Case ID: ny-super-ct_25/html/0134-01.html
Source: Caselaw Access Project
Author: {"author": "Robertson, Ch. J.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

Joseph D. Davis et al. plaintiffs and appellants, vs. William Grove et al. defendants and respondents.
    1. The plaintiffs, a mercantile firm doing business at Havana, entered into an agreement with a firm who were merchants at New York, by which the former were to purchase sugars and ship them from Havana on joint account, consigned to the latter at New York, and to pay for the same by drafts drawn upon the consignees, on said consignments, and negotiated in Havana. Held that the relation of the parties to the agreement was clearly that of partners, in the purchase and sale of sugars.
    2. Held, also, that the interest of each partner, in the assets and stock of the partnership was subject to the lien of the other partners for payments made by them beyond their share of the debts of the company, and was applicable to the payment of debts not paid, before any division of the partnership property.
    S. Held, further; that an assignment by the New York firm of all their real and personal property in trust for the benefit of their creditors, only carried that residuary interest; and the assignee had no right, by virtue thereof, to appro- , priate the whole partnership assets of the two films to the payment of the separate debts of such New York house, and might be restrained by injunction.
    4. Such a cause of action may be joined with one for a partnership accounting.
    5. Where a partnership has been dissolved by the personal insolvency of some of the members, and their attempt to misappropriate the assets of the partnership to their private debts, the other partners will be entitled to a receiver.
    6. Such receivership should extend to all the partnership assets in the hands of the defendants. The injunction order should include them, so as to prevent the defendants from misappropriating them; and they should be required to deliver them over to the receiver.
    (Before Robertson, Ch. J., and Garvin and McCunn, JJ.)
    Heard February 20, 1864.
    Appeal from an order made at a special term.
    The plaintiffs, being merchants, doing business in Havana, were induced by representations made by the defendants, doing business in New York, under the firm name of William Grove & Co. as to their solvency (which representations are alleged to have been fraudulent,) to ship sugars from Havana on joint account, consigned to the defendants at New York, paying for the same by drafts drawn upon said defendants, on said consignments, and negotiated in Havana. The course of the business by agreement between the parties, was to be as follows : the plaintiffs to buy the sugars in Havana for cash, and consign them to the defendants in New York. The purchase money for the sugars was to be raised by the plaintiffs in Havana, by the sale of bills of exchange, drawn by them on the defendants, upon such consignments, which the defendants were to accept at sixty days’ sight. The sugars were purchased and shipped accordingly, and bills of exchange to the amount of the cost thereof were drawn by the plaintiffs upon the defendants, negotiated by the plaintiffs in Havana, and accepted hy the defendants in New York at sixty days’ sight; but before any of said bills of exchange became due, the defendants made a general assignment for the benefit of their creditors, without preference, A large portion of the sugar had been sold by the defendants before-making the assignment, and 'the proceeds are in the hands of the assignee. A large part arrived after the making of the assignment, and are now in the hands of the assignee, unsold. The assignee is about to proceed under the assignment which is executed by two of the defendants, only, to distribute the assigned property pro rata among all the creditors of the defendants.
    The object of this action is to compel the application of the consigned property to the payment of the amount alleged to be due to the plaintiffs, and to the payment of the several drafts drawn upon and accepted by the defendants Grove & Co.
    The complaint prays for an injunction to prevent the assignee from interfering with the sugars assigned, or any part thereof, also that a receiver be appointed; that out of the proceeds of the consignment the bill holders be first paid, and then that any balance remaining be paid to the plaintiffs, on account of the sum of $1187.49 expended by them for said sugars, over and above what was realized from the sale of the bills, also on account of the half of the profit to which the plaintiff's are entitled.
    The order of special term appealed from, limited the equities of the plaintiffs in respect to the injunction and receiver, to the amount of the plaintiffs’ share of the profits only, while the plaintiffs contend that their equities as consignors of the bills extend to the proper application of the entire fund.
    
      W. N. Anthony for the appellants.
    
      T. B. Eldridge, for the respondents.
   By the Court,

Robertson, Ch. J.

The relation of the plaintiffs and all the defendants, except Barmore, ’was clearly that of partners in the purchase and sale of sugar. (Cumpston v. McNair, 1 Wend. 457. Reynolds v. Cleveland, 4 Cowen, 282. Mumford v. Nicoll, 20 John. 611. Smith v. Wright, 1 Abb. Pr. 243.) The interest of each partner in the assets and stock of the partnership was subject to the lien of the other partners for payments, beyond their share of the debts of the company, and was applicable to the payment of debts not paid before any division of the partnership property. (Addison v. Burckmyer, 4 Sandf. Ch. 498. Kirby v. Schoonmaker, 3 Barb. Ch. 46. Geortner v. Trustees of Canajoharie, 2 Barb. 625.) The assignment to Barmore only carried that residuary interest, as it was general of the real and personal estate of the assignors. He had no right by virtue thereof to appropriate the whole partnership assets to the payment of the separate debts of three of the partners, and he may be restrained from attempting to do so, if threatened by him, by the interference of the court; such a cause of action may be joined with a partnership accounting, which is the proper main relief in this action. (Wade v. Rusher, 4 Bosw. 537.) The partnership was not agreed to be continued for any definite time, and, therefore, may be dissolved at the pleasure of any party. It has been dissolved by the insolvency of Grove & Co. and their attempt to appropriate the assets of the partnership to their private debts, entitles the plaintiffs to a receiver. (Coll. on Part. 196. Harding v. Glover, 18 Ves. 281. Roberts v. Eberhardt, 23 En. L. & Eq. R. 245. Wilson v. Greenwood, 1 Swanst. 471, 480. Court v. Harris, Turn. & Russ. 496. Hubbard v. Guild, 1 Duer, 662.) The receivership in this case ought to have extended to all the partnership assets in the hands of the defendants, and the injunction order to have covered them, so as to prevent the defendants from misappropriating them, and they should have been required to deliver them over to such receiver. If there was any doubt as to the amount in the hands of the defendant Barmore, there should have been a reference to ascertain it. This is necessary, in order to provide for, and anticipate the final judgment, which must be for a payment of all the debts of the partnership pro rata out of its assets.

I agree with the learned judge who decided this motion in doubting whether this action could be sustained to enforce any supposed equity of the draft holders who bought their drafts in the market without taking any specific lien on- the goods. My views on that point have been heretofore expressed in the two cases referred to by him, of Scheidt v. Sturges, Shaw & Co., and The Bank of Mutual Redemption v. The same, decided in this court; but it is not necessary now to consider that point.

The order should be modified as hereinbefore suggested, with costs to the plaintiffs on the defendants’ appeal.