Case ID: ad_23/html/0182-01.html
Source: Caselaw Access Project
Author: {"author": "Willard Bartlett, J.:", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

Terrence F. Ferguson, Appellant, v. Julius F. Bruckman and Others, Defendants. John Naumer, as Receiver, etc., of T. F. Ferguson & Co., Respondent.
    
      Partnership—a receiver of, is entitled to firm, assets in the possession of either partner, but not to an order that money already used by either partner be paid over to him.
    
    The primary purpose of a temporary receivership, ordered in an action brought to procure an accounting between partners, is to preserve the firm property, and if either partner has in his possession property belonging to the firm, the court will assist a receiver to obtain it; but where the money, for which a partner is alleged to be accountable, has been actually expended by him for his own use, the court has no power to make, at, the instance of the temporary receiver of the firm assets, an order summarily directing the partner to deliver and pay over to the receiver, within ten days, the sum in question.
    Appeal by the plaintiff, Terrence F. Ferguson, from an order of the Supreme Court, made at the Kings County Special Term and entered in the office of the clerk of the1 county of Kings on the 28th day of September, 1897, directing the plaintiff to pay over to John Naumer, the receiver appointed in the action, the sum of $919.37, assets of the firm of T. F. Ferguson & Co., collected by said plaintiff, . and also from an order entered in said clerk’s office on the 7th day of October, 1897, denying the plaintiff’s motion to vacate the first-mentioned order.
    
      Josiah T. Marean,, for the appellant.
    
      George W. Sickels, for the respondent.
   Willard Bartlett, J.:

This is a suit for an accounting between partners, which was duly referred to a referee, who determined the rights of the respective parties. After judgment had been entered upon the report of the referee, both the report and the judgment were set aside upon the application of the defendant, and the case was sent back before the same referee to continue the trial. This was done in order to enable the defendant to prove an allegation which he made as the basis of his motion to open the judgment, to the.effect that the plaintiff had collected $919.37 of partnership moneys, which he had applied to his own use, all of which the defendant had neglected to show when the case was first before the referee. (See Ferguson v. Bruckman, 16 App. Div. 67; S. C., 18 id. 358.)

It now appears that after the case had thus been reopened, the respondent Naumer was appointed receiver pendente lite of the assets of the firm. He thereupon applied to the court at Special Term and procured an order requiring the plaintiff within ten days to “ deliver and pay over to the receiver herein the sum of $919.37, assets of the firm of T. F. Ferguson & Company, collected by said plaintiff.”

This is the principal order which the present appeal brings up for review.- There was no material dispute of fact upon the motion. The plaintiff admitted having collected the- specified amount, upon certain partnership accounts, but swore in. an affidavit, verified on September 16, 1897, that immediately upon the receipt of such moneys, more than six months before, he had applied the same to his own use, and that no part thereof had been in his possession since the month of January, 1897.

We think that an order commanding a party to pay money to a receiver under such circumstances is based upon a misconception of the scope of a receivership pendente Ute in a suit for an accounting between • partners. The primary purpose of such a receivership is the preservation of the firm property. If there is any property or money belonging to the firm in the possession of either party, the receiver may rightfully demand it and the court will aid him in obtaining it. But his functions do not extend so far as to enable him to compel a party to regain and turn over to him property which has passed out of the hands of that party months before.

Some support for the order under consideration is supposed to be found in Beach on Receivers (2d ed. 209), in which it is said : “ Where a partner makes an application for a receivership of the copartnership effects for the purpose of liquidating its debts, it has been held that the court will compel him to pay over to the receiver assets collected by him shortly prior to his application.” Speaking of partnership litigations, the same author says in another place that the first and principal duty of a receiver in these cases is to collect and reduce to available funds the debts and effects of the partnership, and that “the partners may be compelled, upon his motion, to pay over collections made by them prior to his appointment.” (Id. 633.) The proposition thus stated is quite correct, provided it be understood as applicable only to -collections still in the possession of the partner proceeded against. That it goes no further is apparent from an examination of the only authority cited by Hr. Beach to sustain it. (Murphy v. Du Berg, 11 Abb. N. C. 112.) In that case the receiver, who had been appointed at the instance of the plaintiff, sought and obtained an order directing the delivery to him of $3,01-0 assets of the partnership, which the plaintiff had collected shortly before the appointment of the receiver. But the opinion of Judge Joseph F. Dalt, of the New York Common Pleas, in granting the motion, clearly shows that the money was still in the hands of the plaintiff, for the learned judge says : “ He does not stand in the position óf a mere debtor of the copartnership, but as a party to the action may be summarily compelled to transfer to the receiver any portion of the copartnership- property he now holds.”

Upon this appeal we are not called upon to consider or determine whether the act of the plaintiff in disposing of the assets which he collected was rightful or wrongful. If it was wrongful, the law doubtless affords the defendant a remedy. It is enough now to say that the particular collections in question appear to have gone too-:far to be reached upon a summary application by a receiver.

The order should be reversed, with ten dollars costs: and disbursements.

All concurred.

Orders reversed, 'with ten dollars costs in one case and disbursements in both.