Case Name: Reddington, Respondent, vs. Franey, Appellant
Court: Wisconsin Supreme Court
Jurisdiction: Wisconsin
Decision Date: 1905-04-05
Citations: 124 Wis. 590
Docket Number: 
Parties: Reddington, Respondent, vs. Franey, Appellant.
Judges: 
Reporter: Wisconsin Reports
Volume: 124
Pages: 590–593

Head Matter:
Reddington, Respondent, vs. Franey, Appellant.
March 18
April 5, 1905.
'Partnership: Lien of creditors: Sale of partner’s interest: Agreement to pay debts: Rights and liabilities of incoming partner.
1. Creditors of a partnership have no claim or lien upon the firm property other than creditors generally have on a debtor’s property; and the partnership has the same right to dispose of its assets that individuals have.
'2. The equity between partners to have the firm assets applied to payment of its debts may be preserved by an outgoing partner for his protection, and when so preserved will inure to the benefit of the creditors, who may claim through such partner’s equity.
'.3. Where a retiring partner sold to an incoming one his interest in the firm assets and agreed to pay all the outstanding liabilities, neither he nor the creditors had any lien upon the firm assets or equity to compel application thereof to such liabilities; and, there being no obligation on the part of the incoming partner to pay the debts of the old firm, the fact that he does pay them gives him no right of action to recover the amount so paid from the retiring partner.
Appeal from an. order of the circuit court for Sheboygan county: Michael KikwaN, Circuit Juclge.
Reversed.
This is an appeal from an order overruling a demurrer to the complaint. The material allegations of the complaint are as follows: Jolm Franey, the defendant, was associated with Thomas F. Franey under the firm name of T. F. Franey & Co., which was engaged in a retail furniture business and the sale of musical instruments and undertakers’ supplies. On June 30, 1902, defendant, in consideration of $4,700, sold to plaintiff his undivided one-half interest in the partnership, being all his right, title, and interest in the stock and in the bills receivable and accounts owing *to the firm. Defendant agreed to pay all outstanding bills payable or accounts payable by the firm of T. F. Franey & Co., and to hold the plaintiff whole, safe, and free from these accounts. It was agreed that plaintiff was to have the same rights over the management of the business and affairs of the firm as the defendant had had. It is alleged that defendant represented that there were no bills payable, and that plaintiff relied upon this representation, while in fact the firm was indebted in the sum of $3,815.92. It is also alleged that:
“By reason of the defendant’s failure, neglect, and refusal to pay and discharge the outstanding bills payable by said firm of T. F. Franey & Co., as provided by the terms, conditions, promises, and covenants of said bill of sale, the plaintiff was required to pay and did pay the then outstanding bills payable or accounts payable of said firm of T. F. Franey & Co., the sum of $3,815.92.”
Plaintiff asked fox judgment fox this amount and interest. Defendant interposed a general demurrer to the complaint. This was overruled, and he was allowed thirty days in which to answer. As stated above, this is an appeal from such order.
The cause was submitted for the appellant on the brief of M. O. Mead, and for the respondent on that of Simon Gillen.

Opinion:
SiebecKER, J.
It is contended by plaintiff tbat tbe complaint states a good canse of action because it is alleged tbat under tbe contract be was to succeed defendant in tbe firm of T. E. Eraney & Oo., whose business was to be conducted as before, and because defendant undertook to pay all tbe liabilities of tbe firm existing at tbe time of such sale and transfer of bis interest to plaintiff, and "by sucb payment to bold tbe plaintiff, vendee, whole, safe, and free from tbe same or any part thereof." This claim assumes tbat tbe creditors of tbe old firm bad a lien on tbe firm property which they could enforce against tbe property after tbe plaintiff bad purchased and gone into possession of defendant's interest in tbe firm assets.
It i-s fundamental in partnership transactions that creditors have no other claim or lien than creditors generally have on a debtor's property. A partnership has tbe same right of disposition of tbe partnership assets tbat individuals enjoy in tbe law. 2 Bates, Partn. § 820. There is an equity between partners giving tbeifi tbe right to compel application of firm assets to tbe payment of its debts. This right may be preserved by an outgoing partner for bis protection in extinguishment of partnership liabilities, and when so preserved it will inure to tbe benefit of creditors, who may claim through sucb partner's equity. Thayer v. Humphrey, 91 Wis. 276, 64 N. W. 1007. Tbe allegations of tbe complaint, however, do not present sucb a case. It is alleged tbat it was expressly agreed between plaintiff and defendant tbat tbe defendant, upon retiring from tbe partnership between himself and T. E. Eraney, was to pay all outstanding bills and accounts. -This sale operated as a dissolution of tbe partnership, and tbe outgoing partner expressly relinquished all bis equities to have tbe firm assets applied in payment of tbe firm's debts. Since partnership creditors have no claim or lien on tbe firm's assets, and it appearing tbat tbe defendant, as outgoing partner, wholly disposed of bis interest in the firm assets, and expressly relinquished his right to have them applied in payment of the existing liabilities, no right remained in him to which creditors could be subrogated, and hence there was no liability on the part of plaintiff to pay the partnership debts. Case v. Beauregard, 99 U. S. 119; Thayer v. Humphrey, supra.
The allegations of the complaint are that defendant made a valid disposition of his interest in the firm to plaintiff, agreeing to pay the liabilities of the firm. Nothing is alleged to show that plaintiff became obligated to pay the partnership liabilities through defendant's neglect and refusal to pay them. Plaintiff was in no way liable to pay the amounts owing by the old firm, either under his contract of purchase or by implication of law as incoming partner to continue the business in the name of the old firm and the talcing over of its assets. The legal result of this transaction was that plaintiff and T. E. Eraney became a new partnership under the old firm name, which held and owned the assets free from all claim or lien as to the creditors of the old firm and defendant as. retiring partner. Case v. Beauregard, supra, Thayer v. Humphrey, supra; Harris v. Lindsay, 4 Wash. C. C. 98; Nickerson v. Russell, 172 Mass. 584,, 53 N. E. 141; 22 Am. & Eng. Ency. of Law (2d ed.) 206; Allen v. Logan, 96 Mo. 591, 10 S. W. 149; McCall v. Moss, 112 Ill. 493. The demurrer to the complaint should have-; been sustained.
By the Gourt. — The order overruling the demurrer is re-: versed, and the cause remanded with directions to enter an order sustaining the demurrer, and for further proceedings according to law.