Ryder v. Gilbert , 23 N.Y. Sup. Ct. 163 ( 1878 )

GILBERT, J. :

The defendant Carpenter, sheriff of the county of Westchester, in June and July, 1876, sold a quantity of merchandise on execution. The object of this action is to settle conflicting claims to the proceeds arising from said sale. That falls within the equitable jurisdiction of the court. It appears that in August, 1874, the plaintiff sold out his stock of merchandise to John D. Williams, and that shortly thereafter the latter formed a partnership with his son, Louis W. Williams, and they continued in business as partners until said partnership was dissolved by the levy and sale hereinafter mentioned. N'o formal agreement of partnership was entered into by them, but it was verbally agreed between them that each should share equally in the business of the partnership, and the profits and losses thereof. John D. Williams, in part payment for said stock, indorsed and transferred to the plaintiff promissory notes of third persons. The notes not having been paid, the plaintiff, on the 10th of June, 1876, recovered three judgments against John D, Williams, upon his said indorse-ments, and on the same day caused executions thereon to be issued to said sheriff. The sheriff immediately levied on the right, title and interest of John D. Williams, in all of the goods in the possession of said partnership, and subsequently made an absolute sale of all of said goods (not of the interest of said John D. Williams therein), and delivered the same to the purchasers at such sale respectively. Intermediate the levy and sale, several executions against both of said partners, upon judgments recovered by the defendants respectively, excepting Carpenter, for partnership debts, were delivered to the sheriff, The justice at Special Term decided that priority must be given to tbe plaintiff’s executions for two reasons : first, that tbe sale by tbe sheriff was under bis executions exclusively; second, that tbe goods purchased of tbe plaintiff bad never been transferred to tbe partnership, and that tbe proceeds of tbe sale of those goods were sufficient to satisfy tbe plaintiff’s executions. Assuming, for tbe present, that tbe goods sold were partnership property, I am of opinion that tbe judgment is erroneous. Tbe sheriff having made a levy upon all the goods under tbe plaintiff’s executions, and being in actual possession of tbe goods when tbe executions in favor of tbe defendants respectively were delivered to him, such levy was good and sufficient for tbe executions in bis bands last referred to, and enured to the benefit of tbe plaintiffs in such executions respectively. (Cresson v. Stout, 17 Johns. R., 117; Van Winkle v. Udall, 1 Hill, 559; Slade v. Van Vechten, 11 Paige, 21; Peck v. Tiffany, 2 Comst., 451; Eighth Nat. Bk. v. Fitch, 49 N. Y., 539.) A levy consists in taking possession of the goods, and the sheriff having such possession, although for tbe purpose of selling tbe interest of one partner only, can do no more by way of making an actual levy for tbe purpose of selling tbe whole interest in tbe goods. (Waid v. Gaylord, 1 Hun, 607.) Tbe sale of tbe sheriff having embraced the corpus of all tbe goods, and not tbe interest of the debtor in the plaintiff’s executions only, tbe presumption which tbe law raises, in favor of tbe regularity of tbe proceedmgs of public officers, is sufficient to show that tbe sale was in fact made under tbe executions against both partners. For after many fluctuations, tbe rule of law has at last become well settled that, under an execution against one partner, while the sheriff may levy upon tbe interest of that partner in tbe goods of tbe partnership, and for that purpose may remove and take possession of tbe goods, bis power of sale is limited to the residuary interest of such partner in tbe goods, subject to tbe equitable lien of tbe debts due to tbe creditors of tbe firm and to tbe other partners, on a settlement of tbe partnership accounts. (Menagh v. Whitwell, 52 N.Y., 158 ; Walsh v. Adams, 3 Denio, 125.) The sheriff acts under a statute power, and can transfer no greater interest than the execution debtor himself could do by a voluntary sale of bis interest in the partnership. That interest, so transferrable, is merely an aliquot share of the surplus, after satisfying the claims of creditors of the partnership and of his copartners, (Morss v. Gleason, 64 N. Y., 204.) If the sheriff had made the sale under the plaintiff’s executions, which he did make, he would have been a trespasser ab initio. For such a sale would imply a seizure of the property of the partner not sued, for his copartners’ -debt. (Waddell v. Cook, 2 Hill, 47 ; Walsh v. Adams, supra.) The presumption stated, I think, was not rebutted by the evidence given on the part of the plaintiff, that the levy was made under the plaintiff’s executions, and that notices of sale of the interest of John D. Williams only, under those executions, were posted, for, as has been shown, it was not the duty of the sheriff to do any act in order to make a levy under the executions of the defendants, and he may have posted other notices of a sale under the other executions. There was ample time to do so, and evidence was given by the defendants, which renders it probable that such other notices were posted.

Having in his hands executions against all the members of the partnership, and others against one member only for his individual debt, it was the duty of the sheriff to sell the partnership property for the satisfaction of the former executions, and if any goods remained, then to soil the interest of the single partner therein for the satisfaction of the execution against him. (Dunham v. Murdock, 2 Wend., 553; Peek v. Tiffany, 2 Comst., 451; Eighth Nat. Bk. v. Fitch, 49 N. Y., 539.) The sale, in this case, was in accordance with the sheriff’s duty, and if it was not preceded by the requisite notice of sale that fact created an irregularity, which had no greater or different effect than that -of selling the rvhole partnership goods under an execution against one partner. In either case there would be a lack of authority to make the sale, for the sheriff was not authorized to sell, under the defendants’ executions, without the prescribed notice of sale, nor under the plaintiff’s, without restricting the sale to the interest of the single partner in the goods. There having been no valid sale under the plaintiff’s executions, he has acquired no right to the proceeds of the goods sold, nor has he any legal or equitable, right to have snch proceeds diverted from the defendants, for the reason that they had a prior lien on the goods sold, and such priority of lien in equity attached to such proceeds. The plaintiff may have a remedy against the sheriff, on proof that the goods were sufficient to satisfy the partnership creditors, and leave a surplus which the sheriff might have made available in satisfaction of the plaintiff’s demand, by a sale of the interest of the single partner therein ; and the sheriff may have become liable to the defendants in the executions for making an illegal sale of their goods. But the irregularity or illegality of the sheriff’s proceedings affords to the plaintiff no muniment of title to the fund in controversy. The case of Fenton v. Folger (21 Wend., 676), would seem to be an authority for the proposition, that the proceeds of a valid sale, under an execution against one member of a partnership, belong to the plaintiff in that execution in preference to a creditor of the partnership who had recovered a judgment against the latter, and had delivered to the sheriff an execution thereon, but which the sheriff did not execute. That was a decision at law, and it can be sustained only upon the ground that the sale under the execution against the single partner was a sale of his interest only, and that there had been no sale of the property of the partnership. If it is susceptible of a construction which sustains the claim of the plaintiff in this case, it is in conflict with the cases in 2 Com-stock, and 49 New York, which have been cited, and must be deemed overruled thereby.

The only remaining inquiry is, whether that portion of the goods sold in this case, which John D. Williams bought of the plaintiff, was the property of the partnership. That it was, seems to be clear in reason and upon authority. Conceding that Louis AY. Williams contributed nothing, the goods contributed by John I). Williams constituted the sole basis of the partnership. The business of the partnership was to sell those goods, and to buy and sell other goods of the like description. Louis was to share equally with his father in the business. The goods bought by John D. of the plaintiff, as well as the goods subsequently bought by the partnership, were sold indiscriminately, and the proceeds were received and appropriated by the partnership. Those acts, in the absence of a contrary agreement, are unequivocal evidence of a community of interest in the property, as well as in the profit and loss. (Story on Part., §§ 16, 27, 29.) -When it-does not appear what is the precise amount of the respective shares of the partnership, the presumption is that they are entitled equally. (Coll on Part., § 167.) Whatever, at the commencement of a partnership, is thrown into the common stock, etc., belongs to the ( firm, unless the contrary be shown. (Lindley on Part., 546.)

In Peacock v. Peacock (16 Ves., 56), it was held that as no distinct share in the partnership property was ascertained by force of any express contract between the partners, they must, of necessity, be equal partners, if partners in anything. That was adopted as a rule of law by Ch. Kent and by the late court for the correction of errors. (3 Kent's Com., 6; Gould v. Gould, 6 Wend., 263-267.) The same principle was decided in Ex parte Owen (4 De G. & Sm., 351), and in Bradbury v. Smith (21 Me. 117). In any event, both parties are estopped by their acts and conduct as partners from averring or proving against creditors of the partnership that the property sold was not partnership property, and the plaintiff, who is a creditor of one of them, is in no better position than his debtor; for it cannot be pretended that the plaintiff retained a vendor’s lien on the goods sold by him. Consequently he is also estopped from denying that the goods belonged to the partnership. (Kelly v. Scott and others, 49 N. Y., 595.)

The judgment must be reversed and a new trial must be granted, with costs to abide the event.

Barnard, P. J., concurred; DykmaN, J., not sitting.

Judgment reversed and new trial granted, costs to abide event.