Case ID: miss_16/html/0280-01.html
Source: Caselaw Access Project
Author: {"author": "Mr. Justice Clayton", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

John D. Scott, Administrator, de bonis non, of Johnson Silverberg, deceased, vs. Tullius C. Tupper et al.
    S. assigned to T. & R. certain notes and accounts due to S.-individualiy in part; and in part to S. as surviving partner of the firms of J. S. & Co., and of S. & V., and of M. V. & Co.; the proceeds of the notes and accounts when collected, to be applied to the payment of T, & R.’s liabilities by way of acceptances, and otherwise for S., and the firms of J. S. & Co., and S. & Y.; and when those liabilities were paid, the residue of the proceeds to be paid to B., W. & Co. ; held, that the assignment on its face was valid; the assignees were trustees for those really interested, and could not apply the proceeds of the claims generally to the payment of their liabilities generally; but the proceeds of the claims due to each firm must be appropriated to the discharge of the liabilities due by each firm; and that a court of chancery would not at the instance of the representatives of the deceased partners, enjoin the assignees from collecting the claims without a showing of a misapplication of the funds on the part of the assignees.
    A surviving partner cannotbind the firm, nor transfer the partnership effects to pay a debt of his own, ndr pay the debt of one firm of which he is the survivor with the debt of another firm of which he is a survivor ; but he may transfer the assets of a firm of which he is a survivor to pay the debts of that firm.
    On appeal from the superior court of chancery; Hon. Robert H. Buckner, chancellor.
    Jo'hn D. Scott, administrator of Johnson Silverberg, deceased, states in his bill, that Silverberg was for a short time before .his death engaged in a mercantile partnership with Charles J. Searles, under the style of J. Silverberg & Co.; by mutual consent this partnership was dissolved about the first of the year 1838; Silverberg died in November of that year; the entire capital of the firm was advanced by and belonged to Silverberg; by the terms of the partnership, Silverberg was to receive two-thirds and Searles one-third of the clear profits; that on the dissolution of the firm all the effects thereof became the separate property of Silverberg, and Silverberg was at the time of his death winding up affairs as he had aright to do by the contract of dissolution.
    That Silverberg was also engaged in another mercantile partnership with Michael Yanderherst, since deceased, under the style of M. Yanderherst & Co.; which partnership was dissolved by mutual consent about the first of the year 1838; that Silver-berg retained the partnership effects and was winding up the same at the time of his death; Silverberg advanced all the capital and owned the larger portion of the interest and profits; that Yanderherst died in the fall of the year 1839, and no administration had been taken out on his estate, and that the amount of capital advanced by Silverberg to M. Yanderherst & Co. was yet unpaid to him.
    That Searles and Yanderherst were the former administrators of Silverberg’s estate; Searles acted as surviving administrator thereof after the death of Vanderherst until the May term, 1841, of the , probate court-of Madison county, when he resigned his letters of administration ; and there had been no administration of the effects of said two firms by said administrators, or by Searles as surviving administrator; and that the same remained yet unadministered.
    That Searles, by agreement with Tullius C. Tuppera nd John H. Rollins, and the firm of Burk, Watt & Co. had fraudulently assigned to Tupper and Rollins a large amount of debts owing the firms of J. Silverberg & Co., and M. Yanderherst &. Co. ; that Searles had no power to make such assignment which was made for the benefit of himself and the firm of Burk, Watt & Co., and to defraud Silverberg’s estate.
    That Tupper and Rollins collected a ¡large amount of the debts assigned them, and continued to collect and waste the debts which were assets of the estate of Silverberg;, that if they should collect any more on said claims, they will misapply it or pay it to some one not entitled to the same; that many of said debts were placed in the hands of Tupper and Rollins as attorneys for collection, by Silverberg during his lifetime. But they never paid any moneys collected by them on said claims to Silverberg’s administrator, and have refused to pay the complainant since he had been administrator, de bonis non, and refuse to give up to the complainant the claims so assigned to them; the complainant did not know the precise nature and terms of the assignment, or the particular debts embraced therein ; or the particular claims placed in the hands of Tupper and Rollins for collection by Silverberg, or the precise amount thereof, or by Searles, or how much the attorneys have collected.
    Searles and his securities on his administration bond are alleged to be insolvent. There are other allegations in the bill, which it is not deemed necessary to notice. It prays that Tup-per and Rollins discover, and render an account of the debts and their amounts due and owing said firms of J. Silverberg, & Co. and M. Vanderherst & Co., assigned to them by Searles; and that they state for what purpose, and when the debts were assigned, and give all the particulars, to whom and by whom the various assigned debts were due, and what they had collected, and its disposition.
    Also, that it may be decreed that Tupper and Rollins deliver up to the complainant all the notes and other evidences of debt due to the firms of J. Silverberg & Go., and M. Tanderherst, & Co. assigned to them by Searles, that remain uncollected, and for a decree against the defendants, for the amount collected by Tupper and Rollins on said claims, and for an injunction against further collections by'Tupper and Rollins, and for general relief.
    The injunction was granted.
    It is deemed necessary to give the substance of the answer of Tupper and-Rollins only.
    It states that the defendants believe, from information, that Silverberg was, previous to his death, engaged in a mercantile partnership with Searles; but as to the amonnt of capital stock advanced by either partner, tfyey had no knowledge, nor of the amount of profits either was to have.
    They had no knowledge, that on the dissolution of the firm of J. Silverberg & Co. all the effects and goods thereof, became the separate property of Silverberg, by contract between the partners; but, on the contrary, they believed that no such contract existed, and stated some of the reasons for such belief, which need not be set out.
    They admit also the partnership of Silverberg & Vabderherst, and that Searles & Yanderherst were the first administrators of Silverberg’s estate, and acted as such, until Yanderherst’s death; and Searles, as surviving administrator, until complainant became administrator de bonis non.
    
    They admit the assignment of debts of the firm of J. Silverberg & Co. by Searles, as surviving partner, but deny that it was fraudulently done, or that Searles had no authority or- power to make it. They admit they have collected a portion of the debts assigned them, and have paid it out and appropriated it in accordance with the terms of the assignment, and deny waste, or that they will waste the same. That in the month of April, 1840, the defendants having previously come under heavy liabilities for the firm of J. Silverberg & Co. by the request both of Silverberg <fc Searles, by becoming acceptors for them, on drafts drawn by said Searles, as surviving partner-, to a large amount, and otherwise, that Searles made the assignment to them.
    That most of the notes and accounts assigned to them, were payable to J. Silverberg & Co. as expressed on their face; but a small part appear to be payable to M. Vanderherst & Co. and a few to J. Silverberg individually, and some to Searles & Yan-derherst; but that all of said notes and accounts, payable to M. Yanderherst & Co. and J. Silverberg, were placed in the hands of defendants for collection, by Silverberg, in his lifetime, and represented by him as the property of J. Silverberg & Co. and most of them placed in their hands by Silverberg, after the dissolution of the firm of J. Silverberg & Co. to pay acceptances of defendants, on account of Silverberg & Co.
    The defendants state that they are still liable on some of the acceptances for J. Silverberg & Co. on which suit is pending, and that they will not procure from all the claims assigned to them, more than enough to save themselves harmless; and insist on their rights, under the assignment, to proceed to collect the debts.
    It is not deemed necessary to give/a more detailed statement of the answer on these points, nor to notice other matters in the answer, not material to the proper understanding of the opinion of the court.
    The following is a copy of the assignment disclosed by the answer, made underneath a list of the claims assigned ; viz.:
    “The foregoing claims set forth above, and on the preceding pages, I, Charles J. Searles, in behalf of myself, and as surviving partner of the late firm of J. Silverberg &■ Co. and Searles & Vanderherst, and in behalf of the late firm of M. Vanderherst &. Co. do hereby transfer to Tupper & Rollins, to be collected, and the first proceeds of which are to be applied to the payment of all their liabilities, by way of acceptances and otherwise, for me and the late firms of J. Silverberg & Co. and Searles & Van-derhersf, and the balance of the proceeds of said claims are to be paid by said Tupper & Rollins, when collected, to Messrs. Burk, Watt <fc Co. or their order, they the said Tupper & Rollins to retain the usual fees for collection. As witness my hand this 30lh of April, 1840. Chakles J. Searles.”
    Various exceptions were taken by the complainant, to the answer of the defendants; and on the 8th day of June, 1844, they were referred to J. F. Foute, Esq. who sustained five of the exceptions. An appeal was prayed to the chancellor, from the report of the commissioner, and the latter was, on the 15th of July, 1844, confirmed by the court. On the same day, and at the same time, the injunction was dissolved, and the complainant appealed.
    
      Samuel Scott, for appellant.
    That the injunction should not have been dissolved, we shall attempt to show, for several reasons.
    1. The court erred in dissolving the injunction, when exceptions to the sufficiency of the answers were allowed by the , commissioner. Eden on Injunctions, 73 to 76; 1 Paige, 164.
    
      2. The lower court erred in dissolving the injunction, when some of the defendants, Burk, Watt & Co., against whom the gravamen of some of the charges in the bill lie, had not answered. See Depeysier v. Graves etal.2 Johns. Ch. R. 148.
    3. The denial in the answer, that the effects of the firm of J. Silverberg & Co. became the separate property of Silverberg, is not sufficient to dissolve the injunction.
    1st. Because “an injunction will not be dissolved, on coming in of the answer, unless the defendant positively deny all equity of the bill.” Ward v. Van Bokkelin, 1 Paige, 100.
    2d. Because, “ unless the answer be full and satisfactory, in the first instance, the injunction ought to be continued to the hearing.” Roberts v. Anderson, 2 Johns. Ch. R. 204.
    3d. “ An answer upon knowledge and belief, is not sufficient whereon to dissolve the injunction.” Apthorpe v. Comstock, 1 Hop. R. 143; 1 Smith’s Ch.-Pr. 278; Woods v. Morrell, 1 Johns. Ch. R. 103; Frost v. Beekman, lb. 288; Moris v. Parker, 3 Johns. Ch. R. 297; Smith v. Lasher, 5 lb. 247.
    4th. “An insufficient answer considered as no answer.” 2 Mad.^Chan. 343; Bishton v. Birch, 1 Yes. & Beam. R. 366 ; Edwards v. McLeay, 2 lb. 258; 3 Yes. 209; Hagthorp v. Hook, 1 Gill & Johns. R. 282.
    5th. “ If the defendant submit to answer at all he must answer fully and particularly; not merely limiting his responses to the allegations, but to respond to the whole, and every substantial part of the plaintiff’s case.” M. E. Church v. Jaques, 1 Johns. Ch. R. 65 ; Phillips v. Prevost, 4 lb. 205.
    6th. “An answer is insufficient if it does not answer specifically and precisely whatever is specifically charged in the bill.” 1 Smith’s Ch. Pr. 278.
    4. But again; it will be seen upon the examination of the assignment from Searles to Tupper and Rollins, that all the notes and other debts therein contained were due at the time said assignment was made. This leaves ^them'in no better situation than Searles. 1st. “ The rule is, that a person who takes a bill or note after it is due, takes it subject to all objections and equities in respect of want of consideration or illegality, and all other objections or equities affecting the instrument itself, and to which it was liable in the hands of the person from whom he takes it.” Chitty on Bills, 244, 9th American, from 8th London edition; Taylor v. Mather, 3 Term R. 83, in notes; Brown v. Davies, lb. 80; Rothschild v. Corney, 9 Barn. 6 Cres. 391; Burrough v. Moss, 10 lb. 558. “Therefore, if'a bill or note, founded on a smuggling or stockjobbing transaction, be indorsed after the same became due, to a person ignorant of the illegality, and for full value paid by him, he cannot recover.” Chitty on Bills, 244, same edition.
    2d. “But in order thus to affect the note in the hands of the indorsee, the infirmity, equity or defence relied on for that purpose must have existed against, and attached to the note itself, before the. transfer, and not have arisen out of subsequent and collateral matters.” Robinson v. Lyman, 10 Conn. R. 30.
    3d. “ When a note is overdue, it being out of the common course of dealing, is alone such a suspicious circumstance, as makes it incumbent on the party receiving it, to satisfy himself it is a good one, and that if he omit-to do so he must stand in the situation of the indorser.” Rothschild v. Corney, 9 Barn. & Cres. 391; Lee v. Zagury, 8 Taunt. R. 114; Brown v. Turner, 7 Term R. 630 ; Tinson v. Francis, 1 Camp. 19.
    4th. “ If a bill or note was indorsed after it was due, the in-dorsee took it on the credit of the indorser, and stood in his situation.” Banks v. Colwell, cited 3 Term R. 81; 4 Barn. & Cres. 325; Borough v. White, 6 Dow. & Ry. 379.
    5. Then even taking it to be true that Searles has still the rights of surviving partner, and had at the time of said assignment, the admission of this places the defendants Tapper and Rollins, in no better situation, so far as the question before the court now is concerned. For there is no better settled rule or principle, than that one partner cannot even indorse bills or notes previously given to the firm, nor accept bills previously drawn on it, so as to bind the firm. Lansing v. Game, 2 John. R. 300; Sanford v. Mickles, 4 Johns. R. 224; 3 Kent’s Com. 63; see also Fells v. Pourie, 2 Dess. R. 40; Martin v. Walton, 1 McCord, 16; Evans v. Drummond, 4 Esp. 89; Rootes v. Wellford, 4 Munf. 215; White v. Union Insurance Company, 1 Nott & McCord, 560; 4 Johns. R. 224; 2 lb.' 300; 3 lb. 538.
    Tupper and Rollins are now applying the partnership effects of the firm of J. Silverberg & Co. to the payment of cfebts for which, according to the above rules of law, in said authorities, they are “ by no means liable.” And still it is insisted that they ought to be allowed to go on and misapply these effects, which are really the assets of Silverberg’s estate.
    6. Taking the agreement of dissolution as giving to Silver-berg the right to wind up the firm, then “an agreement that one partner shall take the effects of the firm and wind up the concern, vests the property of the firm in that partner and his representatives.” 1 Mad. Chan. 96, and authorities there cited, where the above extract will be found. Ex parte Ruffin, 6 Yes. 119; Ex parte Williams, 11 lb. 3; Ex parte Fell, 10 lb. 347; Ex parte Harris, 3 Mad. Ch. R. 473 ; Gow on Part. 306, 309; Collyer on Part. 511 Gram v. Cadwett, 5 Cowen’s R. 489.
    7. Again ; the bill states “ that, the whole and entire capital of the firm of J. Silverberg & Co. was advanced by Silverberg, and belonged to him.”
    This allegation, not having been positively denied by the answers, the injunction ought to have, for this reason, been retained. For we contend that a partner in the profits, or in the loss and profits, has no control over the property of the firm, after a dissolution of the firm. See Collyer on Part. 88, where the question is discussed, and cases commented upon, from which work, the most recent and valuable on the subject, we extract: “ A partner, whose interest is confined to the profits, and does not extend to the capital, cannot, after the bankruptcy of the real owner,' transfer the property so as to render the transfer effectual against the assignees.”
    8. The assignment from Searles to Tupper and Rollins, is fraudulent and void, viewed in any light.
    It is stated in the bill, “that Searles has fraudulently and col-lusively, By agreement with Tupper and Rollins, and the firm of Burk, Watt & Co., assigned to said Tupper and Rollins a large amount of debts, due and owing the firms of J. Silverberg & Co. and M. Yanderherst & Co.”
    
      The admissions or statements of the answers, show a fraudulent and illegal appropriation of the effects of the firm of M. Yanderherst & Co. and of the estate of J. Silverberg by parties not pretending to have any rightful or legal control over the same. It is stated in the bill that Silverberg and Yanderherst were the only members of the firm of M. Yander-herst & Co. Searles, then, had no authority or power, as surviving partner of the firm of J. Silverberg & Co., to assign debts due the separate estate of Silverberg, and to the firm of M. Yanderherst & Co.
    This part of the assignment, then, being clearly fraudulent and void, makes the whole assignment so. For a contract or deed, fraudulent and void in part, is void in Mo. Mac/de v. Cairns, 5 Cow. R. 548, where the cases are arraigned and commented on.
    9. But the assignment from Searles to Tupper and Rollins, is clearly void for fraud.
    1st. Because Searles therein attempts to assign for his own benefit, and in payment of his own individual debts, the debts or effects of the firm of J. Silverberg.
    2d. Because he also attempts therein to transfer for his own benefit, and in payment of his own debts, the debts or effects belonging to the firm of M. Yanderherst & Co., of which he was not a partner, and of whose effects he had no pretence of control, as surviving partner, or in any other way.
    3d. Because he could not assign, either as surviving partner or otherwise, the effects of the firm of J. Silverberg & Co., to pay debts owing by him as surviving partner of the firm of Searles & Yanderherst, or to pay drafts drawn by him as surviving partner of said firm.
    4th. Because he could not assign debts due the firm of M. Yanderherst & Co., to pay the debts of the firm of Searles & Yanderherst, or drafts drawn by him as surviving partner of the firm of Searles & Yanderherst.
    5th. Because he could not assign the debts or effects of the firm of J. Silverberg & Co., to pay the debts of the firm of M. Yanderherst & Co. Nor could he assign the effects or debts of the firm of M. Yanderherst & Co., to pay debts of the firm of J. Silverberg &’ Co., or drafts drawn by him as surviving partner of the firm of J. Silverberg & Co., even if he had the rights of such.
    That the assignment is fraudulent and void, we cite the court to the following authorities : Riggs v. Murray, 2 Johns. Ch. R. 582; Hyslop v. Clark, 14 Johns. R. 458; Mackie v. Cairns, 5 Cow. 547; Austin v. Bell, 20 Johns. R. 442; 15 lb. 501.
    That the surviving partner is a trustee of the partnership funds, we refer to Story on Partnership, 494.
    
      Tupper, for appellees, contended,
    1. That a surviving partner could legally appropriate the effects of the firm to the payment of the firm debts, by assignment or transfer for that purpose. Egberts v. Wood, 3 Paige, 517; Wallace v. Fitzsimmons, 1 Dallas, 250; Anderson v. Thompkins, 1 Brock. 462; White v. Union Insurance Company, 1 Nott & McCord, 560; Harrison v. Sterry, 5 Cranch, 289; Scott v. Searles, 5 S. & M. 25.
    2. The rights of the assignees could not be affected by any contract made between Searles and Silverberg, unless they had knowledge of such contract; or that Searles intended to misapply the funds by the assignment. Field v. Shieffelin, 7 Johns. Ch. R. 154; Prosser v. Leatherman, 4 Plow. 237.
   Mr. Justice Clayton

delivered the opinion of the court.

This is an appeal from an order of the chancery court, dissolving the injunction in the cause.

On the 30th April, 1840, Charles J. Searles made an assignment to Tupper & Rollins, in the following words: “ The foregoing claims, amounting to $36,891 66, I, Charles J. Searles, in behalf of myself, and as surviving partner of the late firm of J. Silverberg & Co. and Searles & Yanderherst, and in behalf of the late firm of M. Yanderherst & Co., do hereby transfer to Tupper & Rollins, to be collected, and the first proceeds of which are to be applied in the payment of all their liabilities, by way of acceptances and otherwise, for me, and the late firms of J. Silverberg & Co., and Searles & Yanderherst, and the balance of the proceeds of said claims are to be paid by said Tupper & Rollins, when collected, to Messrs. Burk, Watt & Co., or their order ; they to retain the usual fees for collection.” The claims so transferred were payable, partly to J. Silverberg &Co., partly to J. Silverberg alone, partly to Charles J. Searles, partly to Searles & Yanderherst, and some of them to various other persons.

The bill charges that this assignment is fraudulent and void, and that it was made for the benefit of Searles, and of Burk, Watt & Co. It charges that Tupper & Rollins will collect the said debts, and misapply the proceeds; prays for an injunction to restrain the further collection of the debts so assigned, and for a decree for a delivery of the¡ claims to the complainant.

The bill also charges that there was an agreement at the time of the dissolution of the firm of J. Silverberg & Co., which occurred a few months before the death of Silverberg, that he alone should have authority to settle the partnership affairs; but this is denied by the answer, and is not proven.

The answers deny all fraud in the assignment, or otherwise, land allege that the liabilities of Tupper & Rollins had been incurred by the request of both the partners ; and that the assignment was made to relieve them from those liabilities.

The injunction was dissolved. It is now insisted that this order was erroneous, because some of the debts for which the assignment was made, were the individual debts of Searles, or were altered in their form by him, by renewal or otherwise, after the dissolution. It is no doubt true, that the power of a partner to bind the firm, ceases with the dissolution. It is equally true that the surviving partner cannot transfer the partnership effects to pay a debt of his own; neither can he apiply the effects of one firm, to pay the debts of a different firm. The assignee taking the effects under such circumstances, with notice, would be but a trustee for the benefit of those really entitled. The personal representatives of the deceased partner have a right to insist upon the application of the joint property, in the hands of the survivors, to the payment of the joint debts, and a division of the surplus. In ease of a neglect of duty, or improper conduct on the part of the survivor, a court of equity may interpose by injunction, or by appointing a receiver, and compel a correct application of the funds. Story on Part. 492, 496. These rules of law are clear; does this case require the interposition of a court of equity 1 The assignment in question was of various classes of debts, and for various purposes. Under it the debts due to J. Silverberg & Co. are properly applicable to the payment of the debts due from that firm; and so of each of the other firms and individuals. If the assignees thus apply the proceeds when collected, they will act in the strict line of their duty ; if they divert them from these to other purposes, they will be liable for so doing. The bill does not charge that they are insolvent, and the answers allege that they are abundantly able to answer for any misapplication of the funds.

It was in the power of Searles, as surviving partner, to assign the choses in action due to the firms for the payment of the debts due from them respectively, and to assign the debts due to himself, for the payment of his own debts. It would have tended to avoid confusion, if the assignment had more plainly designated the several classes of debts, and the several objects to which they were to be applied. It is for the complainant to show a misapplication of the funds, in order to sustain the injunction. He has not done so, and, in the absence of such showing, we cannot interfere with the order of dissolution. That being the only matter appealed from, the order is affirmed, and the cause remanded.

The counsel for appellant filed a petition for a rehearing in this case. It was not granted.