Court Opinion

ID: 5547870
Source: CourtListenerOpinion
Date Created: 2022-01-10 21:22:30.14734+00
Date Added: 2024-06-11T08:34:58.139042
License: Public Domain

The Chancellor.
The case of Smith v. Haviland and Field, before Chancellor Jones, in June, 1827, appears to be decisive as to the question raised by his bill. From the reporter’s note of the decision in that case, with a copy of which I have been furnished, it appears that the administrator of a deceased partner assigned all his interest in the partnership effects to Haviland, the survivor, under an agreement that the latter should pay and discharge all the debts of the ' firm. The surviving partner became insolvent. The bill alleged that he had also assigned over his property, including the effects of the late firm, to Field, and that the complainant was apprehensive that the effects would be wasted, leaving the debts unpaid. It therefore prayed for an injunction; and that the property, or so much thereof as was necessary, should be applied to satisfy the partnership debts. A.demurrer to the bill was overruled. The defendant Haviland then put in an answer denying the assignment, and also denying any agreement that the effects of the firm should be applied to the payment of the debts of the partnership which had been assumed by him; and he insisted that the complainant had no interest in those effects, either under the agreement or otherwise ; but that they were his sole property. The chancellor held that the effect of the agreement was to transfer all the equitable rights of the deceased partner to the survivor, who had the legal right before; he becoming responsible for the payment of all the debts of the firm, whether the property was sufficient to pay them or not. That the agreement only transferred the interest of the administrator in the surplus, if any there should be; but did not destroy the lien or equity which existed in favor of each, on the dissolution, to have the partnership property applied to the payment of the debts.
*402I can see no reasonable objection to this decision iro point of equity, where the rights of bona fide holders of the property are not affected. It must therefore be considered the settled law of this court. Several questions of this kind have recently arisen in England. But as the decisions appear to have turned on the construction of a particular provision in their bankrupt law, giving the property to the creditors of such person as should be the visible owner. &c. I do not consider it necessary to notice them particularly. (In Re Gilpin, 3 Dow. & Ry. 636. Ex parte Burton, 1 Glynn & Jam. 207. Ex parte Usborne, id. 458. Lingen v. Simpson, 1 Sim. & Stu. 600.) It is a well settled principle of equity that the creditors of a partnership concern have an equitable right to payment out of the partnership effects, in preference to the creditors of the individual partners. The fair presumption, in the absence of any express agreement to the contrary, therefore, is, that it was not the intention of the complainant that the effects assigned to the defendant should be appropriated to the private use of the latter, leaving the debts of the firm unpaid.
The motion to dissolve the injunction must be denied, with costs.