Rosenberg v. Schraer , 200 Mass. 218 ( 1908 )

Loring, J.

It appears from the master’s report that the plaintiff and three others were partners “in the clothing and furnishing business ” before the afternoon of December 11,1902. On the morning of that day an attachment of the firm property was made, and in the afternoon a general assignment was made by the firm to one Ettenson, attorney for the attaching creditor.

The plaintiff owned as his separate property a mortgage for $775, made by one Perrusse, pledged for a private loan to him, amounting to $100. “Under date of December 10, 1902,” the plaintiff assigned this mortgage and on December 11 he paid to the defendant $250, the proceeds of a check drawn on the firm bank account, both to be used in paying the firm debts. The fact that this $250 was the proceeds of a firm check was known to the defendant.

The defendant conceded that the $250 was not applied to the payment of the debts of the firm. His story was that he cashed the check by handing to the plaintiff $150 on December 10, and the balance on the morning of December 11. The master did not believe the defendant’s story, and (as we have said) found that the $250 was paid to the defendant to be used with the Perrusse mortgage in paying the creditors of the firm.

One of the many contentions put forward by the defendant before the master, and the only one insisted upon here, is that the $250, being firm money, belongs to the firm and not to the plaintiff, and can be recovered only in a suit brought in the name of the firm. In support of this contention he relies on Hewes v. Bayley, 20 Pick. 96.

The primary fund for the payment of firm debts is firm property. For that reason it was the duty of the defendant to apply the firm’s $250 to the payment of the firm’s debts in the first instance, and only after that fund had been exhausted to have recourse to the Perrusse mortgage. It would follow that (were there nothing else in the case) since only $250 out of the $900 was not applied to paying the firm debts, the money now in the defendant’s hands belongs to the plaintiff and not to the firm.

But there is something else in the case. The master found that after March 31, 1903, “the defendant continued to deal with the plaintiff and to sell the plaintiff goods, the balance due from the plaintiff to the defendant being usually about $200.” Shortly before April 5, 1904, the defendant sued the plaintiff for the balance then due. On April 5,1904, the parties made a settlement by which the plaintiff paid the defendant $175 and the defendant gave the plaintiff a release of all demands in consideration of the $175 and the Perrusse mortgage. The master found “ that the Perrusse mortgage became at that time, if it had not become before, the absolute property of the defendant.” It appears from the master’s report that the Perrusse mortgage had not been collected but that the defendant had made advances against it and used the money so advanced in paying the debts of the plaintiff’s firm. How much had been so advanced did not appear.

Had there been originally two agreements, one between the plaintiff’s firm and the defendant relating to the $250, and the other between the plaintiff and the defendant relating to the Perrusse mortgage, the result of this release would have been to leave the defendant liable to the firm for misapplication of the $250. The release would have operated to make the $250 the money of the firm as between the plaintiff and the defendant, although it would remain the money of the plaintiff as between the plaintiff and his partners.

But we find, on the facts stated in the master’s report that the defendant made but one agreement, and that the one agreement was an agreement with the plaintiff. It is manifest that there was but one transaction, and it is equally manifest that one accounting only was within the contemplation of the parties. So far as that agreement related to firm property it was made by the plaintiff as trustee for the firm. In such a case the action must be brought in the name of the trustee. Boyden v. Hill, 198 Mass. 477.

Where exceptions to a master’s report raise questions depending on inferences of fact to be drawn from the facts found by the master, it is for the court which has to deal with those exceptions to draw such inferences of fact. American Circular Loom Co. v. Wilson, 198 Mass. 182.

Decree affirmed.