Case Name: William Loeschigk et al. plaintiffs, vs. Rachel Addison, administratrix et al. defendants
Court: New York Superior Court
Jurisdiction: New York
Decision Date: 1865-06-24
Citations: 3 Rob. 331
Docket Number: 
Parties: William Loeschigk et al. plaintiffs, vs. Rachel Addison, administratrix et al. defendants.
Judges: 
Reporter: Reports of cases argued and determined in the Superior Court of the city of New York
Volume: 26
Pages: 331–351

Head Matter:
William Loeschigk et al. plaintiffs, vs. Rachel Addison, administratrix et al. defendants.
1. In an action tried by a court without a jury, the only guide for the entry of the judgment by the clerk is the formal decision filed by the judge before whom it was tried, containing his findings of fact.
2. So held where merely certain conveyances and transfers Were adjudged in a decision not to be void, and one to be void ¡ and in the judgment entered an additional conveyance was adjudged to be void, a receiver was ordered to be appointed, to whom certain defendants were ordered to release their interest, and costs were awarded.
3. If the clerk, in entering the judgment, pursuant to section 267 of the Code of Procedure, deviates from the decision, the judgment must be set aside.
4. If such decision do not dispose of all the issues in an action, a new trial must be ordered.
5. There is no such survivorship between partners, as there is between joint tenants. Hence, upon the dissolution of a firm by the death of one of the partners, the survivor has no power, as such, to assign the whole stock in trade of the firm to creditors by way of preference. (Per McCüns, J.)
6. Where*the surviving partner of a dissolved firm conveyed all its stock in trade to his father-in-law, a favored creditor, and then mortgaged all the remaining estate of the firm to the same creditor, as an indemnity not only against any failure of title, but against remotely contingent future expenses which he might incur for counsel or otherwise, in defending all actions which might be brought against him, to test the validity of the conveyance; Held that such conveyance carried the privilege of giving preferences too far; and that its in- ■ evitable effect to delay creditors to an indefinitely remote period brought it within the very letter of the statute. Per McCunx, J.
7. The only ground on which authority over partnership assets can be claimed for a surviving partner, before the payment of the debts of the firm, is that the original legal entity Which owned the property having ceased to exist as an entirety, the surviving partner being all that remained of it, is the fittest administrator. and distributor of such property. If he assume such duty, he must exercise it as trustee for all parties in interest equally, and not give preferences. Per McCunn, J.
8. After the dissolution of a partnership, by the death of one of its members, the choses in action of the firm constitute a trust fund for the payment of its debts; and it seems, the stock in trade, and lease of the store in which it is carried on, are equally subject to that trust. The surviving partner, in the performance of such trust, has no power to exercise partiality, between creditors, but is bound to distribute the property among themrata, according to the maxim, that equality is equity. Per McCunn, J.
9. A surviving partner has no right to transfer the whole property of the firm to a trustee to sell the same for the payment of the partnership debts. Per McCunn, J.
10. Where a conveyance of the grantor’s patrimonial property to his wife was a mere gift; not called for by any special exigency ; and made by one engaged in business and heavily indebted, who continued so in debt until he .became insolvent; and the grantor having afterwards contracted a debt to the plaintiffs by means of a false and fraudulent representation that no such gift had been made, failed soon thereafter, transferring the very property obtained by such false and fraudulent representations to his wife’s father, who was his agent and co-operator in making such gift; Held that such a state of facts wholly unexplained and uncontradicted, led irresistibly to the inference of a fraudulent intent on the part of the grantor, in respect to such gift. Per McCunn, J.
(Before Monem, Moncrief and McCunn, JJ.)
Heard April 11, 1865;
decided June 24, 1865.
This action was brought by the plaintiffs, judgment creditors of Samuel D. Addison, as survivor of Joseph Addison, against' the defendants, to set aside, as fraudulent and void, certain separate conveyances, assignments and transfers of property made by Samuel D. Addison, to the defendant Rachel D. Addison, and to the defendants, Hatfield and Marshall, respectively. .
In the year 1860, Joseph Addison and Samuel Addison, dry goods merchants, who transacted business at Nos. 304 and 306 Canal street, in the city of New York, under the firm of “ Addison Brothers,” commenced purchasing goods on credit from the plaintiffs, who composed the firm of “Loeschigk, Wesendonck & Co.” In August of that year, their indebtedness on that account to the plaintiffs, amounted to nearly $10,000. On the commencement of such dealing, Samuel D. Addison had represented to the plaintiffs that his firm had a capital of $45,000 in stock and receivables ; that he and his brother had been careful in their business ; that no fear need be entertained of their solvency ; that they had an estate from their mother, and upon her death would be perfectly independent. Joseph Addison died on the 13th February, 1861. On the 26th of June, 1861, the plaintiffs recovered a judgment for $6806.32, a part of their demand, against Samuel D. Addison, as survivor of his brother, in this court. They also recovered another judgment for 2263.95 against him, as such survivor, in the Supreme Court, for this district. And Samuel D. Addison being then resident of the county of Kings, transcripts of these judgments were filed in that county, and executions issued thereon accordingly to the sheriff thereof. Both executions were returned wholly unsatisfied.
Immediately after the death of Joseph Addison, his brother, Samuel D. Addison, as surviving partner, executed an absolute bill of sale of all their stock by him appraised, in an inventory, as worth $65,000, to the defendants, Hatfield and Marshall, comprising the firm of “ Hatfield & Marshall," which bill of sale was dated the 20th of February, 1861, and "was executed for the consideration therein expressed, of $45,512.85. Such vendees forthwith took possession of such goods and removed them to their store.
Soon after such transfer actions were commenced against the defendants, Hatfield & Marshall, to recover possession of part of the goods so transferred, worth between $8000 and $9000. On the 20th and 21st of February, 1861, Samuel D. Addison, as surviving partner óf the firm, transferred to the Pacific Bank certain bills, notes and accounts of such firm, and on the 2d of March, 1861, as such surviving partner, executed an assignment of all the residuary interest of such firm, in such choses in action, to the defendants, Hatfield & Marshall, to indemnify them against loss by reason of failure of title to any part of the stock of goods, so sold- to them, or a recovery against them in the then pending suits or any to be brought in a reasonable time, and against expenses in any suit incurred in defending their title.
On the 15th of February, 1861, Samuel D. Addison, as survivor, executed an assignment to the defendant Hatfield, of a lease of certain premises, (No. 40 Murray street,) expiring on the 1st of May, 1864, together with all the rights of such firm of “Addison Brothers,” under various subleases of parts of such premises ; which lease was subject to an annual rent of $5000. On the 17th of August, in the same year, Hatfield surrendered such lease to the owner of the fee for the sum of $1350.
On the 15th of September, 1857, Samuel D. Addison conveyed his interest in-five lots in the city of New York, in fee, to the defendant Hatfield. The deed therefor expressed a pecuniary consideration of $13,000.
On the 15th of April, 1862, this action was commenced against Samuel D„ Adams and his wife Eachel and the defendants, Hatfield & Marshall. During its pendency Samuel D. Addison died intestate, and letters of administration on his estate were issued to his widow, against whom, as his administratrix, the action was continued.
The complaint claims that the several dispositions of property by Samuel D. Addison hereinbefore and therein mentioned, were made with intent to hinder, delay and defraud the creditors of Addison Brothers. It alleges that at .the time of the conveyance of five lots before mentioned “Addison Brothers” were indebted over $80,000, and from thence until their failure in 1860, they continued to be indebted not less than that amount.
The answers of the defendants alleges that the' stock of goods assigned to the defendants Hatfield and Marshall, were not worth more than $36,000, and were so assigned to secure debts due from the firm of Addison Brothers to such defendants, for money lent by them separately, to such firm, amounting together to $44,500; that is to say, $20,000 borrowed from Hatfield on the 14th of September, 1859, and $4500 subsequently, and $20,000 borrowed from Marshall between that time and the 18 th of January following. The defendants, Hatfield and Marshall, allege in their answers, that they have endeavored in good faith, to sell such stock of goods to the best advantage, and state their inability to realize therefrom more than three-fifths of the invoice price. It is also alleged in the answers of the defendants, that the conveyance of the four lots to the defendant, Hatfield, was for the benefit of his daughter, the defendant, Rachel Addison wife of Samuel D. Addison, and that the pecuniary consideration of $13,000 was inserted in the deed by mistake of the draftsman. It was also alleged therein, that all the indebtedness of the firm of Addison Brothers, at the time of executing such conveyance, was discharged before any debt to the plaintiffs was contracted, and that they then had more than enough property to pay all their debts.
The choses in action, transferred to the Pacific Bank, amounted to nearly $40,000 nominally, on which about $19,000 was realized, leaving $3000 still due such bank ; other choses in action belonged to the firm of Addison Brothers, of the nominal value of $14,000, but whose collection was desperate.
On the trial no evidence was given, that at the time of the conveyance to Hatfield, of the five lots in question, Addison Brothers had sufficient property to pay $75,000, or any property whatever, or that they ever subsequently paid any debt then due, or sustained any losses.
The issues in the action were tried before Justice Barbour, without a jury. .
The justice before whom the cause was tried made a decision therein, whereby he found certain facts as established by the evidence, stated certain conclusions of law, and made the following adjudication: “ I do decide and determine : That the deed of September 18th, 1857, from Samuel D. Addison to Amos F. Hatfield, and the deed of the same premises from said Hatfield to Rachel A. Addison are not fraudulent and void as against the plaintiffs ; and that the goods mentioned in the complaint as • transferred by Samuel D. Addison, survivor, to Hatfield & Marshall cannot be reached in this action. And the said Samuel D. Addison, survivor, as aforesaid, had no power to assign the said collateral securities of Addison Brothers in the Pacific Bank, to the said Hatfield & Marshall, and that the said assignment be declared void.”
Upon filing such decision, the cleric entered a judgment, by which, after reciting the trial of the action before a justice of this court, without a jury, and the filing of a decisión in writing of the justice, containing a statement of the facts found, and the conclusions of law separately, it was ordered, adjudged and decreed, that the deed of September, 1857, from Samuel D. Addison to the defendant Hatfield, was not fraudulent and void as against the plaintiffs, but valid. That the goods mentioned in the complaint, as transferred by Samuel D. Addison, survivor, to Hatfield & Marshall, and the leases mentioned in the complaint, could not be reached in this action. And that the assignment of the collateral securities of Addison Brothers in the Pacific Bank, to Hatfield & Marshall, was void for want of power in said Addison, as survivor, to make the same. That the defendants Hatfield & Marshall should assign, under oath, to a receiver to be appointed by this court, all their interest in collateral securities in the ^Pacific Bank, assigned to them by Samuel D. Addison, survivor, as indemnity against the suits in replevin, aforesaid, as mentioned in the pleadings and proofs; and that Hatfield should assign to the receiver, certain promissory notes and all other securities held by him, in the same manner as the notes above named.
That the defendant, Eachel A. Addison, administratrix of the said Samuel D. Addison, should join in such conveyance. And that the plaintiffs should have judgment to that effect, and for their costs of this action, as adjusted by the clerk, against the defendants, Hatfield and Marshall, and have execution thereon.
And also, that the receiver to be appointed in said suit pay to the plaintiff the amount of the judgments in the complaint mentioned, out of the proceeds of property of the defendant, to be assigned to him as thereinafter mentioned. And that such receiver bring the residue of the proceeds of the said property into court, to abide the further order thereof. That the complaint be dismissed as against the said Eachel A. Addison individually, and her costs, as adjusted by the clerk, should be paid by the receiver out of the fund in his hands, and if the same be insufficient, that such costs be paid by the plaintiffs.
From this judgment all the parties appealed ; the plaintiffs appealing from some parts, and the defendants respectively from those parts which award costs to the plaintiffs, or to the defendants, to be paid out of the fund. •
W. Watson, for the plaintiffs.
A. R. Dyett, for the defendants.

Opinion:
Monell, J.
The only judgment which could be entered upon the decision of the justice who tried this cause, was, that the deed to Eachel D. Addison was not fraudulent and void; that the goods transferred to Hatfield and Marshall could not be reached in this action; and that the assignment of the securities in the Pacific Bank was void. This was the whole of the decision. The learned justice did not determine any other question, and the proper judgment to be entered thereon should have embraced only the points decided.
The paper purporting to be a judgment, which recites the decision of the court, and from which both parties have appealed, contains several provisions wholly unauthorized by the decision ; such as adjudging the deed from Addison to Hatfield to be valid ; that Hatfield & Marshall assign under oath to a receiver to be appointed, their interest in the securities in the Pacific Bank ; that Hatfield assign to the receiver the promissory notes of Clark, &c.; that Eachel D. Addison join in the conveyance ; that the plaintiffs have judgment for their costs against Hatfield and Marshall; that the receiver pay the plaintiffs the amount of their judgment out of the proceeds of the property to be assigned to him ; that the balance of the proceeds be brought into court, to abide its further order ; that the complaint be dismissed as against Eachel D. Addison in dividually and her costs to be paid by the receiver out of the funds in his hands, and if such fund is insufficient, that the same be paid by the plaintiffs.
There was no authority in the decision for any portion of the judgment above recited. The Code requires that upon the trial of questions of fact by the court its decision must be given in writing (the conclusions of fact and law being separately stated,) and judgment is entered upon the decision. (Code, §267.)
In Chamberlain v. Dempsey, (14 Abb. 241,) this court decided that in an action tried by the court without a jury, the only authority for entering judgment is the decision of the judge who tried the cause. The clerk cannot go beyond the decision and include any thing in the judgment not embraced in the decision.
In the case before us, the 11 decision " does not award costs to either party. Costs, in this class of cases, are wholly in the discretion of the court, and the question of costs must be disposed of by the court in its decision.
As I understand the requirement of the Code, and as determined in Chamberlain v. Dempsey, (supra,) the conclusions of law must contain all that goes into the jndgment; and it makes no difference that the judgment, (as entered in this case,) had the allocatur of the justice who tried the cause. Such allowance (and there is no evidence in the papers that there was one) was unnecessary, as the clerk, on filing the decision is required and authorized to enter judgment, without any other direction of the judge. (Code, § 267.) It is to this decision alone, therefore, that we must look for the adjudication of the,.judge ; and any thing in the judgment not in the decision ,is improper and erroneous.
This is not an irregularity merely, but a substantial error. Parties cannot appeal from a decision, only from a judgment; and if the judgment is unauthorized by the decision it must be set aside. (Chamberlain v. Dempsey, sup. per Robertson, J.)
For the reasons stated, we think the judgment must be reversed. And as all the issues in the case do not appear tó have been disposed of on the former trial, we think there should also be a new trial ordered.
Moncbief, J. concurred.
McCunn, J.
The first and most interesting question in this case is, whether upon the dissolution of the firm of Addison Brothers, by the death of Joseph Addison, Samuel D. Addison had power, as surviving partner, to assign the whole stock in trade of Addison Bros, by way of preference, to two of their creditors ?
By the common law a simple purchase of lands or chattels, by two or more persons, created a joint ownership ; and upon the death of one before the severance, the survivor or survivors took the whole ; but it is well settled that this rule does not apply to mercantile partnerships. On the death of a partner his personal representative becomes entitled to his proportionate share of all chattels belonging to the firm, as tenant in common with the surviving partner or partners. (Williams on Personal Property, 219, 220. Co. Litt. 181, a. Rex v. Collector of Customs, 2 Maule & Selwyn, 223.) Mr. Justice Story, in his treatise on the law of partnership, section 90, shows that partners do not occupy towards each other precisely the attitude either of joint tenants or of tenants in common, and as to the point in hand, he says : " There is no survivor-ship in cases of partnership as there is in joint tenancy. This has been the doctrine of the common law for more than three centuries'." Again, in section 342, he says ; "Here the remark already made becomes important, that a partnership is not, strictly speaking, either a joint tenancy or tenancy in common, and it is an universally established principle of the whole commercial world that the property and effects thereof do not belong.exclusively to the survivors, hut are to be distributed between them and the representatives of the deceased, in the same manner as they would have been on a voluntary dissolution inter vivos."
The same point was subjected to a most searching and thorough investigation by the English court of exchequer in 1857, when Judge Story's doctrine was distinctly affirmed in an unanimous judgment. (Buckley v. Barber, 6 Exch 164. See Kemp v. Andrews, 3 Levins, 290.) It is therefore quite clear that at least in respect to one moiety of the stock in trade Samuel D. Addison had no title, nor any authority whatever to convey it. The same principles apply to the lease and sub-leases of the Murray street store.
In the choses in action belonging to the partnership held by the Pacific Bank, Samuel D. Addison had by survivorship the sole right of action, and consequently he had what may be called the legal title. But he held this merely as trustee; for in equity the share of the deceased partner in his portion devolved on his representatives. (Williams on Pers. Prop. p. 220, and cases cited in notes.)
The sweeping dispositions made by the surviving partner immediately upon his brother's death, bear strong indicia of a fraud. The whole stock in trade, the leasehold interest, in fact every scrap of property belonging to the firm, except the choses in action, was transferred within a week, to the surviv- or's father-in-law, and the .choses in action soon went in the same direction. Viewed merely as a preference of one's favored creditor over all others, this series of transactions is subject to many unfavorable observations. Its effect upon the present plaintiffs presents a case demanding relief if the law can afford it. These. plaintiffs were induced to sell their goods on credit to Samuel D. Addison, in 1860, on a false and fraudulent representation by him that he owned the inheritance that had come to him from his father, and that his firm had a fair capital in hand. When the representation was made the paternal estate had been transferred to his father-in-law, Hatfield, as a gift to Hatfield's daughter, and the pretended capital, if any there was, consisted of loans made by the same Hatfield, whose confidential creditor stood ready, with the cooperation of his son-in-law, the fraudulent purchaser, to make that very capital an excuse for seizing, in satisfaction of his demand, the identical goods they purchased from the plaintiffs. Doubtless there was an understanding between Mr. Hatfield and his son-in-law, that his demand should be deemed confidential. But any one who looks at the effect of the arrangement between them will be struck with the appositeness of Judge Duer's remarks'upon a similar case. He says, " a secret confidence by which the public is deceived, and creditors who were excluded from its knowledge and its benefits are made the victims of their credulity and ignorance, a confidence which in respect to third persons, is a source of delusion, and an instrument of fraud assuredly deserves any other name than that of honorable; it is. not an agreement that it implies, but a conspiracy." (Nicholson v. Leavitt, 4 Sandf. 281.)
The bill of sale was not truthful. It professed to be a sale as'for a cash payment, recited in dollars and cents, so as to give it the color of a business transaction. The precise motive of the prompt removal of the stock to another store is not explained, but it looks very like a precaution to avoid the presumption of fraud which attaches to a transfer by a debtor in failing circumstances, if unaccompanied by a change of possession. Considering that the transaction was between confidential friends, father and son-in-law ; that Addison Bros, had no longer an existence, or need of a store this prompt change of location, with the careful notice of the fact in the agreement pledging the choses in ae'tiofi, resembles that over caution which is one of the settled indicia of fraud, evincing a distrust of the rectitude of the transaction, and exciting a corresponding solicitude to provide defenses for its protection. (Sands v. Codwise, 4 John. 567-591. 3 Dessaussure, 291.)
. It is not necessary to follow to their conclusion the grave suspicions that attach to this transaction. The transfer of the choses in action as an attendant upon it, is subject to so many objections, that it cannot be sustained. A surviving partner of a dissolved firm conveys all its stock in trade to his father-in-law, a favored creditor, including at least one interest which he had no power to convey, and then mortgages all the remaining estate of the firm to the same creditor, as an indemnity not only against any failure of title, but against the remotely contingent future expenses which he may incur for counsel, or otherwise, in defending all actions which any one may bring against him to test the validity of the conveyance.
No limit is assigned to the number or character of the suits thus indemnified against. They aré required, indeed, to be commenced within a reasonable time ; but how long a time is that ? When will they terminate ? This surviving partner has ordained that the business creditors of Addison Bros, must stand still "in patient expectation," until the father-in-law shall have run the guantlet of the law in any number of actions, and defeated all opponents, and must then be contented with what may be left for them after that gentleman shall have liberally compensated his counsel for their achievements in his .behalf. Sdch an act carries the much abused privilege of giving preference far beyond any thing which has hitherto been tolerated. If it had no other fault, its inevitable effect to delay creditors to an indefinitely remote period, marks it for condemnation, as falling within the very letter of the statute, and as wholly indefensible on this very ground.
It is adjudged to be fraudulent for a failing debtor to authorize his voluntary assignee to sell on credit. (Nicholson v. Leavitt, 2 Seld. 510. 3 Kern. 219. 17 N. Y. Rep. 17.)
The transfer of the receivables was plainly unauthorized by law, and a fraud upon creditors. I return to the question of power in the surviving partner to make the bill of sale of the stock in trade and the transfer of the lease. It may be thus stated.
Having the formal legal title to an individual portion of the chattels, and the entire formal title to the choses in action which constituted the stock in trade of the firm, has a surviving partner the jus disponendi even of what is thus legally vested in him, so that he can exercise the power of making an assignment of the whole property to a favored creditor, to the exclusion of all others having demands against the dissolved co-partnership ?
The firm creditors have in equity a preference over creditors of the individual partners, and on the other hand the creditors of the individual partners may justly insist that the firm assets be applied to the payment of the firm creditors, before resort is had by such creditors to the individual assets. An individual creditor of one partner cannot acquire by purchase under execution, any right in chattels of the partnership, except to have an account, and to possess himself of what interest shall be found remaining to his debtor, after settlement of the partnership affairs and payment of all joint debts. (Garbetta v. Vele, 5 Ad. & Ellis, [5 Q. B. Rep.] N. S. 408. Burton v. Green, 3 C & P. 306, and cases in notes. Walsh v. Adams, 3 Denio, 128.) This is all the right an individual partner's creditor can acquire in the firm property. Surely the individual partner himself has ^no-higher right, Our law does not contemplate that a debtor shall have title to chattels which his creditor may not sell on execution. During the existence of the firm, each partner in the ordinary course of-business and as agent of the joint concern, may sell the joint property and convert it into money or other property, for the use of the firm, and he may therewith pay the debts of the concern ; but this is the whole extent of his power. He cannot lawfully step aside from the ordinary course of business and assign the1 partnership effects to a trustee, even for the payment of the partnership debts, giving preference. (Havens v. Hussey, 5 Paige, 31. Stevens v. Brown, 9 Upper Can. Law Journ. Chancery, 110.)
While the partnership continues, no individual partner can lawfully divert the property, or any part of it, from the purposes of the co-partnership ¿ nor can he, as we have seen, lawfully apply it even to those purposes, except in the ordinary and usual course of the business, so that his act may be imputable to the partnership itself, acting by one of its members as the agents of all. It is not easy to find in the reason of things, an authority in one partner acting on .his own motion, and without the consent of his fellows, to transfer the whole estate and effects of the partnership, to one favored creditor in payment of his demand, thereby virtually terminating the business, and leaving all other creditors unpaid. If this be a lawful exercise of one partner's jus disponendi, as supposed by the chancellor in Egberts v. Wood, (3 Paige, 517,) the privilege is fraught with incalculable dangers, and the decision of the question, whether it exists, had best be deferred until a necessity for its decision shall arise. Ho such necessity exists in this case. Here the partnership had been dissolved by the death of one partner. The choses in action, certainly constituted a trust fund for the payment of debts, and it seems to me the stock in trade and lease were equally subject to that trust. The question then is, had the survivor power to exercise a partiality in the performance of this trust, or was he bound to administer the property pro rata ? I will not deny that all the partners of a joint concern, have together the entire title and absolute right of property. Having, therefore, the entire and uncontrolled jus disponendi, it follows that in the absence of fraud, any one of them, pursuing the usual course of business, may dispose of the partnership effects, and the concurrent act of all the partners, though entirely outside of the ordinary range of the partnership business, may actually extinguish the whole joint interest. (Dimon v. Hazard, 32 N. Y. Rep. 65.) But a dissolution, by the death of a partner, gives rise to a very different state of things. The partnership is at an end ; consequently all powers which the survivor once had, founded on the mere existence of that relation, must cease. The deceased had, in his life time, power to concur in giving preferences ; but this power is by express statute, devised to his executors. The survivor's right to the co-partnership property, may be diminished, but surely it cannot be increased by the dissolution. Upon what principle then, is it, that he is claimed to have a right to give preferences ? Manifestly he cannot do so, in respect to his deceased co-partner's share, in the chattel property of the firm. It seems to me equally manifest that he cannot in respect to the choses in action; for here, the equitable title to the deceased partner's share, is in his personal representative, and he is forbidden to give preferences.
In truth, the only ground on which any authority at all over the partnership assets can fairly be claimed for the surviving partner before the payment of debts is, that the legal entity which owned the property having ceased to exist, the surviving partner occupies an attitude which makes' him the fittest administrator of the fund. If allowed to assume this duty, it must be as trustee for all parties in interest, and he should not give preferences.
As the legal title to choses in action survives, the surviving partner may collect them; as the legal joint liability survives the copartnership, creditors have their remedy by judgment and execution at law against the survivor.
In this way, preferences may be acquired at law by the creditors who are most vigilant, but there is a means of preventing injustice from that source. Any creditor who apprehends loss of his demands by such means, may go into equity and obtain an equal distribution. This is usually done through the agency of the deceased partner's personal representative. (Payne v. Hornby, 27 Law Jour. Ch. 689, 4 London Jurist, N. S. p. 446.) But the right of the creditor to proceed directly in his own behalf is indisputable. (Brett v. Beckwith, 26 Law Jour. Ch. 130-3. London Jurist, N. S. 32-33. See also Story on Partnership.)
Learned judges have confessed themselves unable to define the precise quality of a surviving partner's interest in the assets of the firm. (7 Paige 34.) But decisions fairly establish as law at this day, that on such a dissolution the assets are in the first instance applicable to the payment of the co-partnership debts, and at the instance of any party in interest, equity will restrain any attempt to divert them from that object. (Newell v. Townsend, 6 Simons, 419.) If the surviving partner is not a trustee for this purpose, he cannot fairly be considered as having any other authority, and if he be such trustee, then surely, like all other trustees, (especially since the Revised Statutes of 1830 have forbidden the application of the deceased partner's share in any other way,) he is "bound to distribute pro rata, according to the maxim that " equality is equity." Upon the whole, I cannot resist the conclusion that the bill of sale of the goods and the transfer of the lease and sub-leases was, even in respect to" the technical share of the surviving partners, an unauthorized preference, and void as against the copartnership creditors.
If this general objection to the transfer of the stock in trade be not maintainable, still, upon settled principles, the transfer was unauthorized, and a fraud upon creditors. It has been thought that one partner might sell, deliver or assign the whole partnership stock directly to a creditor in payment of his demands. But it is clear that he has no right to transfer the whole property to a trustee to sell the same for the payment of the debts. This is upon the principle " delegatus non potest delegare." Each partner is, by the agreement of partnership, impliedly constituted agent of the firm, with full authority to sell, and pay debts in the usual way. Delivering the property to the creditor is merely doing directly what he had power to do circuitously. So in Egberts v. Wood, (3 Paige, 517,) the chancellor decided that one partner might make a valid assignment of partnership effects, and directly to the creditor, in payment of his demands, though the effect of such assignment was to give a preference to one set of creditors over another. But in Havens v. Hussey, (5 Paige, 30,) the same learned jurist decided that one partner could not assign the goods to a trustee for this purpose. Eow, according to the answers of the defendants, the goods in question were not delivered to Hatfield & Marshall in payment or on account of their demands. On the contrary, they were appointed agents or trustees of the copartnership, to manage the goods according to their discretion, to sell them, and to apply what might be realized from such sales, in satisfaction of their respective demands. Surely, this .is a transfer of the partners' power and duties in respect to the administration of the firm estate to third persons. It is precisely equivalent, in its nature and consequence, to a transfer to a trustee or agent for like purposes. It is, therefore, void.
The judge, at the special term, does not seem to have arrived at any different conclusion. His decision is merely that the goods " cannot be reached in this action." The justice of the plaintiffs' claim, and the injustice of placing these goods beyond the reach of process on their judgment at law, is not denied ; but for some reason of a formal or technical nature, which is not disclosed, this action is deemed an inapplicable remedy. This is not apparent to me. The plaintiffs were copartnership creditors , they proceeded to judgment at law in the only known form, i. e. against the surviving partner. Before the judgment could be obtained, the surviving partner and the defendants, Hatfield & Marshall, had made away with the property, so that it could not be reached by execution. The plaintiffs exhausted legal diligence against the surviving partner, by issuing executions into the county of his residence, which were returned unsatisfied, and this gave them a right to proceed in equity against the property of their debtors, of e.very description. (3 R. S. p. 264, § 43, 5th ed.) It is familiar practice to include in such action, as defendants, all persons who may have co-operated with the debtor in defeating the legal remedies of the creditor. Besides, according to the principle before referred to, those plaintiffs, as creditors of the dissolved partnership, had a right to the aid of equity in enforcing a proper distribution of the firm assets. It may possibly be that, as matter of form, in this aspect of the action, there should have been an administrator of Joseph Addison, and he should have been made a defendant. Perhaps, also, the other creditors, if any there be, of Addison Bros, ought, in some form, to have been parties; but if this be so, it is not a ground for denying relief, or dismissing the action. Under the former practice, in chancery, it was firmly established that the bill should not be dismissed for want of parties, especially if the objection was not taken by demurrer, or in the answer.
The settled practice was to direct the cause to stand over, to the end that requisite parties might be brought in by amendment or supplemental bill. The Code has adopted this practice and made it imperative upon the courts. Section 144, subdivision 4, provides that for a defect of parties apparent on the face of the complaint, the defendant may demur. Section 147 provides that if the objection do not appear on the face of the complaint, it may be taken by answer ; and the next section provides that if not taken either by demurrer or answer the defendant shall be deemed to have waived it. Consequently there was no fatal or incurable defect of parties. Whether or not the legal diligence of the plaintiffs entitled them to a preference, leaving the surplus for distribution amongst other creditors of Addison Brothers, need not now be decided. Perhaps on a full investigation, there may be no other creditors, or the assets may prove sufficient to pay all the debts.
The remaining question is whether Samuel D. Addison's gift of his patrimonial estate to his wife, is sustainable. The Revised Statutes, (vol. 3, 224, 5th ed. § 1,) declare that every conveyance of any interest in lands, made with intent to hinder, delay or defraud creditors or other persons of their lawful demands, shall, as against the person so hindered, delayed or defrauded, be void. This is a re-enactment of an ancient English statute, and is merely declaratory of the common law. (Hamilton v. Russell, 1 Cranch, 316.)
It was determined by the courts that indebtedness of a grantor, at the time of a voluntary conveyance, founded on the consideration of natural love and affection, is not conclusive evidence of fraud in such conveyance. (Jackson v. Seward, 5 Cowen, 67.) In Hindes v. Longworth, (11 Wheat. 213,) it is said that " the mere fact of being in debt a small amount would not make the deed fraudulent if it could be shown that the grantor was at the time in prosperous circumstances and unembarrassed." The 4th section of this same title, of the Revised Statutes adopted these decisions, (see Revisers' note, 3 R. S. p. 658, 2d ed.) But the absence of a valuable consideration, and the fact of the grantor's being deeply indebted at the time of the conveyance, has always been deemed to raise so strong a presumption of the fraudulent intent, that without some explanatory circumstances, as for instance such as are cited from Wheaton's reports," the transaction will be deemed void as against subsequent creditors. (Wadsworth v. Havens, 3 Wend, 412.) That subsequent creditors are within the words of the statute as well as within the mischiefs it was designed to suppress, was decided by Lord Hardwicke in Taylor v. Jones, (2 Atk. 601,) and his decision was approved by Chancellor Kent in Reade v. Livingston, (3 John. Ch. 481.) He notices the distinction between creditors existing at the time of the conveyance and subsequent creditors. From the mere fact of the gift being voluntary and without a valuable consideration, fraud may. be an inference of law as to the former ; but as to subsequent debts there is no such necessary legal presumption, and there must be fraud in fact. He thus defines the requisite proof of such fraud in fact. " The indebtedness at the time, though not amounting to insolvency, must be such as to warrant the conclusion." In another place he says: " subsequent creditors would be required to go so far, and only so far, in showing debts, as would be sufficient to raise a reasonable presumption of a fraudulent intent." These principles have been reiterated in adjudged cases times without number. They are the conclusions of common sense upon a pure common law question. If a trader, deeply in debt, not proven to have had at any time property sufficient to pay his outstanding liabilities, without any special reason or present particular inducement, makes a gift of his real estate to his wife or child, what can be supposed, at the very best, but that his motive was to cast upon his creditors, existing and subsequent, all the risks of his trade and to preserve his capital for the benefit of himself an'd his family. This is a fraudulent act. (Twyne's case, 3 Coice, 83.) In the recent case of Carpenter v. Roe, (6 Seld. 227,) Judge Gardiner thus delivers the opinion of the whole court: " To avoid the conveyance and trust in favor of his wife it is not necessary that the debtor should be insolvent, or believe himself to be so, when they were executed or created. It was sufficient that he was indebted, and that insolvency would be the inevitable or probable result of a want of success in the business in which he was engaged. He could not legally and honestly in this manner provide for himself and his family and cast upon his creditors the hazard of his speculation," After such a lucid exposition by our highest tribunal it cannot be profitable to enlarge upon this topic. Such is the rule of law ; now let us recur to the facts.
The plaintiffs brought the case distinctly within the rule by alleging that a very large indebtedness existed at the time of the gift, and that thence until the failure such indebtedness was not diminished. The indebtedness admitted the continuance of debt until the failure is admitted. That there was any reduction of its gross amount is not pretended in the answers, nor is there in the evidence the slightest color for a surmise that it would have been reduced. On the contrary, the loans obtained from Hatfield & Marshall, after the gift in question, were obtained not to pay debts with, but to increase the business. The answers assert that the debts existing at the time of the gift were paid. This is an affirmation alleged by way of avoidance. The burden of proving it devolved on the defendants. They have offered no evidence whatever in support of it. But even if such were the fact, it would not avail to repel the presumption of fraudulent intent. From the admissions in the answers it must be understood that the debt of this firm, like the liabilities of most mercantile concerns, constituted an unbroken stream of equal volume from the time of the gift to the time of the failure. The stream continued the same alike in all essentials, though the particles of which it was composed were constantly changing. Such an allegation is frivolous in point of reason, and according to all authorities, totally unavailing in point of law. The authorities are collected and their result stated with admirable exactness by the learned editors of American Leading Oases. (1 Hare & Wallace, pp. 40, 41, 4th ed.)
The allegation that the firm or the partners had at the time of the gift sufficient money to pay their debts independently of this real estate, was material and relevant, and if proven, might have sanctioned the gift. But this also was an affirmative, and the burden of proving it devolved upon the defend ants. No evidence whatever was offered in support of it. Though not necessary to condemn this transaction, it may properly be added that all reasonable inferences from the circumstances before the court are against the allegation. The plaintiffs were not bound by law to disprove this averment, and indeed it would be in the highest degree unreasonable to exact from them proof of such a negative. The proof was most accessible to the defendants ; the plaintiff had very slender means, if any, to ascertain the facts.
The conveyance was a mere gift; it was called for by no special exigency ; it was made by one in trade and heavily indebted, and who continued so in debt until he sank into disastrous insolvency. The grantor contracted the debt in question by means of a false and fraudulent representation that no such gift had been made, and soon afterward failed, transferring the very property obtained by his false and fraudulent representations to the same member of his family, who was his agent and co-operator in making this gift. I do not assert that fraud or not is a question of law • I admit that in its very nature it is a question of fact. But on such a state of facts, wholly unexplained and uncontradicted by any proof whatever, the fraudulent intent alleged in respect to this gift is an irresistible inference. (Vance v. Phillips, 6 Hill, 435, 436.) These lots lie in the city of New York; the plaintiffs' judgments are both liens upon them. The conveyance to Hatfield and Mrs. Addison should have been declared fraudulent and void as against the plaintiffs. Their judgment at law might then he executed upon them, or this court might direct a sale by a receiver, requiring all parties to join in the conveyances, and apply the proceeds among the creditors according to law. (Per Tracy, senator, McElwain v. Willis, 9 Wend. 567, 568.)
The appeals of the defendants should be dismissed with costs, and a new trial directed on the plaintiffs' appeal.
New trial ordered, with costs to abide the event.