Court Opinion

ID: 6123135
Source: CourtListenerOpinion
Date Created: 2022-02-04 20:10:56.794276+00
Date Added: 2024-06-11T08:24:17.974045
License: Public Domain

Brady, J.:
It is, to my appreciation of the facts developed in this proceeding, quite apparent that the engagement of the members of the firm of Hoyt, Spragues & Co. as sureties for Chapin was directly connected with the interest, and therefore for the benefit, of the firm as such. The facts seem to leave no room to doubt this deduction. They were the creditors of Mr. Chapin, and one of them acting on behalf of the firm, and for Mr. Chapin as well, negotiated a loan from the claimants, the amount of which was to be applied to reduce the indebtedness of Mr. Chapin. The loan was made to him, and he was therefore the principal, but the members of the firm for considerations expressed in the instrument became sureties for the payment of the loan, which, through the instrumentality of one of its members, was accomplished and for the benefit of the firm. In other words, the money was thus obtained to pay a part of the indebtedness of Chapin to the firm, and in order to secure it they guaranteed its payment. The transaction was in effect a qtoasi loan to the firm, which they might or might not be called upon to refund, that incident depending upon the value of the pledge made by Chapin and his ability to meet the obligation imposed by the loan. The money having been thus received and used by the firm, their joint and several obligation was in legal effect, though not in precise terms, the undertaking of the firm for its benefit and advantage. The members of the firm by it assumed an obligation for their joint advantage as a copartnership, the whole transaction having no other object in view. When a joint obligation is executed by the individual members of a copartnership for a consideration passing to it, although it be not in the name of the firm, the liability incurred becomes one of the partnership, and when matured is enti*512tied to priority of payment out of the assets over the private debts of the copartners. There is no distinction in favor of debts directly contracted in the firm name. If the debt exists as one of the firm, its status is instantly determined. (Ex parte Hunter, 1 Atk. Ch., 225, and cases cited; Galway v. Matthews, 1 Campb., 403; Filley v. Phelps, 18 Conn., 295; Agawan Bk. v. Morris, 4 Cush., 99; Turner v. Jaycox, 40 N. Y., 470; Forsyth v. Woods, 11 Wal., 484.)
In the last case Mr. Justice Strong said: “ If a firm be composed of two persons associated for the conduct of a particular branch of business, it can hardly be maintained that the joint contract of the two partners made in their individual names, in respect to a matter which has no coivnecüon with the fii-m, business, creates a liability of the firm as such.” (See, also, Franklin v. Fairchild, 64 N. Y., 471.)
The reporter’s note in Turner v. Jaycox (supra) does not seem to be warranted by the case. One of the questions therein considered was whether a note made by the members of a firm, though not in the firm name, and given for money used by the firm, was a partnership debt, and it was declared to be of that character. The doctrine that a joint note of individual partners was not,per se, a partnership debt was doubtless appended to prevent any misunderstanding of the opinion delivered. If such was not its object, then the reporter’s note seems to have been unnecessary.
If the question be considered in reference to the intention of the contracting parties, there is little opportunity for discussion as to the intent. No other surety, than those composing the firm was called upon to unite in the obligation given, and no one was interested in the consummation of the transaction but Chapin and the firm, but more particularly the latter, to whom the proceeds all went, and whose obligations to each other when the money was received immediately became those of jiartners inter sese. The money became assets at once, and becoming thus amalgamated, continues to be represented by what is left either in whole or pro tanto.
The counsel for the receiver seems to think that the claimants having commenced an action against the surviving obligors and the executors of IToyt and Knight, they have waived any right to proceed against the joint estate, if such ever existed. This is an erroneous view of the effect of the procedure mentioned. In several *513cases it has been held that the creditor had the right in bankruptcy, to prove his debt against the firm and an individual member signing the obligation, and was not obliged to elect. (In re Bigelow, 2 N. B. R., 371, 373; Emery et al. Assignees v. The Canal Nat. Bk., 7 id., 217; In re Bradley, 2 Bis., 517.)
The opinion of Justice Clifford, in Emery v. The Canal National Bank, is elaborate and exhaustive, and the conclusion is in accord with what is stated. The assignee applied in that case to compel the claimant to elect, but the court declared he could proceed against both estates, namely, that of the firm and that of the individual partner. In In re Bradley, Justice Mullin said: “I think the court has no judicial power to restrict the right of the creditor to pursue the joint and several debtors for the collection of his debt in the manner known to.the law.” If there be any restraint tolerable in such cases, there seems to be more propriety in requiring the creditor to pursue the joint property and to exhaust it before resorting to the individual estate, because the joint fund is primarily liable to the payment of joint obligations. Here the effort is to obtain payment out of the joint estate, and the effect, if payment be made, would be to increase the personal or individual property, and in that way to enlarge the security for the individual creditors. Although it may be justly said that there is some conflict of authority in regard to it, and which to some extent is discussed in the cases cited, nevertheless considering the organization of courts and the object of their creation, the dictates of reason result in the proposition that the creditor may seek the property of his debtor in whatever form it may be found, unless exempt by law, and the authorities cited sustain such a doctrine. Whatever estate may be applied, the debt can be collected but once, and until collected the creditor is by law entitled to his remedy.
Bor these reasons the exceptions to the referee’s report should be sustained, the order ajipealed from reversed, and an order entered directing the referee to allow the claim of the appellants.
Davis, P. J., and Daniels, J., concurred in the result.
Order reversed and order entered as directed in opinion.