liable; and should yet take a judgment against the general partners alone.
If, however, there be doubt as to whether if sued at law McArthur might not have pleaded the judgments against the general partners as a merger of the demand against him, it requires, I think, no extension of the principles recognized by this court in the cases of
Having disposed of those questions, which from their novelty and difficulty seemed to me to call for more especial notice and remark by the court, the length to which I have found it necessary to extend my opinion in doing so, induces me to forbear any further observation in respect to the other questions raised in the pleadings, than that, after having given to the whole record a careful examination, I have been unable to discover any error in the decrees of the court.
I think the decree should be affirmed.
The other judges concurred in the opinion of Daniel, J.
Decree affirmed.