Case Name: RUSSELL'S APPEAL
Court: Supreme Court of Pennsylvania
Jurisdiction: Pennsylvania
Decision Date: 1885-04-14
Citations: 2 Walk. 363
Docket Number: No. 123
Parties: RUSSELL’S APPEAL.
Judges: 
Reporter: Reports of cases decided by the supreme court of pennsylvania which have been omitted from the regular reports
Volume: 2
Pages: 363–365

Head Matter:
RUSSELL’S APPEAL.
The surviving partner of an insolvent firm may sell the firm’s property to one of its creditors, receiving in payment a credit upon the firm’s indebtedness.
Such a sale is illegal, however, when there is an actual intent to hinder and delay other creditors.
Appeal from the Common Pleas, No. 2, of Philadelphia County; In Equity; No. 123 Jan. Term, 1884.
■ The bill was filed by creditors of the firm of Morris R. Stroud, & Son, against William Stroud, the surviving partner, and against a creditor, to whom the latter had assigned the firm assets. By amendment the administrator of Morris R. Stroud, the deceased partner was added as a party complainant. The-bill, set forth, that the firm of Morris R, Stroud & Son, had been composed of Morris R. Stroud and William Stroud.- That Morris R. Stroud had died; that the firm was insolvent, at the time of his death; that William Stroud, thereafter, while liquidating the business, had, without consultation, with the other creditors, or representatives of the deceased partner, assigned all the assets of the firm, to one creditor. Complainants prayed for an injunction against the transfer of the assets, under this, assignment, a discovery and account of said assets, and the appointment of a receiver. The answer substantially admitted the above facts, but averred that the transfer to the preferred creditor was a bona fide sale of the assets, for a fair price, which was paid by giving a credit to the firm on their indebtedness, to the extent of such price. The- Court dissolved the injunction, (12 W. N. C. 419 ;) and afterwards on Nov. 24, 1883 dismissed the bill, on bill and answer. Russell and others, creditors of the firm of Morris R. Stroud, then appealed, and assigned for error, that the Court' erred in dismissing complainants bill, and in not entering a decree for complainants, 'on the bill and answer-filed.
John G. Johnson Esq., for appellants
argued, that the surviving partner of an insolvent firm, after its dissolution, by reason of the death of his co-partner, could not assign all its assets to a creditor, aware of such insolvency, to the exclusion of all the other creditors, from participation in the administration of the same. During the existence of a partnership, it is not within the power of one partner, against the wishes of his co-partner, to .assign all the assets to a trustee, for the benefit'of creditors ; McNutt vs. Strayhorn, 39 Penna. 273; Dickinson vs. Legare, 1 Dessau 537; Pearpoint vs. Graham, 4 Washington C. C. 232; Story on Partnership, Section 101; Bull vs. Harris, 18 B. Mon. 195; Deckert vs. Filbert, 3 W. & S. 454. The surviving partner of a firm, dissolved by the death of' a co-partner, is a trustee of the firm assets, and as such must administer and distribute them pro rata without preferences; 2nd. Bindley on Partnership, 666 ;Parsons on Partnership, section 442; Story on Partnership, 7th Edition, Section 346; Ex Parte Williams, 11 Vesey 5; Hartz vs. Schrader, 8 Vesey 317; Barcroft vs Snodgrass, 1 Coldwell, 442; Paton vs. Wright, 15 Howard, Pr. 481; Sloan vs. Moore, 37 Penna. 218.
D. W. Sellers and A. B. Letchworth, Esqs., contra,
argued that upon the death of Morris B. Stroud, William'-Stroud became sole surviving partner, and as such, the entire legal title to the partnership assets vested in him ; Lindley on Partnership, 1045 notes; Gratz vs. Bayard, 11 S. & R. 41. The Act of April 17, 1843, P. L. 273 only prevented a partner preferring in an assignment; Worman vs. Wolfersberger, 19 Penna. 59. A partner may prefer any creditor he chooses,provided he does not do it by means of an assignment; Wilson vs. Berg, 88 Penna. 171; Heberton vs. Jepherson, 10 Penna. 124; York County Bank vs. Carter, 38 Penna. 446; Bentz vs. Rockey, 69 Penna. 71; Mellon’s Appeal, 1 Gr. 212; Miners’ National Bank’s Appeal, 57 Penna. 193; Wallace vs. Wainwright, 87 Penna. 263. They cited Blakey’s Appeal, 7 Penna. 449; Baker’s Appeal, 21 Penna. 76.

Opinion:
The Supreme Court affirmed the decree of the Common Pleas, on the 14th of April, in the following opinion:
Per Curiam.
The legal title to all the partnership assets rests in á sole surviving partner of the firm. He is entitled to the exclusive possession and control thereof. He may sell and dispose of the whole assets or any part thereof in payment of the debts of the firm. The payment of ouc creditor is no fraud on the other creditors. It is true that the Act of April 17, 1843, P. Laws 273, prohibits preferences in assignments for the benefit of creditors ; yet it does not prevent a debtor by a conveyance or transfer of property, to prefer any of his creditors,, although he may thereby hinder or prevent his other creditors from collecting just demands. To defeat a transfer to a creditor accompanied by a delivery of possession, there must be an actual intent to hinder or delay the other creditors; Bentz vs. Rockey, 69 Pa. 71; Wilson vs. Berg, 88 Pa. 167. In this case the payment was made in good faith, to apply on an unquestioned debt against the firm. The surviving partner had a right to so appropriate the assets of the firm. It follows that the Court committed no error in dismissing the bill.
Decree affirmed and appeal dismissed at the costs of the appellants.