Case ID: abbn-cas_7/html/0295-01.html
Source: Caselaw Access Project
Author: {"author": "Larremore, J.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

WHITCOMB v. FOWLE.
    
      N. Y. Common Pleas ;
    
    
      Special Term, January, 1879.
    Partnership. —General Assignment. —Receiver. ■—Injunction.
    Any creditor of an insolvent limited partnership, although he has not proceeded to judgment and execution at law, may bring an action to restrain the insolvent partners from disposing of the property contrary to law, and for the appointment of a receiver.
    A general creditor may at least prevent a dissipation of the copartnership assets.
    A revocation by the parties to a general assignment, can in no way prejudice or impair the rights of creditors.
    Motion by defendants to remove a receiver and vacate an injunction.
    This was an action, by Joshua M. Whitcomb and others, against Josiah F. Fowle, John H. Folk, and William A. Brown, Jr., to set aside an assignment for the benefit of creditors, &c.
    Prior to January 2, 1879, a limited copartnership existed under the firm name of “J. F. Fowle,” of which the defendant, Josiah F. Fowle, was the general, and the defendant, William A. Brown, Jr., was the special partner. On the day last mentioned, the said firm made an assignment for the benefit of its creditors to the defendant, John H. Folk, in which the amount due the special partner was made a preferred claim. This action was then commenced in behalf of the plaintiff and other creditors who might come in and contribute to the expense thereof, to have the assignment declared null and void ; that a receiver of the copartnership property be appointed, and that an injunction issue, restraining any disposition of such property. An order to show cause as to the appointment of a receiver, and the granting of an injunction, was made January 7,1879, returnable January 8, 1879, the hearing of which was on that day adjourned to January 13,1879, with the direction that no disposition of the property by sale was to be made by Folk, the assignee.
    On January 7,1879, Fowle (as appears by his affidavit) was served with the summons and complaint, and the order to show cause in this action. On January 9, 1879, with the consent of Brown, Folk re-assigned the copartnership property, and on the same day the said firm, with Brown’s consent, made a new assignment to Folk for the benefit of its creditors generally, and without preference. Folk, as such assignee, subsequently filed the schedule required by law, and executed a bond, which was duly approved.
    A receiver having been appointed, this motion was made by the defendants for his removal and the vacating of the injunction.
    
      John Henry Hull {Childs & Hull, attorneys), for assignee, Folk.
    Although the first assignment was invalid, the second was good (Hone v. Woolsey, 2 Edw. Ch. 289 ; Mills v. Argall, 6 Paige, 577; Metcalf v. Van Brunt, 37 Barb. 621). The plaintiffs are not judgment creditors, and therefore cannot attack the assignment (Southard v. Pinckney, 5 Abb. New Cas. 190 ; Miller v. Miller, 7 Hun, 208 ; affi’g 1 Abb. New Cas. 30; Schnitzer v. Cohen, 7 Hun, 665; Estes v. Wilcox, 67 N. Y. 264; Spicer v. Ayres, 2 Supm. Ct. [T. & C.] 626 ; Ballou v. Jones, 13 Hun, 629 ; Geery v. Geery, 63 N. Y. 252 ; Produce Bank v. Morton, 67 Id. 199 ; see, also, Burrill on Assign. 3 ed. § 503, and cases cited). Levy v. Ley, 6 Abb. Pr. 89, Levy v. Ely, 15 How. Pr. 395, and Lachaise v. Lord, 1 Abb. Pr. 213) simply decide that a receiver can be appointed for an insolvent- limited copartnership. If the assignment is valid, except as to the preference of the special partner, then the court should carry it out so far as regards its valid provisions, and refuse to do so as to the invalid preference (Kavanaugh v. Beckwith, 44 Barb. 195 ; Burrill on Assign. 143). In some cases it has been held that an assignment is revocable until there was an express acceptance on the part of the creditors (Galt v. Dibrell, 10 Yerg. [Tenn.] 626 ; Brevard v. Neely, 2 Sneed [Tenn.] 164; Mill v. Harris, 3 Head [Tenn.] 332; Gibson v. Chedic, 1 Nev. 497; McKinley v. Combe, 1 Mont. 105 ; Pitts v. Viley, 4 Bibb, 446). The assent to a fraudulent assignment will not be presumed (Ashley v. Robinson, 29 Ala. 112).
    
      Win. A. Goolc, for defendant, Brown.
    
      P. & D. Mitchell, for plaintiffs.
    This action was brought under the authority of Jones v. Lansing, 7 Paige, 583-585; Van Alstyne v. Cook, 25 N. Y. 489 ; Levy v. Ely, 15 How. Pr. 395. Brown had made • himself a general partner under 3 R. S. 6 ed. 1157, and could not take a dividend on his alleged claim. A second general assignment could not be made (Metcalf v. Van Brunt, 37 Barb. 629, and cases cited ; Townsend v. Stearns, 32 N. Y. 209).
   Larremore, J.

[After stating the facts.]—If this were an action in the nature of a creditor’s bill, the plaintiffs would have no status in court without alleging the recovery of a final judgment and execution issued and returned thereon (Geery v. Geery, 63 N. Y. 252, and cases there cited).

But I do not understand that the doctrine laid down in Jones v. Lansing (7 Paige, 583), has been disturbed or disputed. That case holds that when a limited partnership becomes insolvent, its assets are a special fund for the payment of its debts ratably (except those due to the special partner), and any creditor, although he have not proceeded to judgment and execution at law, may file a bill in equity to restrain the insolvent partners from disposing of the property contrary to law, and for the appointment of a receiver. This practice was reviewed and approved in Van Alstyne v. Cook (25 N. Y. 489).

If the plaintiffs have asked for more or greater relief than the court can afford them on a final judgment, that is no reason why the court, on a mere motion, should try issues upon the determination of which they may be entitled to some relief. If as general creditors they cannot (as contended) contest the validity of the assignment, yet, as general creditors, they may have the right to prevent a dissipation of the copartnership assets.

The authorities cited by the counsel for the defendants (Hone v. Woolsey, 2 Edw. Ch. 289; Mills v. Arghal, 6 Paige, 577 ; Metcalf v. Van Brunt, 36 Barb. 621) establish the theory that as between the parties to it the assignment is binding and revocable at their pleasure. But no case goes to the extent of holding that such a revocation could in any way prejudice or impair the rights of creditors. In the case under consideration, the creditors had commenced proceedings to protect their rights upon a statement of facts which should not be decided on affidavits.

Considering the hopeless insolvency of the firm, that its indebtedness to its. special partner would almost, if not entirely, exhaust its assets, the peculiar relations of the assignee and the special partner, and also the entire merits of the application to remove the receiver and vacate the injunction, I think it should be denied.

Ordered accordingly.

There was no appeal.