Court Opinion

ID: 6629755
Source: CourtListenerOpinion
Date Created: 2022-07-20 20:36:35.854801+00
Date Added: 2024-06-11T15:58:54.699622
License: Public Domain

Wi-iipple, J.
dissenting. The only question presented for the decision of this Court is, whether the assignment executed by Justus Ingersoll, and set forth in the pleadings, can be sustained. I agree with the Chancellor, that no question of greater practical importance has ever arisen since the organization of our state government; and I have, therefore, felt bound to examine it with great care and deliberation, as it is probable that its adjudication in the pi'esent cause, will be regarded, hereafter, as authoritative. In the case of Brown v. Kellogg et al. the Supreme Court of the late territory decided the identical question upon which the judgment of this Court is now to be pronounced, and that decision wras acquiesced in, until the filing of the bill in the present case. We are not bound by that decision, although, upon a doubtful question, it should have its just weight, as it might affect rights acquired under the impression that a rule prescribed some years since, and acquiesced in, would not be disturbed.
I propose, very briefly, to test the validity of the assignment made by Justus Ingersoll, by those general principles which govern and control mercantile copartnerships, and by the authorities which were cited by counsel on both sides upon the argument.
No principle is better established, than “ that the transactions of partners, in which they all severally and respectively join, differ in nothing, in respect to legal consequences, from transactions in which they are concerned individually.” Gow on Partn. 52; Watson on Partn. 167. Let us now consider in what instances the act of one partner shall be construed to be the act of all. It *496may be laid down, as a principle resulting from the contract of copartnership and the relation growing out of such a contract between the parties to it, “that partners are bound universally by what is done by each in the coui-se of the partnership business.” When acting within the rule thus prescribed, each partner is considered not merely as a principal, but as the general and authorized agent of the firm; so that, every act which the copartners might jointly do, may be lawfully done by each, in the name of the firm. The very existence of commerce may be said to depend upon the recognition of this principle ; for, without it, mercantile copartnerships would, to a great extent, cease to exist. One partner may, in the name of the firm, draw, endorse and accept negotiable instruments; may induce a joint responsibility by any contract or agreement for the purchase or sale of goods; he may borrow money; he may pay the debts of the firm; and to this end has authority to sell any or all of the copartnership property; he may employ an agent or agents in managing the affairs of the firm; he may authorize such agent or agents to draw, endorse or accept bills in behalf of the firm; he may even bind the firm by an act not having relation to their joint business, provided it receive their assent express or implied; he may even bind the firm in many cases, upon an agreement made for his own special benefit. Over the whole copartnership property, one partner “may exercise the jus disponendi, and in the absence of fraud, the sale will be binding upon the firm.” Gow on Partn. 68. “He may pledge the partnership effects, and the pledge will bind his copartners.” Gow on Partn. 70. Such is an enumeration of some of the powers which each partner possesses. These powers result from the nature of the connection of partnership, — a relation implying unlimited confidence, — each declaring to the world his confidence in the integrity of the others, and undertaking im*497pliedly to become responsible for the act of each within the compass of the copartnership concerns. Did Justus Ingersoll, then, in executing the assignment in question, exceed the powers with which he was by law invested ? If he did, the assignment must be declared void; as the exercise of an unwarrantable authority would be regarded as a legal fraud upon the rights of the complainant. This question has been discussed and decided in several of the state and federal courts ; and applying to it the principles I have laid down, conflicting opinions have been expressed. In the case of Dickinson v. Legare, 1 Desaus. 537, Chancellor Matthews decided that a general assignment of the whole copartnership effects by one of the partners when abroad, without the knowledge or consent of the partners at home, but for a partnership debt, was void. The correctness of this decision is questioned by Mr. Collyer, in his valuable treatise on partnership, and has since been overruled in the case of Robinson v. Crowder, 4 McCord’s R. 519. In the case of Havens v. Hussey, 5 Paige’s R. 30, the Chancellor declared an assignment of all the partnership effects, executed by one of two copartners, without the consent of the other, and against the known wishes of her agent, void. In declaring his opinion, the Chancellor remarked, that he had, in the case of Egberts v. Wood, 3 Paige’s R. 517, arrived at the conclusion that, from the nature of the contract of copartnership, one of the partners, during the continuance of the copartnership, might make a valid assignment of the partnership effects, or of so much thereof as was necessary for that purpose, in the name of the firm, to one or more of the creditors, in payment of his or their debts; although the effect of such assignment was to give a preference to one set of creditors over another. But, as it was not necessary for the decision of that case, he did not express any opinion as to the validity of an assignment of the partnership effects *498by one partner, against the Jcnown wishes of his copartner, to a trustee, for the benefit of the favorite creditors of the assignor, in fraud of the rights of his copartner to participate in the distribution of the pártnership effects among the creditors, and in the decision of the question as to which of the creditors, if any, should have preference in payment out of the effects of an insolvent concern. He then declares the assignment to be illegal and inequitable; and this opinion is founded on the reason, that it is no part of the ordinary business of a copartnership to appoint a trustee of all the partnership effects, for the purpose of selling and distributing the proceeds among the creditors in equal proportions; and that no such authority as that can be implied; but, on the contrary, such an exercise of power by one of a firm, without the consent of the other, is, in most cases, a virtual dissolution of the copartnership.
Such was the reasoning of Chancellor Farnsworth, in delivering his opinion in the present case.
In the case of Egberts v. Wood, Chancellor Walworth affirmed the doctrine that, from the nature of the contract of copartnership, one partner might make a valid assignment of the partnership effects, in the name of the firm, to one or more creditors, in payment of his or their debts, although the effect might be to give a preference to one set of creditors over another. In the case of Havens v. Hussey, the principle decided was, that such an assignment made by one partner to a trustee, against the known wishes of the other, was void. The distinction, then, between the two cases, is simply this: that in the first case, the assignment is made directly to a creditor, and in the second, the assignment is to a trustee, for the benefit of a creditor or creditors. But does such a distinction in fact or in principle exist, as will authorize a court to declare the assignment made directly to a creditor legal, which, if made to a trustee for the benefit of the same *499creditor, is fraudulent and void ? I have been unable to draw a line of distinction between the two cases. No reason for such a distinction is given by Chancellor Walworth, except that it is no part of the ordinary business of a copartnership to appoint a trustee of all the partnership effects, for the purpose of selling and distributing the proceeds aznong the creditors, and that no such authority can be implied. The principle is incontestable, and is fully admitted, that the effects of a copartnership are pledged to the payment of the copartnership debts; that the members of a firm, or any one member, may sell or assign the whole of those effects to pay the debts owing by the firm, although the effect may be to give a preference to one set of creditors over another. If these principles be sound, it is difficult to conceive why the same object and purpose may not be accomplished through the agency of a third person or trustee. The property, it is true, is assigned to him; he may be the legal owner; but the creditors have the beneficial interest. Instead of assigning the effects directly to the creditor, the assignment is made to a trustee for the benefit of the creditor. In other words, the principal thing to be done is the fair and lawful one of paying the debts of the firm. The mode of doing the thing is the mere incident, and ought to be left to the discretion of the party executing the assignment, whose interest, as well as that of the firm, might be greatly promoted by the appointment of a trustee. In such a case, the trustee is a mere agent appointed to dispose of the effects; the creditors are the persons beneficially interested; the assignment enures to their benefit; so that, in point of fact, there is no real distinction between the two cases. This seems to me to be the plain common sense view of the question ; and I confess myself unable to discover why an assignment should be stigmatized as fraudulent, when its object is meritorious, simply because in the mode or form of ac*500complishing that object, it should be deemed expedient to appoint an agent or trustee. It is said that each partner has a right to be heard in the selection of the trustee, and of the creditors for whose benefit the trust is created. This right does exist; but it does not follow, that an assignment naming a trustee, and the creditors for whose benefit it may be executed, is void, because that right has not been respected. Each partner of a mercantile firm has a right to be consulted in respect to each and every transaction in relation to their joint business ; but it does not follow that every transaction in which the right has not been exercised, is to be characterized as fraudulent. Each partner has a right to be consulted in respect to the amount of purchases the firm may make 5 but yet he will be holden to the full amount of such purchases, although he may have never been consulted, and although the purchases may have been made contrary to his express wish. One of several members of a firm may take from the drawer all the funds of the firm, and discharge a debt due a single creditor, without consulting the wishes of his copartners ; yet, such a transaction would be sustained, although the effect might be to prefer one set of creditors to another. I might multiply, indefinitely, instances in which the right to be heard and consulted by the several members of a firm may exist, and yet the most momentous concerns of that firm may be managed and controlled by one of its members, without consultation or advice with the others. The only practical rule, I think, that can be laid down is, that, where the object to be attained, or the thing to be done, is unexceptionable and legal, each partner must exercise a sound discretion as to the mode in which that object is to be effected, or the thing is to be done. If this discretion has been exercised honestly and without actual fraud, I know of no reason why the transaction should be pronounced fraudulent. *501But if, in the selection of the trustee or agent, or in giving a preference to one class of creditors over another, there are circumstances which induce the belief that fraud in fact was meditated, then a court of equity might be successfully appealed to for relief. But in the absence of fraud, either in respect to the object to be attained, or the means of attaining it, I know of no reason why assignments of this nature should be declared void.
The view I have taken of this case, is strongly sustained by the following cases: Anthony v. Butler, 13 Pet. R. 433; Harrison v. Sterry, 5 Cranch’s R. 289; Mills v. Barber, 4 Day’s R. 425; Lamb v. Durant, 12 Mass. R. 57; Anderson v. Tompkins, 1 Brock. R. 456. This last case was decided by Chief Justice Marshall, and the whole of his reasoning was directed to the vindication of the power of one copartner to convey the partnership effects, to the creditors of the firm, in payment of their debts, either directly, or through the intervention of trustees ; and he decides that, if the transaction be bona fide, the assignment will not be set aside, although the consent of the other partners was not obtained. “ The mode of sale,” (says the Chief Justice,) “must, I think, depend on circumstances. Should goods be delivered to trustees, for sale, without necessity, the transaction would be examined with scrutinizing eyes, and might, under some circumstances, be impeached. But if the necessity be apparent, if the act is justified by its motives, if the mode of sale be such as the circumstances require, I cannot say that the partner has exceeded his power.”
Upon a careful examination of the bill and answer in this case, I am not prepared to say that the mode of disposing of the effects was not justified by the circumstances of the parties; and if the answer be true, “ the act was justified by its motives.”
I have not the time, and if I had, I have no disposition *502to review the several cases cited by me and referred to by counsel, to sustain the view I have taken upon the question under consideration. They all differ in respect to the facts; but the reasoning of the judges who pronounced opinions, go to confirm the opinion I have formed, that the assignment executed by Justus Ingersoll, to his brother, Nehemiah Ingersoll, must be sustained ; and that, to impeach such an instrument, it must appear that the transaction was tainted with fraud.
Goodwin, J. did not participate in the decision, having taken part in the argument as counsel, before he took his seat upon the bench.

Decree affirmed.