Pfister v. Graton & Knight Manufacturing Co.

Maeshall, J.

The facts presented in support of the application of appellant for leave to intervene and attack the plaintiff’s judgmeht on the ground that it was entered for other than partnership indebtedness were all presented on the application of defendants to set aside their default and for leave to defend in the action. The latter application was denied by the lower court, and such denial was affirmed on appeal to this court. Pfister v. Smith, 95 Wis. 51. That necessarily settled finally, as between plaintiff and the defendants, tbat the judgment is for partnership indebtedness and that plaintiff is entitled to satisfy it out of partnership funds. That is binding upon the proposed intervener, unless it has rights superior to the defendants themselves.

The nature of the rights of creditors of a partnership, in the partnership effects, was fully discussed, and the law in respect thereto definitely laid down, in Thayer v. Humphrey, 91 Wis. 276. It is not necessary to go over the subject again. Suffice it to say, generally, that whatever superior right partnership creditors have over individual creditors results from the equitable lien of the partners. Partners have such equitable lien upon the entire firm assets as security that such assets will be applied in discharge of the firm debts. So long as such lien exists the creditors may enforce it for their benefit. Whenever, without fraud, the lien is barred as to the partners, the right to enforce it as to creditors necessarily fails also, for creditors must work out their preferences through the equities of the partners; they have no equities for themselves alone. Lord EldoN, in Ex parte Ruffin, 6 Ves. 119, a leading case on the subject cited by all elementary writers, said, in effect: £ Creditors of a partnership have no lien upon the partnership assets. They may sue and create a demand that will attach to such effects, but standing alone they have no lien either at law or in equity. In all cases where, in the distribution of partnership assets, the partnership creditors are preferred, it is not through any equity of the creditors, but solely the equity of the partners with regard to each other, that operates to enforce the preference. The joint creditors must of necessity be paid first in order to do justice to the partners themselves.’

It follows logically from what has preceded that the appellant has no standing upon which to intervene and attack plaintiff’s judgment. The proceedings on the part of plaintiff were adversary from the first. No collusion between him and defendants is charged, to affect the bona fides of the transactions which resulted in the judgment. That stands, as to the defendants, unimpeached and unimpeachable as a partnership claim; hence it is likewise binding upon those who must depend upon the equities of the partners to establish a preference over other creditors.

By the Court. — The order appealed from is affirmed.