Court Opinion

ID: 8188196
Source: CourtListenerOpinion
Date Created: 2022-09-09 23:10:59.494071+00
Date Added: 2024-06-11T16:40:30.191457
License: Public Domain

SiebecKER, J.
It is contended by plaintiff tbat tbe complaint states a good canse of action because it is alleged tbat under tbe contract be was to succeed defendant in tbe firm of T. E. Eraney & Oo., whose business was to be conducted as before, and because defendant undertook to pay all tbe liabilities of tbe firm existing at tbe time of such sale and transfer of bis interest to plaintiff, and “by sucb payment to bold tbe plaintiff, vendee, whole, safe, and free from tbe same or any part thereof.” This claim assumes tbat tbe creditors of tbe old firm bad a lien on tbe firm property which they could enforce against tbe property after tbe plaintiff bad purchased and gone into possession of defendant’s interest in tbe firm assets.
It i-s fundamental in partnership transactions that creditors have no other claim or lien than creditors generally have on a debtor’s property. A partnership has tbe same right of disposition of tbe partnership assets tbat individuals enjoy in tbe law. 2 Bates, Partn. § 820. There is an equity between partners giving tbeifi tbe right to compel application of firm assets to tbe payment of its debts. This right may be preserved by an outgoing partner for bis protection in extinguishment of partnership liabilities, and when so preserved it will inure to tbe benefit of creditors, who may claim through sucb partner’s equity. Thayer v. Humphrey, 91 Wis. 276, 64 N. W. 1007. Tbe allegations of tbe complaint, however, do not present sucb a case. It is alleged tbat it was expressly agreed between plaintiff and defendant tbat tbe defendant, upon retiring from tbe partnership between himself and T. E. Eraney, was to pay all outstanding bills and accounts. -This sale operated as a dissolution of tbe partnership, and tbe outgoing partner expressly relinquished all bis equities to have tbe firm assets applied in payment of tbe firm’s debts. Since partnership creditors have no claim or lien on tbe firm’s assets, and it appearing tbat tbe defendant, as outgoing partner, wholly *593disposed of bis interest in the firm assets, and expressly relinquished his right to have them applied in payment of the existing liabilities, no right remained in him to which creditors could be subrogated, and hence there was no liability on the part of plaintiff to pay the partnership debts. Case v. Beauregard, 99 U. S. 119; Thayer v. Humphrey, supra.
The allegations of the complaint are that defendant made a valid disposition of his interest in the firm to plaintiff, agreeing to pay the liabilities of the firm. Nothing is alleged to show that plaintiff became obligated to pay the partnership liabilities through defendant’s neglect and refusal to pay them. Plaintiff was in no way liable to pay the amounts owing by the old firm, either under his contract of purchase or by implication of law as incoming partner to continue the business in the name of the old firm and the talcing over of its assets. The legal result of this transaction was that plaintiff and T. E. Eraney became a new partnership under the old firm name, which held and owned the assets free from all claim or lien as to the creditors of the old firm and defendant as. retiring partner. Case v. Beauregard, supra, Thayer v. Humphrey, supra; Harris v. Lindsay, 4 Wash. C. C. 98; Nickerson v. Russell, 172 Mass. 584,, 53 N. E. 141; 22 Am. & Eng. Ency. of Law (2d ed.) 206; Allen v. Logan, 96 Mo. 591, 10 S. W. 149; McCall v. Moss, 112 Ill. 493. The demurrer to the complaint should have-; been sustained.
By the Gourt. — The order overruling the demurrer is re-: versed, and the cause remanded with directions to enter an order sustaining the demurrer, and for further proceedings according to law.