Court Opinion

ID: 5550523
Source: CourtListenerOpinion
Date Created: 2022-01-10 21:34:03.407945+00
Date Added: 2024-06-11T08:35:04.574501
License: Public Domain

The Chancellor.
The existence of a copartnership between the plaintiffs, as charged in the bill, appears to be sufficiently established by the testimony. But there is not any just ground for interfering with the proceedings, under the attachment act, against the plaintiff, R., as an absconding debtor, upon the charge of irregularity and fraud. Thomas Kittle, the creditor, residing abroad, was a competent creditor to institute proceedings under the absconding debtor act. The 20th section of the act expressly declares, that “ any creditor residing out of the state,” shall be deemed a creditor within the act; and I cannot undertake to say that K. was not a bona fide creditor, when be made his affidavit to that effect before the Recorder of JYew-Yorlc. Nor does there appear to be any fraud in the appointment of the defendants as trustees; nor can the proceedings, safely, upon any of the grounds taken, be vacated and declared void. The whole difficulty of the case arises out of the fact, that the joint effects of the copartners have been taken under the attachment against the separate estate of R.
It has been adjudged by the Supreme Court, in the case of Chipman, (14 Johns. Rep. 217.) that a joint creditor 'can institute proceedings under the act, against the separate property and effects of the absconding partner, though the other partner was resident here, and in a condition to be arrested. It has also been decided by the same Court, in the case of Smith, (16 Johns. Rep. 102.) that the Sheriff can take only the separate property of the absconding debtor, and that he cannot seize the partnership effects, as the other partner has a light to retain and dispose of them for the payment of the partnership debts; and the trustees would of course have a right to an account as against the solvent partner, for the absconding debtor’s proportion of the surplus, after payment of the partnership debts. In that last case, partnership property was seized by the Sheriff, under the attachment, in the pos*191session of an agent of the partnership, who was selling it on joint account, and the Sheriff was ordered to restore the property to the undisturbed partner.- I am not disposed, at present, to question the soundness of either of these decisions; and yet I perceive the embarrassments attending their joint operation. The better opinion, probably, is, that partnership property was never intended to be attached and distributed under the absconding debtor act, unless all the partners were pursued, at the same time, jointly, as absent or absconding debtors. But the difficulty is, to preserve an equitable distribution of the funds under the two decisions which have been mentioned; for if the joint creditors are entitled to prosecute under the act, and take the separate property of the absconding partner, instead of resorting to the other partner, they would, probably, under our act, be entitled to come in and take their rateable dividends upon the separate property. The assets in that case cannot be marshalled upon equitable principles, and the joint creditors will participate rateably in the separate fund, contrary to the rule of equity, that the separate estate opght first to be applied to the discharge of the separate debts. This cannot well be avoided, so long as the joint creditors are allowed to come in under the first of these decisions, upon the separate fund, without obliging the trustees to resort to this Court to restrain the dividend, and to bring in the solvent partner, and have an account of the joint as well as of the separate estate taken, and the assets marshalled and distributed upon principles of equity. The embarrassments attending the distribution of the joint and separate assets, between the joint and separate creditors, according to their respective distinct equitable rights, and the great alternation and confusion of the decisions on that subject, in cases of bankruptcy, were noticed in the case of Murray v. Murray; (5 Johns. Ch. Rep. 60.) and I cannot undertake, at present, to prescribe any determinate rule on *192the subject under our absconding debtor act. The diffi» culty is equally pressing under that act, as it is in cases of bankruptcy, and, perhaps, much more so, since proceedings under that act do not fall directly within equity jurisdiction. The great and desirable object is, to preserve the higher and better right of the joint creditors to the joint fund, and of the separate creditors to the separate fund, from being invaded in the distribution of the assets. The assignees of a bankrupt partner, under a separate commission of bankruptcy, can retain and distribute the joint funds. For this I refer to the case of Murray v. Murray, already mentioned. But in the present case, the joint effects have been taken under the process of attachment, when they were in the possession of an agent of the firm, and consequently, in contemplation of law, in possession of the solvent partner, equally as in the possession of the absconding debtor. It is analogous to the case of Smith, except that in that case the solvent partner was within the state, and here he was not. In both cases, the possession was in fact in an agent, acting for and in behalf of the firm; and it will best accord with the rule of law which has been declared in this case, and tend more effectually to preserve the just rights of the two distinct classes of creditors, to direct the trustees to account to the plaintiff, M., being the solvent partner, for the partnership property seized and taken out of his constructive possession, under the attachment.
The following decree was entered :
“ It is declared, that a copartnership between the plaintiffs, in the mercantile transactions of the plaintiff, R., in the city of New-York, as mentioned in the pleadings and proofs, is fully and satisfactorily proved. And, it is further declared, that Thomas Kittle, though residing ont of the state, was a competent creditor within the purview of the absconding debtor act, to institute proceedings under it, and that there is not sufficient evidence of fraud either is *193instituting proceedings, or in the appointment of trustees under the act, to set aside and vacate these proceedings. And it is further declared, that the said Thomas Kittle, or any other creditor of the plaintiffs, as partners, might lawfully institute proceedings under the said act, against the separate property and effects of the plaintiff, R., as an absconding debtor, for a debt due from the plaintiffs, as partners. And it is further declared, that the separate property only of the plaintiff, R., and not the partnership property and effects of the plaintiffs as partners, was liable to be attached and seized in this case, under the attachment in the pleadings mentioned; and this is the authoritative construction in the case of proceedings under the said act, against one partner only, and not jointly against all of them. And it is further declared, that the defendants are accountable to the plaintiff M., for all the partnership property and effects of the plaintiffs, which have come to their possession, or under their control, as trustees under the attachment aforesaid. It is thereupon ordered, &c. 'that it be referred to one of the masters of this Court, to take and state an account of all the monies, property and effects,, books, papers, and choses in action, belonging to the plaintiffs, jointly, a§ partners, which have been attached or seized under the said attachment, and that the defendants severally account on oath before the master, touching the same, and that the master report, &c. so that the same, when duly ascertained, and the report thereon confirmed, may be restored to the plaintiff, M., or to his duly authorized attorney ; and the question of costs, and. all other questions, are reserved.”