Case ID: ohio-st_67/html/0245-01.html
Source: Caselaw Access Project
Author: {"author": "Shauck, J.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

Enck v. Gerding.
    
      Partnership stock mortgaged — To secure note of one partner— Mortgagors retain control of property — Mortgage void as to firm creditors — Death of partner — Survivor trustee for firm creditors — Law of partnership — Mortgage of personalty.
    
    A mortgage upon a stock of merchandise owned by a partner•ship and executed by its members individually to secure the note of a member, the property remaining in the possession of the mortgagors with authority to sell in the usual conduct of their business, is void as to the creditors of the partnership; and though it may be effectual to devote the individual interests of the mortgagors to the payment .of the note, the assets of the partnership, upon the death of one member are, until the appointment of a receiver, rightfully in the possession of the survivor as trustee for such creditors. notwithstanding the mortgage and a breach of its condition.
    (Decided December 2, 1902.)
    Error to the Circuit Court of Putnam county.
    On October 26, 1895, Mrs. Gerding brought suit in the court of common pleas against Enck and others,, to recover possession of a stock of merchandise and fixtures in a store at Leipsic, the same being the property of a copartnership recently existing between said Enck and one John G. Gerding, doing business as. Gerding & Enck. Tlie firm had been dissolved by the death of Gerding shortly before the bringing of the suit. Plaintiff was the mother of the said John G. Gerding, and she claimed possession of said chattels by virtue of a mortgage which had been executed to her to secure the payment of a note of her son, about four months before his death, the mortgage being executed by both members of the firm individually. The note had been executed January 1, 1895, and was payable January 1, 1896. The mortgage was executed June 25, 1895. At the time of the execution of the mortgage the chattels were left in the possession of the firm to enable it to proceed in the transaction of business as it had done before its execution, and it did so proceed with the consent of the mortgagee, the mortgage containing no condition for a lien on the goods to be thereafter purchased by the firm. Upon execution of the writ of replevin, a statutory bond for that purpose being executed by Enck, the chattels were returned to him. On November 19, 1895, David H. Richards was appointed receiver of the late firm, and ordered to take possession of all its effects, and on the thirtieth of the same month he filed an answer to the petition of Mrs. Gerding, alleging his appointment and qualification, and that he had at once taken possession of the effects of the late firm, including the mortgaged property, having received it from Enck, and that he was still holding it for the purpose of administering his trust. The averments of his answer were not denied. Upon the trial of the issues joined between .Mrs. Gerding and Enck, much testimony was offered respecting the matters of the partnership, the existence of a consideration for the note from John G. Gerding to the mortgagee, and notices and transactions after his death by virtue of which she claimed to have acquired from Enck constructive possession of the chattels prior to the bringing of her suit. Concerning the following facts there is no dispute: The debt which the mortgage was given to secure was never the debt of the firm; after the execution of the mortgage the firm continued in possession of the mortgaged chattels with the consent of Mrs. Gerding, making sales and purchases as before ; at the time of the dissolution of the firm its indebtedness was large in proportion to its assets, and it was probably insolvent; much of this indebtedness existed at the time of the execution of the mortgage. The court of common pleas found that at the commencement of the action the right to the possession of the chattels was in Mrs. Gerding, and rendered judgment in her favor for the amount of their value. Its judgment was affirmed by the circuit court.
    
      Messrs. Watts & Moore and Mr. J. Werner, for plaintiff in error, cited and commented upon the following authorities:
    
      Smetters v. Rainey, 14 Ohio St., 287; Wangerien v. Aspell, 47 Ohio St., 250; Alexander v. Morgan, Root & Co., 31 Ohio St., 546; 2 Greenl., section 561; Jones on Chat. Mort., 72; Freeman v. Rawson, 5 Ohio St., 1; Edgell v. Hart, 9 N. Y., 213; Collins v. Myers, 16 Ohio, 547; Harman v. Abbey, 7 Ohio St., 218; In re Assignment of Brammer, 4 Dec., 107; 2 N. P., 169; 1 Jones on Mort., section 615; Lewis v. Anderson, 20 Ohio St., 281; Copeland v. Manton, 22 Ohio St., 398; Swan’s Tr. (13 ed.), 572; Oxford Bank v. Haynes, 8 Pick., 423; Roxborough v. Messick, 6 Ohio St., 448; Eaton v. Davidson, 46 Ohio St., 355; Story on Partnership, section 134; Peterson v. Roach, 32 Ohio St., 374; Bank v. Sawyer, 38 Ohio St., 339; Page 
      v. Thomas, 43 Ohio St., 44; Parsons on Partnership, 344; Summer v. Hampson, 8 Ohio, 365; Story on Partnership, 97; Jones on Chat. Mort., 45, 186; Thompson v. Spittle, 102 Mass., 207; 49 Ill., 28; 1 Jones on Mort., 120; Insurance Co. v. Carnahan, 63 Ohio St., 258.
    
      Mr. George Fritz and Messrs. Straman & Malone, for defendant in error, cited and commented upon the following authorities:
    17 Am. & Eng. Ency. Law, 1157, 1158; Anketel v. Converse, 17 Ohio St., 11; Williams v. Englebrecht,. 37 Ohio St., 383; Freeman v. Freeman, 17 N. J. Eq., 44; Olcott v. Tioga Ry. Co., 40 Barb., 179; Tannahill v. Tuttle, 3 Mich., 104; Cross v. Carstens, 49 Ohio St., 548; Atkinson v. Jordan, 5 Ohio, 289; Gwin v. Selby,. 5 Ohio St., 96; Sigler v. Bank, 8 Ohio St., 511; Francisco v. Ryan, 54 Ohio St., 307.
   Shauck, J.

The record shows that in the trial court much consideration was given to questions of law and fact supposed to be material to the determination of the relative rights of the mortgagee and the-surviving partner in the chattels of the late firm. In orderly inquiry it seems that first consideration should be given to questions which must determine-whether either of them had any rights therein. There is no merit in the claim of Mrs. Gerding that she had acquired possession of the chattels after the dissolution of the firm and before the commencement of this, action. Her petition alleges the possession of the-surviving partner, and that had continued without change from the dissolution of the firm. Assuming in her favor all that can be claimed from the record, she took a mortgage executed by the individual members of a firm when it was involved in indebtedness, the mortgage embracing all of the chattels which it used in the transaction of its business. The chattels were left in its possession for sale and for the general conduct of the business in which it had been engaged, and the mortgage was given to secure the note of one of the members, which in fact and law represented only his individual indebtedness. That the mortgage is void as to creditors, because of the power in the mortgagors to sell the chattels described, is established by numerous cases. Collins v. Myers et al., 16 Ohio, 547; Freeman, etc., v. Rawson, 5 Ohio St., 1; Harmon v. Abbey, 7 Ohio St., 218. It is elementary that a surviving partner is entitled to the possession of all the assets of the partnership for the purpose of devoting them to the discharge of its liabilities. Although with respect to a surplus which may remain after these liabilities are discharged he is a debtor of the deceased partner’s executor; until their demands are satisfied he holds the assets as a trustee for the partnership creditors. Gray v. Kerr, 46 Ohio St., 652. These indisputable propositions are sufficient to determine the case, for, assuming that the mortgage was effective to devote the individual interests of both partners in what might remain of the assets after the payment of the debts to the payment of the note described, being void as to creditors, it was. ineffectual to defeat the possessory right of Enck as the trustee of the partnership creditors. At thé commencement of the action the possession of the chattels, was rightfully in the surviving partner for the purpose indicated, and upon the appointment of the receiver such possession passed rightfully te him. Whether anything may remain to any of the parties to the mortgage can be determined conclusively only after administration by the receiver. But that result seems so improbable that we do not consider the questions which engaged the attention of the trial court.

The judgments of the circuit and common pleas courts should be reversed, the original petition dismissed, and the cause should be remanded to the court of common pleas for administration by the receiver of all the assets of the partnership.

Judgment accordingly.

Burket, C. J., Spear, Davis and Crew, JJ., concur.