Reed v. Shepardson

| Vt. | Feb 15, 1829

The opinion of the Court was delivered by$

HutchiNson, J.

The principal question which we have to decide is, whether the creditors of a partnership firm have such a lien upon the partnership effects, that the defendant is liable in tort, for holding and selling the property in question, upon an execution against one individual of the partnership ? I say holding and selling; for the plaintiffs had no pretence of title to this particular property, till long after the defendant attached the same, and held it upon his writ.

The plaintiffs claim that they, as creditors of the firm of J. and J. A. Bascom, had such a lien upon the property, which was perfected into a title to this particular property, by a sale to them in discharge of their debts, against the firm, before the defendant sold on execution. And the defendant contends that his sale was an official duty, giving effect to the attachment he made before the purchase by the plaintiffs; and that neither his refusal to deliver to the plaintiffs, nor his sale of the property, amounted to a conversion. He also denies that the plaintiffs could acquire any title while his attachment was on the property.

There seems no dispute what the law is, upon this subject, in England, and some of than eighboring states, at least, there is none among the members of the Court. That law is, as we understand from the books, that the creditors of a partnership have a lien upon the partnership effects of their debtors in preference to the creditors of the individual members of the firm. They have, also, the right to pursue the individual property in common with the creditors of the separate partners$ while the creditors of the separate partners have no right against the partnership property, only to take the interest of their debtor in the firm, after the partnership is closed, and that interest ascertained. It is understood, this interest can be taken at any time and sold for what it will fetch.

In England, this law took its origin from the same policy whence originated the bankrupt system. The object there is to promote trade; in order to which they use this law to keep up the credit of trading companies. It creates a monopoly of the partnership property in favor of the partnership creditors.

Aside from the question of policy, to promote some natural interest, there is no more reason in this than there would be in giving a like preference to the creditors of the individual partners. There are many cases of partnerships formed by individuals deeply in debt for the property they severally possess, and which is worked into the partnership in such a manner as not to be traced by the prior creditors, and yet there ought to be a lien upon it in their favor. So, there may be cases of partnerships formed by those in debt, who afterwards receive property for the partnership on credit, which may go to pay private debts to the injury of the partnership creditors.

This action is probably the first in which'the Courts in this state have ever been called upon to apply the law under which the plaintiffs claim. The argument in behalf of the plaintiffs is very ingenious to induce its application here, and to exclude the difficulties heretofore suggested by the Court. One difficulty, however, yet remains ; we are not sufficiently informed how the creditor of the individual partner can obtain that interest in the partnership property, to which it is conceded he has aright; namely the interest of his debtor. We can easily conceive how, in England and JYew-YorJc, where the property of the debtor is holden from the delivering out of execution, there may be a sale at auction of this interest, because the execution creates a lien without any visible levy and removing tine property. We are told this interest is sold in Connecticut, and the purchaser is let into the former interest of the debtor, whatever that may eventually be. But how the property is guarded against sales by the debtor, and the attachments of other creditors, between the levy and the sale, we are not informed.

In this state, we have no method of attaching goods so as to avail the creditor, but to take them and keep them from the debtor, as was done in this case. There is no such thing as attaching, or levying upon the debtor’s interest in the goods, and advertising and selling the same, and avoid an intermediate sale by the debtor, but to take the goods themselves from his custody. Just so, with regard to the attachments of other creditors, who might have any right to attach. If, then, the officer, taking the interest of the individual partner in the only way in which he can take it and preserve it for his employer, is to be considered as a trespasser, by reason of such taking, or his sale is to be considered a conversion, when the partnership creditors sue him ; this amounts to a total sequestering of the partnership property, not only to the use of the partnership creditors, but to the partners themselves, as against the creditors of the individual partners. A decision to this effect would be going great lengths, while our statutes give to the creditors, without distinction, the most unbounded right to secure their debts by attaching the goods and chattels of the debt- or, excepting only some articles of necessary use. Upon this point the difficulties under which the Court have always labored, have not been removed by the argument of the plaintiff’s counsel. We seem to want some statute, prescribing some new mode of keeping property safely during the fourteen days that it must, by law, be advertised before a sale ; also, during the pendency of a suit after an attachment; and, without this, an attachment without removal would be a nullity.

The plaintiffs counsel cite the case of Pierce vs. Jackson, 6 Mass. Rep. 242, to show the. law he contends for to have been adopted there. In compelling the sheriff to account for the money raised on a sale of partnership goods, the Court, in that case, • gave a preference to the creditors of ihejirm : but there the goods appear to have been levied upon and sold, as were these by this defendant. The Sheriff was not treated as a trespasser for the taking of the goods. If cases of this kind have before arisen in this state we believe none have been litigated, and the practical course has been to attach the undivided moiety, as was done in this case treating the property as holden by a tenancy in common. It must continue to be so treated, or we cannot attach at all, till the legislature interfere, and make some new provision for such a case.

This furnishes an answer to that part of the argument of plaintiffs’- counsel, ■ which supposes the partnership property to form such a distinct fund .as to be intangible by the creditors of one partner. The undivided half is not thus intangible. We need not now decide what would- be the effect of a proceeding by the partners, or either of them,or by the creditors of the firm, to bring the partnership to a close, and appropriate the partnership property, first, to pay the debts due from the firm, in preference to the individual debts : Such a proceeding differs much from the one before us, which treats the officer as a wrong doer. But, it is urged, that the officer might apply to Chancery, and compel an interpleader, to ascertain to whom the property belongs. In this there would be more reason, if the suit sounded in contract; if it was a suit for the money raised by the sale. But, even then, we would not force the officer into a controversy that might outlive his office, and be attended with great expense : more especially would we not do it, under circumstances like the present, and let his success in this action of tort depend upon the result of that collateral controversy. The parties themselves should litigate such questions ; and if an officer must go into chancery, let him be drawn in as defendant, and not driven in as plaintiff. If the plaintiffs choose to have the question decided in equity, they might bring their bill, and enjoin the defendant from paying over the money, while the suit is depending. The case cited by plaintiffs from 1 Burrow is not in point, unless we first decide the property of the firm to be sequestered out of the reach of the creditors of each partner. That was a case under the Bankrupt laws ; and was really a dispute between the sheriffs for one creditor, and the assignees of the bankrupt, for the body of the creditors; and it resulted in a clear case for the assignees; for the act of bankruptcy was committed December 4th, the judgment and execution, and delivery of the same to the defendants, the sheriffs off London, were on the 5 th. The commission of bankruptcy "on the 8th, and the assignment was the same day, and the sale by the defendants was the 28th. By the bankrupt laws the assignment vests the property in the assignees, by relation, at the time of the act of bankruptcy. Hence, that fund was exclusive in the hands of the assignees. As we decide this property to be not so sequestered to the exclusive use of the creditors of the firm, there is nothing in that case that can govern this.

The plaintiffs- further contend, that the case shows the firm of J. and J. A. Bascom to be insolvent, which excludes all idea of any surplus that could belong to the separate creditors. The case ^oes s^ow’ ^at the plaintiffs adduced testimony tending to prove this; but it further shows, that no account of the partnership property had been taken, and none was submitted to the jury. Testimony short of this is too vague and uncertain, and ought not to have been admitted to go to the jury for the purpose, of showing insolvency. Neither ought it to have been admitted for the further reason, that the officer must act, in making his attachment, in reference to such facts as then appear; and he must not be made a trespasser by the result of an accounting, afterwards had between the partners.

J. Phelps, for plaintiff. S. Elliot, for defendant.

So far as we have now disposed of the case, and if no other point could be urged, the whole testimony ought to have been excluded ; for it only tends to support a claim under alaw never adopted here. Our statute, adopting the common law of England, adopts it so far only as it is applicable to our circumstances, and not inconsistent with our constitution and laws. The law now contended lor is wholly inconsistent with our statutes concerning attaching, and levying upon, personal estate, and the long usage and uniform decisions that the attaching officer must move the property from the custody of the debtor. It is also inconsistent with our circumstances ; as we have no motive to encourage partnerships any moro than individual business men. But should the legislature see fit to adopt this law, they can do it, and prescribe a mode to carry it into effect. This was the opinion of Judge Royce, upon the first argument of this case, and is the result to which Judge Pren-tiss arrived in vacation, as he informed me when he delivered over the papers, a short time since; and we, who are present, are agreed in the same opinion; and a new trial must be granted.

The case presents a point, not much noticed by counsel, and which naay be important in some future disposition of the cause. The case shows, that the defendant had before sold an undivided half of this property, by virtue of other executions against the firm. He now has taken and sold an undivided half of the same by virtue of an exebution against one of the members of the firm. It is not readily seen, upon this state of things, why the defendant had a right to take and sell, upon said last execution, any more than one undivided fourth of said property. But the parties, who know the facts in the case, can present them on a future trial as the merits require. If the defendant took half, when he should have taken but a fourth part, possibly the plaintiffs may be entitled to recover a fourth part.

New trial granted.