Estate of Jamison & Co.

Opinion by

Mr. Justice Mitchell,

I. The main question is whether appellant, having a judgment against the partnership, and also a separate judgment against the individual partners for the same debt, is entitled to a dividend on each out of its respective estate.

It-is settled that a creditor of an assigned estate is entitled to a dividend on the full amount of his debt at the date of the assignment, notwithstanding he has collateral security of any kind on which he has, or may hereafter receive a partial payment of his debt: Morris v. Olwine, 22 Pa. 441; Patten’s Appeal, 45 Pa. 151; Brough’s Est., 71 Pa. 460; Graeff’s Appeal, 79 Pa. 148; Miller’s Est., 82 Pa. 113. “ The accumulation of remedies does not diminish his rights. If a judgment creditor has a right to resort to the personal estate for the payment of his whole debt, without regard to his lien on the real estate, one who has a bond which may be turned into a judgment has the. same right; and that right is not impaired by any lien which he may have by mortgage on the land. ... If this was the right of the creditor before the assignment, it remained the same afterwards : ” Morris v. 01 wine, supra. The creditors of an assigned estate are the equitable owners of it in the proportion of their claims, without regard to the securities they may hold. It would be difficult to imagine a severer application of the rule than was unhesitatingly made in Graeff’s Appeal^ supra. The creditor had three judgments, which were liens on the debtor’s real estate, and after the assignment the land was sold and the proceeds paid two of the judgments in full and part of the third, j'et in the distribution of the personal estate it was held that the creditor was entitled to a dividend on his entire debt, to wit, the amount of the three judgments. The only limitation is that he cannot have more than payment in full.

The fact that the debtor who assigns, and the owner of the collateral are the same person or persons makes no difference in the case. It is the right to resort to two funds which gives the creditor his separate claim on each.

This consideration is decisive of the present case. The funds are different. The partners are. liable individually, but it is by reason of their membership of the firm, and their individual property is liable only secondarily. It is the settled rule that where there are partnership and sepárate creditors, and partnership and separate assets, and the firm is insolvent, each class has priority upon its respective estate : Black’s Appeal, 44 Pa. 508. The appellant was in both classes, he had a judgment in each which gave him a primary claim on that particular fund. Such claim in either class was not lessened, nor its position altered in regard to its own class by his possession of collateral security in the shape of a primary claim ih the other. If he had had government bonds or railroad or other stock of an individual partner pledged for the firm debt, or a mortgage on individual real estate, his case would have been expressly within the decisions already cited, and there could have been no doubt that his claim on one fund would have been unaffected by his security on the other. The judgments on the separate and different bonds stood on precisely the same footing. It was the ordinary case of a creditor with collateral security on another fund, and must follow the same rule. The learned court below was in error in refusing the appellant a dividend out of both funds.

Though this point has apparently never been decided before by this court in regard to claims against a partnership, yet the present conclusion rests on irresistible deduction from principles firmly established by our own cases, and the array of authorities cited by appellant shows conclusively that it is in harmony with the law as held in a large majority of the other states.

II. The next question relates to the date at which the claims are to be taken in calculating their amount. The cases already cited, to which on this point may be added Miller’s Appeal, 35 Pa. 481, Jordan’s Appeal, 107 Pa. 75, and Boltz’s Estate, 133 Pa. 77, have settled that.the creditors become equitable owners of an insolvent estate in the proportions of their debts at the time .of the assignment. As on the one hand subsequent partial payment through means of outside collaterals does not diminish a creditor’s proportionate share of the assets assigned, so on the other an enlargement of his'claim by judgment including interest or penalties cannot increase such share. This was expressly decided in regard to an insolvent corporation, in Dean & Son’s Appeal, 98 Pa. 101, in which the decision was rested on the rule above cited as to ownership by the creditors, and it was said that there was no reason why the same principle should not apply to both corporations and individuals. This case is the corollary of that, and we see no good ground to question the result then reached. The auditor’s first report reducing all judgments to an amount representing their value at the date of the assignment was correct, and the learned court was in error in calculating the dividend of the Indiana bank on a larger basis. Pittsburg and Steubenville R. R.’s Appeal, 2 Gr. 151, is cited for the contrary view, but it is no authority for that position. In'that case a judgment had been recovered subsequent to the assignment, in which interest at twelve percent as a penalty had been included. The auditors allowed a dividend on the principal but not on the penalty. This court held that the fact of its being recovered after the assignment gave the auditors no right to go behind the judgment; as to them it was conclusive in regard both to principal and penalty. The question of reducing it, together with the other claims, to its value at the uniform date of the assignment was not raised or decided.

III. The claim of Redstrake was allowed in full on the ground that the stock was his property and its conversion was a breach of trust which enables him to follow the proceeds specifically. The facts will not sustain this view. The stock was Reds'trake’s, but it was converted prior to the assignment though on the same day, not directly by Jamison & Co. but by creditors with whom they had pledged it. If the pledge was itself a conversion, as to which the facts are not clear, then the case is still stronger against the view taken by the learned court below. In either case no part of the proceeds can be traced directly to the assets which passed to the assignee. In a certain sense and as between Jamison & Co. and Redstrake there was a breach of trust. But it was only such a breach as occurs whenever there is a wrongful conversion of one man’s property by another who has it in his hands, and not the technical breach of trust which authorizes a court to follow the proceeds through all their transmutations until thejr come to the hands of an innocent purchaser for value. This is not a question of Redstrake’s rights against Ja'mison & Co. but One of distribution among the latter’s creditors, who by the assignment became owners of the assigned estate in the proportions of their claims at that date. When the assignment was made Redstrake’s property was gone; none of it came to the hands of the assignee; all that Redstrake had left was a claim for its conversion. The assignee took the assets subject to that claim and nothing more. There was no basis on which payment in full should have been decreed.

IV. In regard to measure of damages the claims of Redstrake, Bearn, Dow and Cooper are of the same nature, to wit, the pledge for their own debts by Jamison & Co. of stocks belonging to the claimants and held as collaterals for other purchases, and the sale by the pledgees of the collaterals so pledged. On this state of facts the cases are not distinguishable from Work v. Bennett, 70 Pa. 484, where it was held that the measure of damages was the market value of the stocks at the date of the-conversion. The auditor in his first report awarded dividends in accordance with this rule. Such award was correct and it was error to change it. Just what change was intended to be made by the court below is -not easy to grasp, as it is said with apparent correctness that the opinion and the decree are not consistent, 'and that many of the exceptions sustained are not consistent with the opinion or with each other. It is not worth our while to attempt to untangle the skein. We have indicated the. principles on which distribution should be made, and so far as appears to us the auditor’s first report conformed to them. Unless there are some points of discrepancy which have escaped us in going through the thirty-eight assignments of error in this appeal, and the nine others in the appeals argued with it, distribution should be made in accordance with that report.

Decree reversed, distribution to be made in accordance with this opinion.

cooper’s appeal, bearn’s appeal, bow’s appeal.

Opinion by

Mr. Justice Mitchell,

July 12, 1894:

These appeals were argued with Boyer’s Appeal in the same estate, opinion filed herewith. The only question not covered by that opinion, is the claim by Bearn and Dow that they should be allowed a dividend on the entire value of their stock sold, without any deduction or set-off for the unpaid balance due by them to Jamison & Co., on the ground that no set-off is admissible in action for damages for a conversion. But this is not a universal rule, and Kater v. Steinruck, 40 Pa. 501, and Arthur v. Sylvester, 105 Pa. 288, cited in support of the contention, were decided on their own circumstances. In the former there was a chattel mortgage on -which default took place after the death of the mortgagor, whereupon the mortgagee took possession of the goods and sold them. It was held that by the death of the mortgagor the title to the goods passed to his administrator who could maintain trover for their value, and the defendant could not set off the mortgage debt, because if the estate was insolvent the mortgage without possession was void against creditors, and that fact could only be determined by passing the estate through the regular course of' administration. Arthur v. Sylvester was trover against a real estate broker for title papers left in his hands merely for the purpose of a sale of the property. It was held that he could not set off his claim for expenses in an unsuccessful effort to sell, because he had no lien on the papers and plaintiff could have demanded them at any time.

In the present case the claimants could not have demanded the stocks from Jamison & Co. before tbe conversion, without tendering payment of the debts for which they were pledged. It was expressly held in Work v. Bennett, 70 Pa. 484, that a wrongful conversion under such circumstances “dispensed with any tender before suit brought, but as in trover not the chattels themselves but the actual damage to the plaintiff from the conversion is to be recovered, the interest of the pawnee is to be taken into account in settling the amount.”

The set-off was properly allowed.

Appeals dismissed at the costs of the appellants.