Court Opinion

ID: 6963740
Source: CourtListenerOpinion
Date Created: 2022-07-24 01:50:07.535435+00
Date Added: 2024-06-11T16:08:16.973402
License: Public Domain

Mr. Justice Scholfield delivered the opinion of the Court: The members of a firm which had for many years been engaged in the manufacture of agricultural implements, agreed with each other, and with some other parties, to form a corporation to carry on the same business. The firm owned and used in its business both real and personal property, and it was agreed by those agreeing to form the corporation, that this property should be transferred to the corporation, and that in payment for it the corporation should deliver to each partner a given amount of its shares of stock. The firm was at the time indebted, but it was not known by the partners that it was insolvent, and no fraudulent purpose is shown to have affected the agreement. The corporation was formed, and legally licensed to do business, pursuant to the agreement, but before the property of the firm was all transferred to it, one of the partners died. The transfer was completed after his death, and the stock was then issued by the company, and $17,500 of it was delivered to a party to whom the deceased partner had, in his lifetime, contracted it, and the remaining $2500 of it was delivered to his executors. A corporation which is a creditor of the firm, claims to be entitled to have its debt satisfied out of moneys in the hands of the executors of the deceased partner, which have been realized by a sale of the $2500 of stock, and of the property in payment for which the $17,500 of stock was delivered, before the individual creditors of the deceased partner can resort to that money. The lower courts each denied this claim, and, we think, properly. It is not in this connection important, as counsel for appellant seems to think, whether the technical legal title passed from the deceased partner to the corporation in his lifetime. The law does not recognize the creditor of a firm as having a superior equity to that of the individual creditor for payment from the partnership assets. It recognizes, however,.that the members of the partnership have a superior lien on the partnership property for the payment of the firm debts, and allows the creditors to avail themselves of this lien to the exclusion of individual creditors, where it has not been surrendered by the partners. Hapgood v. Cornwell, 48 Ill. 64. See, also, Allen v. Center Valley Co. 21 Conn. 130; Sigler v. Knox County Bank, 8 Ohio St. 516. The other partners, here, having joined with the deceased partner in the contract, are, of course, concluded by it if he was. While that contract did not vest a present title, it vested a right in the corporation to have it performed; and by reason of the peculiar property to be transferred,—partly real and partly personal,—and the personal having its peculiar value by reason of its adaptation to use in connection with the use of that realty, an equity vested in the corporation to have that particular property, and a court of chancery would therefore have specifically decreed a performance of the contract at the instance of the corporation, it not being in default. Marsh v. Milligan, 3 Jur. (N. S.) 979. The creditors of the firm can not interpose the Statute of Frauds, the members of the firm themselves not having chosen to interpose it. Kelly v. Kendall et al. 118 Ill. 650. It would, moreover, seem that the admission here made' by the appellant, that the money it is claiming to appropriate is money derived from subsequent sales of the stock of the corporation, is, of itself, sufficient to deny its right. The stock was not partnership property, and it is therefore impossible that its proceeds can be. If the partnership property did not vest in the corporation pursuant to the contract, it is just as it was before the attempted transfer, and the firm creditors may resort to it; and if the corporation issued stock to the individual, for which it had not been paid, and to which the individual was not entitled, the loss is manifestly upon the corporation, and not upon the creditors of the firm of which the individual was a member. But if the partnership property did vest in the corporation, the interest of the partners in it was thereby terminated, and with their interest terminated that of the firm creditors. In equity it was a conversion of partnership into individual property, as of the date of the contract. In our opinion, in no view was the,stock firm property, and as it was so are its proceeds. The judgment of the Appellate Court is affirmed. Judgment affirmed.