Case ID: daly-ny_10/html/0023-01.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

Joshua M. Whitcomb et al., Plaintiffs, against Josiah F. Fowle, et al., Defendants.
    [Special Term.]
    (Decided February, 1879.)
    Where, after an insolvent limited partnership has made an assignment for benefit of creditors, general creditors of the partnership have brought an action to set aside the assignment, and for a receiver of the co-partnership property and an injunction restraining any disposition of such property, without first proceeding to judgment and execution against the debtors, a receiver may, nevertheless, be appointed and an injunction granted, in order to prevent a dissipation of the copartnership assets.
    Although, as between the parties to it, an assignment for benefit of creditors is revocable at their pleasure, such a revocation cannot in any way prejudice or impair the rights of creditors.
    Motion to remove a receiver and vacate an injunction.
    The action was brought to set aside a general assignment for the benefit of creditors made by the defendants Josiah F. Fowle and William A. Brown, Jr., to the defendant John H. Folk.
    Prior to January 2d, 1879, a limited co-partnership 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 II. 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 grantingof an injunction was made January 7tb, 1879, returnable January 8th, 1879, the hearing of which was on that day adjourned to January 13th, 1879, with the direction that no disposition of the property by sale was to be made by Folk, the assignee.
    On January 7th, 1879, Fowle (as appeared by his affidavit) was served with the summons and complaint and the order to show cause in this action. On January 9th, 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 and an injunction granted meanwhile, Folk moved to remove the receiver and vacate the injunction.
    
      John Henry Hull and William A. Cook, for the defendants.
    
      P. & D. Mitchell, for the plaintiffs.
   Larremore, J.

[After stating the facts as above.]—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 Innes 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 co-partnership assets.

The authorities cited by the counsel for the defendants (Hone v. Woolsey, 2 Edw. Ch. 289 ; Mills v. Argall, 6 Paige, 577; Metcalf v. Van Brunt, 37 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.

Motion denied.