Court Opinion

ID: 7182686
Source: CourtListenerOpinion
Date Created: 2022-07-24 16:49:43.239001+00
Date Added: 2024-06-11T16:15:58.091160
License: Public Domain

The judgment of the court was pronounced by
Rost, J.
This is an appeal by Horace Conduit, Jesse Hart and Joseph D. Foster from a judgment distributing the proceeds of the steamer Luna, among the creditors of the commercial firms which had in succession used the boat for the transportation of persons and merchandise for hire; and we must here premise, that in styling the diiferent sets of persons who thus used that vessel commercial partners, we mean only that they should be viewed in that light for the purposes of this suit.
The district judge applied the fund as follows: X. To the payment of law charges, and of privileged claims for supplies furnished the boat, within the sixty days which preceded the seizure; 2. To the payment of ordinary claims for supplies, which had lost their privilege, but were held by persons who had not at any time been owners of the boat. The amount of these ordinary claims far exceeds the sum left after payment of the privileges.
The appellants do not object to the judgment, so far as it decrees the payment by preference of law charges and privileged claims. But they claim the preference over the creditors having no privilege.
C. H. Fairchild, Warring, Hart and Conduit built the steamboat Luna, and were joint owners of her. On the X5th of May, X848, Hart sold his fourth interest to C. H. Fairchild, for five thousand dollars, of which fifteen hundred dollars were paid in cash, and the remainder in three notes, each of $XX66 66§.
By a private written agreement between Hart and C. H. Fairchild, it was provided that judgment should be confessed in favor of Hart, in case of non-payment at maturity of the notes given to him for the price, and A. H. Donaldson was appointed attorney to confess judgment in such event.
On the 2d of December, X848, Conduit sold his fourth interest to Fairchild, taking in payment therefor four notes for the sum of $f X25 each, payable from 2d March to 2d December, X849. The only payment made on these notes was a sum of $600 paid on the first note.
On the 6th of January, X849, C. H. Fairchild executed an act of sale of seven-eighths of the boat — this being his entire interest — to his brother, E. II. Fairchild, for the alleged consideration of $XO,000 cash. This sale is alleged by Conduit to be simulated.
On the 24th day of February, X849, E. H. Fairchild executed an act of sale to Joseph D. Foster, of one-fourth of the boat, for the sum of $3500, which was paid in cash.
On the 3d of March, 1849, E. II. Fairchild, having become the apparent owner of the entire boat, bound himself jointly and severally with C. II Fair-child, for a faithful compliance with all the obligations of the latter as purchaser of Jesse Hart’s interest.
On the 4th of J une, X849, Hart brought this suit for the recovery of $2764 57, being the balance of the price due him, against C. II and E. H. Fairchild, who both appeared and confessed judgment. Under this judgment the steamboat was seized and sold on the 20th of September, X849, for $X0,025. This fund is now in the hands of the sherilf, and, in conformity with a usage established in such cases by the late Commercial Court and not objected to, the creditors of the part owners of the boat, and those of the successive firms who have used it in *195the transportation of persons and merchandise for. hire, ask that it be distributed among them according to their rank and privileges.
The district judge was of opinion that the business of carrying freight and passengers in a vessel being a commercial business, the vessel, with her appurtenances, should be considered as the capital stock, so far, at least, as creditors are concerned; that all persons interested in the ownership of the vessel are, as to all other persons with whom contracts are made in the prosecution of the business, commercial partners; and that, accordingly, although each of the parties interested may withdraw from the partnership by selling his interest to a third person, when the transfer shall have been made by sale upon a credit, the vendor will not be the creditor of the partnership, but only of his vendee; and the privilege of vendor in such a case will not apply to the whole vessel, but only to the share owned by the transferree. And he concluded from this that all those who had furnished supplies to the boat, whether within the sixty days preceding the seizure or previously, were to be considered as creditors of the commercial partnership implied by law, from the trade in which the boat was engaged; and that they must be paid before those claimants who are holders of notes given by part owners in payment of shares- purchased in the boat.
We cannot- assent to this proposition. Every change in the partners while the boat is engaged in carrying persons and merchandise for hire, dissolves the existing partnership and creates a new one. The party selling continues, undoubtedly, bound for all the debts of the old partnership, whether or not they have lost their privilege, and ought not to be permitted to share the proceeds of the boat with his creditors. But he cannot be held responsible for debts contracted after he ceased to be a partner, and his claim for the price of the share sold cannot be defeated by them.
The case of Claiborne et al. v. Their Creditors, relied on by the appellees, presents a state of facts entirely different from those of this case. There, three persons were joint owners of a steamboat, which they used for the transportation of persons and merchandise for hire. The partnership thus formed between them was much in debt when the boat was destroyed by lire. Two of the partners failed, and surrendered to their creditors the policies of insurance of the boat. Lejléchier, the partner who had not failed, subsequently claimed his share of the insurance. The court considered this a demand for a partition and settlement of the partnership concerns, and held that no part of the fund could go into the hands of Lejléchier until the partnership debts were paid. The question whether the fund in hand was a partnership fund or the joint property of the partners, was not raised in argument. It was not before the court; and the casual observation of the court, that it was a partnership fund, did not decide the question. It was enough for the purposes of that case that the fund was liable for the partnership debts. 13 L. R. 279.
We adhere to the rule laid down in the case of Byrne v. Harper, 2 R. R. 229, that when owners of a steamboat use it to carry persons and merchandise, the use of the boat only is brought into the partnership, unless there is an express stipulation to the contrary, and that as it may be enjoyed without being destroyed, the ownership remains in the partners individually, under art. 2834 of the Civil Code, subject to the privileges which the law allows in such cases to the creditors of the partnership.
Under this view of the law, it becomes necessary to ascertain who the real partners were. A careful perusal of the evidence has satisfied us that the sale *196from C. H. Fairchild to E. IT. Fairchild was a simulation: a mere shadow cast upon the title of the vendor to delay the pursuit of his creditors, and so far as it was in his power, to defeat their claims. There was no change of possession under the sale ; the vendor continued to manage the boat and to receive the profits. At the time of the sale, E. H. Fairchild was a store, clerk, enthely destitute of means and unable to pay any portion of the price which his brother has acknowledged he received from him. There is no reality in this transaction; and in distributing the fund we will consider the ownership of C. H. Fairchild as never having been interrupted, except by the sale of one-fourth made to Foster.
Hart claims to be paid by preference, on the ground that the boat was seized and sold under his execution, and that the seizure gave him a privilege.
The other creditors contend that his judgment was obtained on the confession of C. H. and E. H. Fairchild; that these defendants were insolvent at the time to the knowledge of Hart, and could waive none of their legal rights to the prejudice of their creditors; that by doing so, they gave an unjust preference to this creditor over the others. They also urge that a judgment obtained on the confession of the defendant, is only evidence-of a contract, and that the seizure made under such a judgment does not create a privilege.
The confession of judgment was expressly stipulated in the contract, and it is surely no objection to it, that instead of being made by the agent whom the parties had designated, it was made by the debtor himself. There was nothing hurried or suspicious in the proceeding. Hart suffered four months to elapse after his debt was due before he brought suit and called upon Fairchild to execute his promise. It may be, that he knew that the sale to E. I-I. Fairchild was simulated. But as he could not prevent its being passed, it cannot affect his rights. If C. II. Fairchild was insolvent, the creditors who now complain Were guilty of great negligence in suffering their privilege to expire by lapse of time, instead of bringing suit to enforce it. Their loss arises exclusively from this omission. But besides, if it be true that, by confessing judgment, the defendants enabled Hart to obtain an unjust preference over the other creditors, the latter should have brought a revocatory action for the purpose of setting aside the judgment. This ground involves a question of fraud which should have been tried before a jury, and which Hart ought not to be compelled to litigate in this summary proceeding.
■ The seizure having been made under a valid and subsisting judgment, necessarily created a privilege in favor of the seizing creditor, whatever may have been the nature of the evidence upon which the judgment was obtained.
Conduit also claims a privilege, on the ground that when the boat was sold sixty days had not elapsed since the maturity of any of the notes which he received in payment from C. II. Fairchild. We think this ground untenable. The privilege was created by the contract and expired sixty days after its date. Conduit, in selling on time, virtually abandoned the privilege and dealt exclusively upon the credit of Fairchild, as the other creditors did who suffered the sixty days to expire without enforcing their claims. They are all in the same situation.
We are therefore of opinion that the fund should be distributed as follows: 1. The amount of privileged debts must first be deducted from the proceeds of the sale. 2. The fourth of the balance must be set apart as the share of Foster. 3. Out of the other three-fourths, the amount due Jesse Hart must *197first be deducted, aud the balance divided pro rala between Conduit and the other creditors, it being well understood that after the dividend to which Conduit and the ordinary creditors are entitled is ascertained,' the creditors of the' firm of Fairchild, Warren, Hart and Conduit, which continued until the 15th May, 1848, shall be entitled to receive out of the share of Hart, the amounts respectively due them by that firm. That the creditors of the firm of Fair-child, Warren and Conduit, which continued from the 15th May, 1848, to the 2d of December, 1848, shall, in like manner, after the dividend is ascertained, receive out of the dividend coming to Horace Conduit up to its full amount and pro rata in case of deficiency, the amounts respectively due them over and above their dividends, and that, in this distribution of Conduit's dividend, Hart shall be classed as his creditor for one-half of the debts of the firm of Fairchild, Warren, Hart and Conduit, which he is adjudged to pay. That the creditors of the firm of Fairchild and Foster, which lasted from the 24th of February, 1849, until the boat was sold, shall, in like manner, receive out of the share of Foster, the amount of their respective claims.
We consider that portion of the judgment which allows the privileged claims to be correct, except so far as allows a privilege to William B. Scott for $338. This claim must be classed as an ordinary claim, the privilege having been lost by lapse of time.
John Muir asks that the judgment in his favor be increased, so as to allow him a privilege for his entire claim. We. are satisfied that there is no error to his prejudice in the judgment, so far as it settles his claim; and as it is not contested by the appellants, we leave it undisturbed.
The tableau annexed to and made a part of this opinion, shows the distribution of the fund in conformity with the view taken by the court of the rights of the parties.
It is therefore ordered, that the judgment in this case be reversed. It is further ordered, that the fund in the hands of the sheriff be distributed in conformity with the tableau annexed to and made a part of the opinion of the court.
Distribution of the funds in the case of W. A. Violett Sf Co, v. C. H. Fairchild et al., owners of steamboat Luna, &c.
Amount price of boat,........................................$10,025 00
Costs of Supreme Court,.......$ 28 80
“ “ Clerk District Court____414 20
“ “ Sheriff,................ 508 00 951 00
9074 00
Privileged Claims.
$3481 96 Amounts as per judgment court below,...........
225 47 Add as per amended judgment for John Muir and Insurance Company,.........................
$3707 43
Deduct claim of William B. Scott, now ranked as ordinary creditor,............................. 338. 00 3369 43
5704 57
Of which one-quarter for Foster,..................$1426 14
“ “ three-quarters for Fairchild,............. 4278 43 $ 5704 57
*198Distribution of Fairchild’s Share.
Amount his share,......................................... 4278 43
For Jesse Hart,......................................... 2764 51
Balance for division,.................................. $ 1513 92
Amount or ordinary claims, as per judgment of court
below,.......................................$8480 23
Add claim of William B. Scoll,.................. 338 00
“ claim of Conduit,................$4500
Less paid on account,................. 600 3900 00
Total ordinary claims,....................$ 3 278 23
So that Fairchild's share pays a dividend of $11 90 per $100, to the ordinary creditors.
Conduit's dividend on $3900 amounts to $464 10, none of the claims of the creditors bear date prior to the 15th May, 1848, so that no contribution is due by Jesse Hart towards the creditors under the decree.
Distribution of the Dividend of Conduit. Amount of dividend to Conduit,.............................
$464 10
List of the creditors of the firm of Fairchild, Warren and Conduit, which existed from the 15th May, 1848, to 2d December, 1848.
William A. Violeit &f Co........................$ 345 06
Stanton Sf Co........-......-................... 383 95
William B. Scott,.............................. 338 00
Leeds Sf Co.................................... 719 00
F. F. Folger Sf Co.............................1191 08
Hesmarais,..............................-•..... 2041 00
$ 5018 09
Dividend to the above creditors on Conduit's share is $9 25 per $100. Creditors to be paid by Foster, as creditors of partnership of Fairchild and Foster, from 24th February, 1849, till sale of boat.
W A. Violeit Sf Co..............................$874 79
Less amount received by privilege,................. 398 69
476 10
Less $11 90 per cent on this balance, received from Fairchild’s share,............................. 56 66
419 44
D. Felt 8f Co...............................— 53 40
Less dividend of $11 90 per cent,................. 6 35
47 05
J. Carr, Jr.................................... 413 58
Less amount received by privilege................. 360 87
52 71
Less $11 90 per cent,.......................... 6 27 -- 46 44
Long Sf Maglone,............,.................. 65 63
Less received by privilege,....................... 4 50
61 13
Carried forward,............................ 61 13 512 93
*199Brought forward,........................... 61 13 512 93
Less $11 90 per cent,.......................... 7 26 53 87
Numa Lacoste,................................. 117 90
Less received by privilege,....................... 76 20
41 70
Less$ll 90 percent,........................... 4 96 36 74
Chittenden and Dameron,........................ 49 93
Less received by privilege,...................... 40
49 53
Less $11 90 per cent,.......................... 5 89 43 64
John Cottle,.................................... 157 02
Less received by privilege,....................... 68 34
88 68
Less $11 90 per cent,........................... 10 55 78 13
F. F. Folger Co..............................' 113 99
Less $11 90 per cent,.......................... 13 57 100 42
$825 73
Balance for Foster, 600 41
$ 1426 14
Recapitulation.
Total proceeds of boat,..................... ............$10,025 00
Costs,.................................... ! 951 00
Privileged claims,.......................... 3369 43
Jesse Hart,............................... 2764 51
Creditors of Fairchild,............$1513 92
Less dividend of Conduit,.......... [ XXX XX XXXX ] 82
Creditors of Conduit, as per list, 464 10
Creditors of Foster, as per list,.. 825 73
Joseph D. Foster,............. 600 41 $10,025 00