Court Opinion

ID: 5549570
Source: CourtListenerOpinion
Date Created: 2022-01-10 21:31:10.989165+00
Date Added: 2024-06-11T08:35:01.807529
License: Public Domain

The Chancellor.
The testimony in this cause shows that the whole value of the property assigned to Meeker and Johnson, and which was not bound by the appellant’s execution, is entirely insufficient to pay the creditors who are preferred in the assignment, of whom the appellant is not one. He is not interested, therefore, in any part of the decree,, except that part of it which affects his right to the fund arising from the sale of the property which had been levied upon, by virtue of his execution. And if the other part of the decree is erroneous, the assignees are the proper parties to protect the rights of the preferred creditors by an appeal.
The evidence fully establishes the amount of the indebtedness to the appellant, by S. 0. Dmkee, and the bona lides of the judgment. I also think, under the circumstances of this case, that the appellant’s equity to be paid out of the proceeds of the property levied on by the sheriff, is at least equal to that of the creditors of the copartnership to which a part of that property once belonged. I have not been able to find any allegation in the bill that the copartnership was insolvent, at the time of the dissolution of the firm and the sale of the partnership effects to S. 0. Durkee. And the fact that the complainant, R. C. Ketchum, received $175 for his share of the supposed profits of the firm at the time of its dissolution, is evidence against him that he did not, at that time, consider it insolvent. Upon the dissolution of a copartnership by the death or bankruptcy of one or both of the copartners, the creditors of the, firm obtain a quasi lien upon its property and effects; which the court of chancery may work *484out for them in administering the equities between the copartners, or their representatives. The late Mr. Justice Story has fully and ably examined all the English cases on this subject; and he arrived at the conclusion that in case of a bona fide sale and transfer of all the partnership property and effects from one partner to the other, upon the voluntary dissolution of a solvent firm, and without reserving a lien thereon for any purpose, the creditors of the copartnership have no equitable lien on such property and effects as against the claim of creditors of the partner to whom such sale has been made. (Story on Part. 508, § 358 to 361.) Here there was an absolute sale of all the property and effects of the firm, by Ketchum to his copartner, when the firm was supposed to be solvent and to have realized a profit upon its business. And at the time of the sale Ketchum relied upon a simple agreement of the purchaser to indemnify him against the payment of the copartnership debts. I think therefore that the appellant, who had obtained a legal lien upon this part of the futid, by the levy of his execution thereon, was entitled to retain that legal lien as against the vendor and the creditors of the late firm.
In the case of Deveau v. Fowler, (2 Paige's Rep. 400,) which was based upon the decision of Chancellor Jones referred to therein, there was no conflicting claim on the part of any other creditors who had obtained a legal lien upon the fund which had formerly been owned by the copartnership. It was therefore entirely different from this case, so far as the interest of this appellant is concerned. Besides, I am not quite certain that this court gave the proper construction to the agreement of the parties in Deveau v. Fowler ; in supposing that the intention was that the copartnership debts "should be first paid out of the proceeds of the property, before the purchaser should be permitted to apply any part of that property to other purposes.(a)
The assistant vice chancellor erred, in depriving the appellant of the legal specific lien which he had obtained upon the prop*485erty by virtue of his levy under his execution. And as that disposes of the'case, so far as the rights of the appellant are concerned, it is not necessary to examine the formal objections to the frame of the bill; or the question as to the right of the appellant to subrogation, to the extent of the advances which he made to pay off partnership debts.
So much of the decree as affects the appellant’s right to any part of the property levied on by the execution, or as directs the complainant’s costs to be paid out of the proceeds of the sale of any part of that property, or as directs that the appellant shall bear his own costs, must be reversed. And there must be a decree dismissing the complainants’ bill with costs as to the defendant E. C. Durlcee. The decree must also direct the receiver to pay E. C. Durlcee the whole of the fund which has arisen from the sale of the property levied on by virtue of the execution. The residue ot the appeal, which relates to other parts of the assistant vice chancellor’s decree, in which this appellant has no interest, must be dismissed. And neither party is to have costs as against the other upon the appeal.

fa) The decision in tile case of Topliffv. Vail, (Harr. Ch. Rep. 340,) is in accordance with the decision in the case referred to.