People ex rel. Strauss v. Coleman , 8 N.Y. St. Rep. 409 ( 1887 )

Van Brunt, P. J.:

The only question which is presented by this appeal is "whether or not on the second'Monday of January, 1886, there was a debt or obligation for the payment of money due and owing from the survivors of the California firm to the executors of their deceased partner exceeding $100,000. In determining the question it is necessary to consider for a moment the relations which surviving partners bear to the firm assets and to the personal representatives of the deceased partner.

In the case of Daby v. Ericsson (45 N. Y , 786-789) it is held that “ upon the death of one partner, the demands and choses in action of the copartnership belong to the surviving partners, and they possess the sole and exclusive right to reduce them to possession, and when recovered they stand as trustees for the' representatives of the deceased partner to the extent of his interest. The law not only vests the legal title to the choses in action in the surviving partner, but it cast upon him the duty to get in the debts and settle the affairs of the partnership. The jus accrescendi exists for this purpose.”

The surviving partners have, therefore, the whole legal title to the assets of the firm, but such assets, subject to the payment of debts, are impressed with alien in favor the representatives of the deceased partner to the extent of the share of the deceased partner in the firm’s assets, and, although the surviving partner is entitled to the possession of the whole of the assets of the firm for the purposes of liquidation, he is a trustee for that purpose and receives them impressed with the lien above stated ; and in case the surviving partner misconducts himself as a trustee, for the purposes of liquidation, and having disposed of old assets, invests the proceeds into new assets or stock, and mingles such purchases with stock bought upon his own credit so that the same cannot be separated, the lien above mentioned is impressed upon the whole stock to indemnify the trust fund except as against bona fide purchasers ot a.party having acquired a specific lien by the levy of an execution or attachment. And this right, acquired by lien, is carried so far tliat it may be enforced to the exclusion of the individual creditors of the surviving partner, whose debts may have been incurred in the purchase of the very stock mingled as stated above. (Hooley v. Gieve, 9 Daly 104, affirmed in Ct. of App. on opinion in court below, 82 N. Y., 625.) It would thus appear that the representatives of a deceased partner have something more tangible than a mere claim for an accounting against the surviving partner ; that they have a lien upon the firm assets to the extent of the deceased partner’s interest, which lien they may enforce, according to equitable principles. But does the liability of the survivors of the deceased partner constitute a debt or obligation for the payment of money ?

In the statute it seems to have been supposed that the words “ debts ” and “ obligations for the payment of money ” were applicable to different species of personal property, and that by “ obligations for the payment of money ” the legislature meant to describe written instruments for the payment of money, and not to the mere duty to pay money, which might be represented by the word “debt.” Did, therefore,- any debt exist on the second Monday of January, 1886, which was due or owing to the relators from the surviving members of the firm of the deceased ? The surviving members, as has been seen, were entitled to the possession of the whole of the firm’s assets for the purposes of liquidation and they became trustees for that purpose. The relators, it is true, had an equitable lien upon these assets to the extent of having them applied solely to the purposes of liquidation, but no further. They had no legal claim as long as the surviving partners conducted the liquidation in a proper manner, and could not in any way interfere therewith, and their legal claim arose only after it had been determined what the interest of the deceased was and a duty to pay over existed. The trustee was under no obligation to pay over, there was no debt due or owing by him to the representatives of the deceased partner until liquidation, until all the firm debts have been paid and until the interest of the deceased partner had been absolutely determined and fixed. When these things had been done, then a debt arose due from the surviving partners to the personal representatives of the deceased partner, which could be enforced.

In tbe case afc bar none of these things had been done at the time of the imposition of the tax, and hence no debt existed. It is true that there was an obligation resting on the surviving partners to liquidate the affairs of the firm, as trustees, for that purpose, which obligation the personal representatives of the deceased partner could enforce, even to the extent of claiming their equitable lien upon the firm’s assets as above mentioned; but such an obligation cannot be said to be an obligation for the payment of money, but rather an obligation to execute a trust. Therefore, stating the claims of the representatives of the deceased member of the firm in their strongest light, they do not seem to be either a debt or an obligation to pay money as these terms are used in the statute under consideration.

We notice in the points of the appellants that particular attention is called to the words debts due from solvent debtors, whether on accoumt, etc., as though the words “ debts due on account ” referred to a case like the present where a debt might result from an accounting. We think the word “account” is there used in its mercantile sense, and that it does not refer to those cases where a person is entitled, in equity, to have an account taken to settle the rights and interests of parties to a fund.

The order and judgment appealed from must be affirmed, with costs.

Bartlett, J., concurred.

Judgment and order affirmed, with costs.