Case ID: ad_173/html/0717-01.html
Source: Caselaw Access Project
Author: {"author": "Thomas, J.:", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

Isidor Silberberg and Barnett Tanenbaum, Copartners Conducting Business as Eagle Swiss Embroidery Works, Respondents, v. Sam Wember and Others, Appellants, Impleaded with William J. Diamond, Defendant.
    Second Department,
    June 29, 1916.
    Partnership —insolvency — reorganization of insolvent partnership by wives of partners — right of creditors to future services of insolvent partners.
    Where a mortgagee of all the assets of an insolvent partnership, consisting of machinery used in the business, forecloses the mortgage and purchases the property- in which the members of the firm had no interests or equity, said mortgagee may sell said machinery to the wives of the former partners, taking their notes in payment thereof, and other creditors of the firm have no right to object because the former members of the firm conduct the new business as agents of their wives and receive compensation therefor.
    The future services of the insolvent partners do not belong to their creditors and they may place them at the disposition of their wives. 1 Carr, J., dissented.
    Appeal by the defendants, Sam Wember and others, from a judgment of the Supreme Court in favor of the plaintiffs, entered in the office of the clerk of the county of Kings on the 25th day of May, 1915, upon the decision of the court after a trial at the Kings County Special Term.
    
      Louis B. Williams, for the appellants.
    
      Albert M. Levy, for the respondents.
   Thomas, J.:

The facts are free from any concealment and have been. Three men were in partnership under the name of the Favorite Embroidery and Novelty Company. They were Seidenstock, Wember and Kwestel. Seidenstock went out early in 1913. Then the shop was closed, as the remaining partners could not do business. They were owing some $1,200, including the judgment of the plaintiffs. They had no assets, save some machinery, and that was mortgaged and the security held or acquired by Diamond. In that situation Diamond foreclosed and bought in the machines. Then the men had nothing except their hands, skilled to the business. Diamond would not sell the machines to them because they owed money. They had no interests, no equity. But Diamond finally, importuned doubtlessly by the men and wives, consented to sell to the wives, which he did. He received their notes for the purchase price and took back a mortgage. The wives filed a certificate that they were doing business under the name of the Parisian Swiss Embroidery, and, after the place had been closed for some months, the wives started anew. The men worked in the shop and each drew ten dollars per week and the wives severally drew the same. The men substantially conducted the businesss, apparently and actually, for the wives. How the plaintiffs claim to find in that history a plan to place the property beyond the men’s creditors. Diamond’s foreclosure is not assailed. When he bid in the machines the men had nothing in them or otherwise. Their creditors had no ability to follow the machines for their debts. How then could the wives cheat the creditors by buying of Diamond ? Suppose the wives had not bought at all, what could the creditors have got of which they are now deprived % Diamond had a complete right to buy and the women to buy. The husbands were bankrupt in their petty business and actually disqualified by poverty and debts Horn getting credit. Why should not the wives go into business and why should not the husbands aid them by their services ? But it is said that the wives bought and went into business as the agents of the men. Diamond would not sell to the men. So they could not be principals. They had nothing to pay and Diamond would not take their notes. So they could not be principals. Diamond took the wives’ notes. They alone are liable on them, not the men. The wives publicly and legally opened the business and are alone liable for its debts. Ho resort can be had to the men. What reason, then, for the finding that the women were mere agents of the husbands % The supposed answer is because the men conduct the business and with others do the work. But the law does not forbid that. It is a common and legal practice that one unable by his pecuniary condition to do business should, as the agent of his wife or some other, do the work of operation. The vice of the thing is when the husband’s property is covered up by such a scheme. Here the men had nothing, and if the wives had not bought there would have been no sale — no business. The men’s future services did not belong to their creditors, and they could place them at the disposition of the wives.

The judgment should be reversed and the complaint dismissed, with costs.

Jenks, P. J., Mills and Rich, JJ., concurred; Carr, J., dissented.

• Judgment reversed and complaint dismissed, with costs.