Ralph v. Brickell , 7 N.Y.S. 825 ( 1889 )

Merwin, J.

The referee, in his findings of fact, in effect negatives the existence of any cause for setting aside the assignment, except such as may be inferred, as matter of law, by reason of the preference of the firm creditor, so that, if the referee was not correct in his conclusion on this subject, the judgment cannot be supported. It would not be warranted by the facts found. Stoddard v. Whiting, 46 N. Y. 627. Upon such facts, it would be-erroneous. Collender v. Phelan, 79 N. Y. 366. The question, then, is, can one partner, by a general assignment, devote his individual property to the-payment of a firm debt? A court of equity, in the distribution of equitable-assets, applies the rule that, as between the joint and separate creditors of partners, the partnership property is to be first applied to the payment of the partnership debts, and the separate property of the individual partners to the payment of their separate debts. Meech v. Allen, 17 N. Y. 301. In Re Estate of Gray, 111 N. Y. 404, 18 N. E. Rep. 719, this rule was applied to the distribution of the assets of a deceased partner in the hands of his administrator. In Wilson v. Robertson, 21 N. Y. 587, it was held that the appropriation, in a general assignment by an insolvent firm, of partnership property to the payment of the individual debts of one partner, avoids the assignment, at the suit of the firm creditors. Such an assignment assumes to appropriate the share of one partner to the payment of debts that neither he nor his property is liable for. ■ Ho case is cited showing that a like rule applies to the case of an assignment by one partner of his individual property for the payment of firm debts, except the ease of Jackson v. Cornell, 1 Sandf. Ch. 348. In-that case, it was held by Vice-Chancellor Sandford, in 1844, that such an? assignment, preferring the firm creditors to the exclusion of the individual, was fraudulent and void, as to the latter. On the other hand, there are many cases laying down a contrary rule. In Kirby v. Schoonmaker, 3 Barb. Ch. 46, (decided in 1848,) it was said by Chancellor Walworth that copartnersmay assign their individual as well as their partnership property to pay the-joint debts of the firm, thereby giving the creditors of the firm a preference over the separate creditors. This doctrine was followed in Van Rossum v. Walker, 11 Barb. 237, where the question was directly met and passed upon. It was approved by Judge Allen in O'Neil v. Salmon, 25 How. Pr. 252. There are several other cases to the same effect. Becker v. Leonard, 42 Hun, 224 Haynes v. Brooks, Id. 528; Smith v. Perine, 1 N. Y. Supp. 495. In Crook v. Rindskopf, 105 N. Y. 476, 12 N. E. Rep. 174, it is said, in reference to a general assignment, that it is lawful for an insolvent member of a firm to devote his individual property to the payment of firm debts, or to any debt, owing by him to his partners, to the exclusion of his individual creditors; and no inference of fraud can legally be derived from such disposition. It thus-seems to be well settled on authority that a preference of a firm debt by one partner, in an assignment of his individual property, does not make the assignment void. Partners, as between themselves, have an equitable right to-have the partnership property applied first to the payment of the partnership, debts; and, in certain circumstances, this inures to the benefit of the creditors, of the firm, and is sometimes called a “lien.” Saunders v. Reilly, 105 N. Y. 20, 12 N. E. Rep. 170. There is no such lien, as between the separate partners and their individual creditors. Selden, J., in Meeeh v. Allen, supra.. Each partner can, therefore, as long as he has control of his property, use it to pay either class of debts, for he is under legal obligation to pay both.. Brown, J., in Hurlbert v. Dean, *41 N. Y. 104. The general rule adopted by courts of equity, when distribution is made by the court, does not apply to voluntary dispositions, by partners themselves, that are in other respects-good. It follows that the referee erred in his legal conclusion.

In the present case, it is at least doubtful whether, as against the plaintiff, the debts preferred are not to be deemed individual debts of the assignor. As-between the assignor, Brickell, and the retiring partner, Gardner, Brickell,. (by assuming and agreeing to pay the firm debts, became the principal debtor, and individually liable, and Gardner was simply a surety. Colgrove v. Tailman, 67 N. Y. 95. Gardner certainly had the right to have the assumed debts treated as the individual debts of Brickell; and it is not clear that the-plaintiff has any better position, especially, in view of the fact that all the property assigned by Brickell was firm property at the time of the dissolution. Be this as it may, the conclusion reached on the other branch of the case is fatal to the judgment. Judgment reversed upon the exceptions, and a new ’trial ordered; costs to abide the event. All concur.