#### Matter of the Petition of George W. Striker, Executor of Henry S. Ives, Deceased, for a Distribution of Proceeds of Real Estate.

(Surrogate’s Court, New York County,

August, 1898.)

Partnership — Bights of firm creditors, having a lien on individual property, as against subsequent individual creditors of a deceased partner, in the proceeds of real estate;, acquired by him. after the discharge of the general assignee of the» firm. i

Where a firm has made a general assignment, including therein the individual property of its members, and there is a deficiency of firm assets, firm creditors, who did not recover judgments until after a partner died, are, upon the insolvency of the other partners, entitled to share ratably with individual creditors of the decedent, who become such after the general assignment,- in a fund, in the Surrogate’s Court, representing the proceeds.' of real estate acquired by the decedent after the discharge of the general assignee.

Application by an executor for distribution of the proceeds of the sale of real estate.

Thompson *&*Koss, for executors.

Rush Taggart, Edward S. Kaufman, Murphy, Lloyd *&*Boyd, for creditors. .

Fitzgerald, S.

Prior to the death of this decedent, the copartnership, of which he was a member, made a general assignment for the benefit of creditors, which included the property of the individuals constituting the firm. The firm assets were ¡exhausted in the distribution, and the debts due the exceptants to the feport of the referee remain unpaid. Judgments were not obtained by these -latter creditors until after the death of the decedent. . At the time of the assignment the other members of the firm Were, and remain insolvent. .The fund to be distributed by the decree to be entered herein represents the proceeds' of- the sale of, real estate acquired by the decedent-subsequent to the discharge of the assignee. After malting the assignment, the decedent incurred individual debts to a considerable. amount, and the fund for distribution is insufficient to pay the claims of these latter individual creditors in full after the payment of the admittedly preferred claims, The creditors of the assigning firm claim that they are entitled to participate ratably with these individual creditors of the decedent and *423the exceptions relate to the refusal of the referee to accede to this proposition. The doctrine of marshaling depends upon the principle that a person having a right to resort to two funds, in one of which alone another person has a junior lien, shall be compelled to exhaust the fund to which the other cannot resort, before coming upon the one in which they both' have an interest. In the case at bar this principle was applied at the time of the original assignment before any of the debts were incurred, to which the referee has accorded a preference, and before the asset was acquired to which the exceptants desire to have recourse. The partnership funds having been exhausted, the partnership creditors had a right to resort to the individual estates of the partners of the assigning firm, subject only to the prior rights of the then .existing creditors of the said members individually. After the partnership estate was exhausted they were postponed only to such existing creditors. Had they recovered judgment against either of the partners' individually, as they had a right to do, they would have had a right against the present fund not only equal, but superior, to the present individual creditors. I do not see that the cases relied upon by the referee go any further than to reassert the well-established rule of marshaling assets as between partnership and individual creditors. When the present individual creditors became such, there was no partnership; it was dissolved by the assignment. Counsel do not refer me to a case, where the facts existing here have been the subject of judicial, inquiry; nor have'I by diligent research been able to discover a case where the rights of parties standing in the position of the conflicting claimants here have been passed upon. The rights of the exceptants against the individual assets of the decedent' arose prior in point of time to those of the successful creditors, and I know of no rule of equity which would postpone them in point of right to persons whose rights were acquired subsequently. The report of the referee in this respect is overruled, and the exception sustained. A decree may be presented directing the distribution of the fund ratably between the creditors included by the referee in classes 1 and *2'.*

Report overruled 'and exception sustained.