Court Opinion

ID: 5459020
Source: CourtListenerOpinion
Date Created: 2022-01-09 19:28:06.888203+00
Date Added: 2024-06-11T08:32:47.639259
License: Public Domain

By the Court, Harris, J.
Partnership property is regarded, in equity, as a sort of trust fund appropriated for the purpose of paying partnership debts, “ There is,” says Story, “ properly speaking, as between the partners, a lien, or at least an equity, which may be worked out through the partners, in favor of the creditors, although it may not directly attach in the creditors by virtue of their original claims.” (Story on Partnership, § 97.) “ The equity,” says Lord Eldon, “ is not that of the joint creditors, but that of the partners with regard to each other, that operates to the payment of the partnership debts.” (Ex parte Ruffin, 6 Ves. 119, cited by Story as above. See also Story on Partnership, § 326.) This lien or equity, being that of the partners, and not of the partnership creditors, it follows, that it may be discharged by the partner. Upon a voluntary dissolution, one partner may agree that the partnership property shall belong to his copartner. Where such an agreement is made in good faith, the property will be held by the partner to whom it has been transferred, free from any lien or equity in favor of partnership creditors. If the partner taking the transfer has agreed to pay the partnership debts, the partner making the transfer, though he still remain liable for those debts, can only look to the personal security of his copartner for indemnity. (Story on Partnership, §§ 358, 359. Ketchum *599v. Durkee, 1 Barb. Ch. 480. Kirby v. Schoonmaker, 3 Barb. Ch. 46.) In this case, the transfer by the partner Sage, to Dun-ham, of his interest in the partnership property, and the subsequent transfer of the whole by Dunham to Chollar, vested the whole property in the latter. By these transfers, both Sage and Dunham relinquished the lien which they might have had on the property for the discharge of their liabilities, and agreed to look only to the personal responsibility of Chollar for the payment of the debts. The property so vested in Chollar could only be reached by creditors, partnership as well as individual, through the instrumentality of a judgment and execution. I assume that the transfers which had the effect to vest the partnership property in Chollar were made in good faith. There is nothing in the case to impeach their integrity.
[Rensselaer Special Term,
June 11, 1855.
If I have not erred in the application of the appropriate principles of equity to the case in hand, it follows that the plaintiff has entirely misconceived the relief to which he is entitled. That the judgments, upon which a large portion of the property which ought to have been applied to the satisfaction of partnership debts has been swept away, is fraudulent, there is much reason, from the facts as they now appear, to believe. That the sheriff’s sale which has resulted in the transfer of so much of the property which ought to have been devoted to the payment of debts, to the defendants Richmond and Piercy, for an insignificant price, was collusive and fraudulent, there is very little room to doubt. But these frauds, if frauds they are, can only be reached in an action by a judgment creditor, or, at any rate, upon some proceeding instituted upon a theory entirely different from that which the plaintiff presents in this complaint. The motion to dissolve the injunction must be granted, but, under the circumstances, I am not inclined to charge the plaintiff with the costs of the motion.
Harris, Justice.]