Case Name: Augustus S. Gorham, App'lt, v. Aaron Innis, Resp't
Court: New York Court of Appeals
Jurisdiction: New York
Decision Date: 1889-06-04
Citations: 23 N.Y. St. Rep. 615
Docket Number: 
Parties: Augustus S. Gorham, App’lt, v. Aaron Innis, Resp’t.
Judges: 
Reporter: New York State Reporter
Volume: 23
Pages: 615–618

Head Matter:
Augustus S. Gorham, App’lt, v. Aaron Innis, Resp’t.
(Court of Appeals,
Filed June 4, 1889.)
Assignment—For benefit of creditors—What preference ahlowed.
Where, in an action to have an assignment, made by the surviving member of an insolvent firm set aside, the claim was based upon an allegation. that the assignor preferred some of his individual creditors before those who might be designated firm creditors, and upon sufficient evidence it was found, as a matter of fact, adversely to such claim, and that the preferred claims were for money loaned to the firm as distinguished from the individual, and that the firm had the benefit of it, the action must fail, as the insolvent firm had an undoubted right to prefer certain of its creditors over others.
Appeal from a judgment of the supreme court, general term, second department, affirming a judgment in favor of defendant, rendered on the trial of the action at the Dutchess county special term.
Prior to the 1st day of March, 1855, Nathan Gifford, Howland R. Sherman and George Innis did business in the city of Poughkeepsie, N. Y., as dealers in dye wood, and were partners in such business, which was carried on in the firm name of Gifford, Sherman & Innis.
On the 1st of March, 1855, Nathan Gifford sold and transferred all his interest in the partnership property and business to the remaining partners, Sherman and Innis, and on that day he withdrew from the firm, and thereafter had no connection with it as a partner. The survivors, Sherman and Innis, continued the business as partners under the same firm name of Gifford, Sherman & Innis, until Mr. Sherman died, which was in the year 1859, and from that time down to about the 2d day of August, 1884, George Innis continued and carried on the same business under the same firm name of Gifford, Sherman & Innis, but he alone was interested in the business and he had no partner.
On the date last named George Innis failed in business and made a general assignment for the benefit of his creditors of all his property, whether standing and held by him in his individual name or in the name of the firm, which assignment was made to, and accepted by, the defendant, Aaron Innis, who subsequently duly qualified and executed a bond pursuant to the statute, which was approved by the county judge of Dutchess county.
By this assignment the employees of the assignors were made preferred creditors, and then certain other creditors were preferred whose claims arose against the business done in the name of Gifford, Sherman & Innis, as distinguished from the personal or individual creditors of George Innis.
Subsequent to the above mentioned assignment, and in December, 1884, and March, 1866, several creditors of George Innis obtained several and separate judgments against him, and issued executions thereon, which were returned unsatisfied. The contracts and obligations upon which the judgments were obtained, were incurred under the said firm name of Gifford, Sherman & Innis.
The plaintiffs in those actions assigned their various claims to the plaintiff herein, who thereafter commenced this action in his own behalf, and in behalf of all other creditors of Gifford, Sherman & Innis, who might come in and contribute to the expense of the action, and in such action the plaintiff demanded for relief the appointment oí a receiver of the property, assets and effects of the late firm of Gifford, Sherman & Innis, to whom the defendant, Aaron Innis, assignee as aforesaid, should deliver all the property of the firm in his possession, and that the assignment executed by George Innis should be declared null and void, and that the defendants, George and Aaron Innis, should be adjudged to account for all the property, assets and effects of the said firm; that the defendant should be enjoined from paying out or disposing of any of the assets or effects of the said firm, or interfering therewith, except to deliver the same to a receiver when appointed. Also, that a decree might be entered adjudging the plaintiff to be entitled to be paid in full out of the assets of said firm in preference to the claims of individual creditors of said George Innis.
The trial court found that by the assignment certain creditors were preferred, and that those creditors who were thus preferred were those whose claims arose against the business done in the name of Gifford, Sherman & Innis, as distinguished from the personal or individual creditors of George Innis.
The ground for claiming, to have the assignment set aside was that the assignor preferred some of his individual creditors before those of his creditors who might be designated firm creditors.
The trial court gave judgment for the defendant, and dismissed the complaint upon the merits. The general term affirmed such judgment, and the plaintiff has appealed here.
Henry S. Bennett, for app’lt; Henry M. Taylor, for resp’t.
Affirming 10 N. Y State Rep., 867.

Opinion:
Peckham, J.
As matter of fact it is seen that there was no partnership since 1859, in which George Innis had been engaged. Since that date he had carried on the business in which he alone was interested, but under the name of a firm which had not in fact existed for many years. All his debts in existence at the time when he made the assignment in August, 1884, were, therefore, in one aspect, individual debts. But there were some which had been contracted by him while engaged in transacting business under the firm name, and the plaintiff represents judgment-creditors who obtained judgments against Gifford & Innis upon transactions or obligations of a firm nature, although actually incurred by Innis alone.
All those who were made preferred creditors in the assignment, represented and were the owners of debts which arose out of precisely similar transactions or obligations as those represented by the plaintiff herein. In other words, they were all firm, as distinguished from individual creditors.
It thus appears that the appellant's claim that the individual creditors of the- assignor have been made preferred creditors in the assignment, is a matter of fact which has been found adversely to such claim by the referee, and we think there is sufficient evidence to sustain the finding.
The statement of the manner in which the debt to Ella Burger was incurred is somewhat loose, but from all the evidence we think it is a fair inference that the money was loaned by her to the firm as distinguished from the individual, and the firm certainly had the benefit of it.
The appellant claims to come within the principle decided in the case of Kelly v. Scott (49 N. Y., 595). We think not. In this case, although there was in fact no partnership, yet, nevertheless, those creditors who became such by reason of dealing with the so-called firm, and who might, therefore, be called the firm creditors, have been preferred in the assignment as such creditors, and, hence, the equitable lien upon the partnership property; which might have resulted to the partnership creditors if there had been a partnership such as this was held out to be, has been recognized in the assignment, and they have the equitable lien upon the partnership funds or property ' which they would have had if such partnership had in fact existed.
If that be not the case with all the firm creditors, the natural effect of it would be that a preference would be given to some of the partnership creditors over others of the same class, and an insolvent firm has the undoubted right to prefer certain of its creditors over others.
The order for an extra allowance was, we think, within the discretion of the trial court, and, although subject to review by the general term, we have no such power.
The judgment of the supreme court should, therefore, be affirmed, with costs.
All concur.