Case Name: Bell v. Hepworth et al.
Court: New York Supreme Court, General Term
Jurisdiction: New York
Decision Date: 1889-02-11
Citations: 4 N.Y.S. 823
Docket Number: 
Parties: Bell v. Hepworth et al.
Judges: 
Reporter: West's New York Supplement
Volume: 4
Pages: 823–824

Head Matter:
Bell v. Hepworth et al.
(Supreme Court, General Term, Second Department.
February 11, 1889.)
1. Power of Surviving Partners—Execution of Mortgage.
A surviving partner has power to execute a mortgage upon the firm property, in settling up the partnership business, and the right of the mortgagee thereunder, the mortgage having been executed in good faith, is superior to the right of the representatives of the deceased partner to compel an accounting and payment of the amount due the latter’s estate.
2. Same—Rights of Mortgagee.
The mortgage having been given to secure a partnership debt, the mortgagee may proceed first against the partnership property, though he also holds a mortgage to secure the same debt against the surviving partner’s individual property.
Appeal from special term.
Action by James C. Bell against Samuel S. Hepworth, .the Garfield National Bank, O. H. De Lamater, and others, to foreclose a mortgage executed by said Hepworth, as surviving partner of the firm of S. S. Hepworth & Co. The other defendants are the executors of the estate of Joseph Colwell, the deceased partner of Hepworth, and subsequent mortgagees of the firm property. Judgment for plaintiff, and defendants appeal.
Argued before Barnard, P. J., and Pratt, J.
Thomas Darlington, (S. Jones, of counsel,) for Garfield National Bank and C. H. De Lamater, appellants. William B. JEUison, for Skelton and Colwell, executors, and Prank W. Colwell, receiver, appellants. John W. Alexander, for James C. Bell, respondent. JR. JE. & A. J. Frime & Burns, for defendant Quick, assignee, respondent.
Concerning the general power of surviving partners with respect to the partnership business, see Shattuck v. Chandler, (Kan.) 20 Pac. Rep. 225, and note; Beste v. Burger, (N. Y.) 17 N. E. Rep. 734, and note; Clay v. Field, 34 Fed. Rep. 375, and note.

Opinion:
Barnard, P. J.
The mortgage is good by virtue of the power of the surviving partner to execute the same, without regard to the consent of the deceased partner, given in his will, that the business shall be continued for five years after his death. The surviving partner took the legal title, with the right to determine the manner of the management of the firm business, subject to the equitable rights of the survivor. Williams v. Whedon, 109 N. Y. 333, 16 N. E. Rep. 365. Whatever may finally be adjudged to be in the power of a testator as to continuance of a partnership business after death, as between the debts existing at his death and those subsequently contracted in the business, in respect to the estate as it was at the decease of the partner, the mortgage as between the executors of Colwell and the plaintiff is good. Col-well authorized the continuance of the business. The land was purchased in the life-time of Colwell, and the deed was taken after his death. The mortgage was.therefore based upon the business of the partnership, and was given on partnership lands, and under a power expressly given in his will. The parties are therefore bound by it, it being given in good faith, and for value, which the partnership received and retained.
The mortgage on the individual property of the surviving partner, given at the same time the mortgage described in the complaint was given, was a collateral security to the partnership loan. The decree which directed the sale of the partnership mortgage first was equitable. The surviving partner had rights to be copsidered. It is true that he is liable for the partnership debts as an individual, and that the plaintiff could have resorted to the collateral security first; but the plaintiff seeks to apply first the partnership property to the payment of the debt, and this right cannot be objected to by any subsequent lienor. The rights of these lienors must be determined in respect to the individual property of Hepworth, the surviving partner, after the agree ment in respect to the partnership mortgage is carried out. The judgment should therefore be affirmed, with costs.
Pratt, J. The representatives of a deceased partner may require from the surviving partner an account of his doings as such survivor in closing the business. They may also compel payment by the survivor of such amount as shall be found due to the estate of the deceased partner; and, when it is made to appear that by maladministration the rights of the estate are imperiled, equity will find means for their protection. In some cases the courts have spoken of these rights as constituting a "lien" on the property of the firm. The strict propriety of that term may perhaps be doubted. If they can be said to constitute a "lien," it must be in a qualified sense, for the title to the assets vests in the survivor. He may sell the property, and give a clear title. He may even make an assignment, with preferences. The appellants are therefore in error in claiming that any such lien existed in favor of the estate of Joseph Colwell as would prevent Hep worth from making a valid disposition of the property. He could sell the assets, or could make use of them as security for a loan, and, so long as such acts were in good faith, the executors of Colwell could not effectually interfere. The execution by the surviving partner of the mortgage sued upon was within his powers, and the right of the mortgagee thereunder is superior to the claims of the executors.
Counsel for appellant insist that plaintiff should be compelled to resort to his mortgage upon the individual property of Hepworth, and exhaust that security before coming upon the property held by him as surviving partner. Bat the individual creditors object with good reason that the individual property is the primary fund for the payment of their debts. They argue that as the loan now being enforced was contracted in aid of the partnership business, the individual estate must be regarded as a surety upon the loan. That contention appears to be well founded. It follows that the disposition of the cause at special term was correct, and the judgment must be affirmed, with costs.