Court Opinion

ID: 6574267
Source: CourtListenerOpinion
Date Created: 2022-07-20 19:32:47.306256+00
Date Added: 2024-06-11T15:57:01.568952
License: Public Domain

Hosmer, Ch. J.
To the determination below it is made an objection, that the relief requested should have been granted, inasmuch as the general assets of the deceased are liable to the plaintiff. On the other hand, it has been insisted, that the plaintiff has no claim on the general assets, but that his only remedy is against the executor of the deceased.
In respect of the first point for consideration, that is, whether the general assets of the testator are liable to the plaintiff the case has been argued for him on the principle, that although the devisees, strictly speaking, are not partners, yet that an interest in the profits of the trade subjects the estate in their hands to a lien in favour of the partnership creditors, and of the plaintiff as if they were partners.
To this argument the answer is direct and obvious.
If the devisees are partners, they are suable in that capacity, and are to be treated, in all respects, as if they sustained that character. This, at once, terminates the specific relief requested, on the estate in their hands.
But that they are not partners, is indisputably clear. The principle that he who enjoys a part of the profits of a partnership, is liable to the creditors of the firm, although unquestionable as a general rule, yet like other general rules, is limited by the reason on which it is founded. By operation of law, in respect of creditors, a person who is not a partner in fact, but who is benefitted by the profits of a partnership, is clothed with that character, when he takes from them a part of that *312fund, on which they placed reliance for the payment of their debts. Were it otherwise, the partnership creditors would be injured, and the person alluded to would receive usurious interest f°r capital, without its being attended with any risk. Waugh v. Carver, 2 H. Bla. 235. 246. Grace v. Smith, 2 Bla. Rep. 998. 1000. Cooper &. al .v. Eyre & al., 1 H. Bla. 37. 43. Mc Iver & al. v. Humble & al., 16 East 169. 174. Cheap v. Cramond, 4 B. & A. 670. Gow on Part. 6. 13. 15. Chitt. on Cont. 68. But all this is inapplicable to the present case. In this case, the capital is at hazard; and therefore, the reasons derived from the possibility of usury, do not apply ; and as to the diminution of the fund to the disadvantage of the creditors, this is impossible. The devisees under the will are entitled to neither capital nor profits, until the dissolution of the partnership. The company concerns must first be attended to ; and after the extinguishment of all the debts and expenses, the de-visees are to come in for their share of the net surplus, and not before. Hence, the inapplicability of the principle advanced, to this case, under its peculiar circumstances, is perfectly clear; the devisees are in no respect partners, or quasi partners; nor from this source is there any ground to infer a lien upon the general assets of the deceased. I think it equally obvious, that if there were a lien in favour of partnership creditors, it would not extend to the claim of the plaintiff. He trusted the partners personally and the fund; but with open eyes and full knowledge of all the facts, he did not credit the devisees, nor the estate devised ; nor has he any claim upon the latter, unless on another principle, which will now be considered.
2. Are the general assets of the deceased liable to the plaintiff’s demand, by virtue of the testator’s last will 1 By the devise, they are not specifically pledged. The question then arises, whether by operation of law, on a true construction of that instrument, they are made liable to the claim advanced. I take it to be established law, that they are not.
The case of Hankey v. Hammond, 1 Cooke’s Bank. Law, 67. would seem to lend some aid to the principle advanced by the plaintiff; but this case, the first comprising the doctrines contended for by the plaintiff, was overruled by Lord Eldon, in that of Ex parte Garland, 10 Ves. jun. 110. This determination, in the most lucid and able manner, establishes the doctrine, that under the bankruptcy of an executor or trustee *313directed by the last will of a testator, to carry on a trade, and a limited sum to be paid by the trustees of his estate for that purpose, the general assets beyond that fund are not liable. 1 Madd. Chan. 504. In this case it was decided, that the executor was to continue the partnership for four years, on the fund already invested, and beyond this, that there existed no liability on the general assets.
The principles on which the case Ex parte Garland is founded, are expressed by Lord Eldon, at considerable length, and with great force. I do not mean to recite them; but in a concise form, shall refer to those, which, in my opinion, are most material.
To hold the general assets to be liable, would be attended with great inconvenience. It would prevent their distribution for a long period, or disturb a distribution already made. The condition of the executor, it is true, may be attended with considerable hardship, as he becomes liable to the creditors, in his person, to the extent of all his property. Wightman v. Townsend, 1 Mau. & Selw. 412. But in this condition he voluntarily places himself, in the free exercise of his judgment, and on full knowledge of the facts, adventures to assume this sort of responsibility.
In respect of the creditors of the partnership, they are divisible into two classes ; those who were such before the testator’s death, and those who became such afterwards. With respect to the first class of creditors, they have the power and means of calling forth, after the testator’s death, the whole of his property, in discharge of their demands ; and this is all the security they can wish. And in regard to those comprising the second class, who become creditors subsequent to the testator’s death, in the first place, they may determine whether they will be creditors. In the next place, they have the whole fund embarked in trade to look to. Superadded to this, they have the personal responsibility of the individual with whom they deal, the only security in ordinary transactions of debtor and creditor.
It is, therefore, manifestly less inconvenient, to say, that those who deal with the executor, must take notice, that the testator’s responsibility is limited by the authority given to the executor, than to assert, as the executor is authorized to carry on the trade, that all the other objects of the will must, at any *314distance of time, stand still, or that ’eventually they may be subjected to the claims of the partnership creditors.
On these principles, it was concluded by Lord Eldon, that it would be unjust to consider the creditors of the company as having a lien on the testator’s general assets ; and as a precedent extremely inconvenient to the interests of mankind.
As the creditors of the partnership have no claim on the general assets of the deceased, with much less force of argument can a claim be maintained in favour of the plaintiff.
On the death of the testator, the partnership was by law dissolved. Gow on Part. 269. Griswold v. Waddington, 15 Johns. Rep. 57. 82. S. C. in error, 16 Johns. Rep. 438. 490. White v. Union Insurance Company, 1 Nott & McCord 559. With open eyes on this fact, and with full knowledge of his responsibility and of his legal claims on Joseph Pitkin only, the plaintiff thought proper to go on, and incur the further hazard of the partnership. He knew, (for he must be presumed to know the law) that Joseph Pitkin was substituted a partner for the deceased ; and that the fund employed in the partnership, was, in addition to his responsibility, his only resource. With respect to the indebtedness of the deceased, if he was indebted at the time of his death, the plaintiff, after payment, might have contribution from the deceased’s estate, by a claim made on his executor. But even in support of such a demand, no ground is laid in the bill. It is only averred, that the company, at the death of Stephen Pitkin, was indebted to various persons, — in what sum is not mentioned ; and that the plaintiff has been obliged to pay a part of the debts of the partnership, without stating to what amount. It is perfectly campatible with all the allegations made in the bill, that at the death of the testator, the partnership was indebted a dollar only ; that the funds in the plaintiff’s possession comprised many hundreds ; and that the only debts paid by him amounted to an inconsiderable sum, and have been paid out of the partnership funds.
3. It is scarcely necessary to observe, that the plaintiff’s remedy, (if one exists) is not by an application in chancery, to subject the testator’s general assets; but it is by a demand on the executor of Stephen Pitkin. He is obliged by law to the extent of all the deceased’s estate, to satisfy every debt against it. All the debts of a deceased person constitute demands on his executor. Were there a specific lien, either on a part or on all the testator’s property, it might be enforced, by an ap*315propriate suit; but here there is none. The claim, if any, is of a general nature, and to be instituted, as other claims are, against the executor of Stephen Pitkin.
The Court, then, has come to this result; that the general assets of the deceased, are not liable to the plaintiff’s claim, in any other sense, than that they are responsible eventually to all his creditors, through the medium of a demand made on his executor. Of consequence, in the judgment of the court below there is no error.
Peters, Daggett, and Bissell, Js. were of the same opinion, the former suggesting some doubts.
Williams, J. gave no opinion, having been of counsel in the cause.
Judgment affirmed.