N. Y. Superior Court.-Hayes v. Bement and others. from the assets of the firm of Hayes & Heyer. But the firm of Ketchum, Rogers & Bement cannot be called on to account, because Mr. Ketchum was but a special partner in the firm of Hayes & Heyer, and is not liable to the creditors of the latter firm for any deficiency. The statute authorizing and regulating limited partnerships is strict and severe, and though perhaps not unnecessarily so, we are not disposed to put such a construction upon its language as would in a great measure impair the usefulness, if not defeat the objects intended to be accomplished by its passage. The special partner is under disabilities which are not imposed upon general partners, and in consideration, he is relieved from liability, except to the extent of the capital which he may contribute, but as in many, if not most of such limited copartnerships, the bulk of the cash capital is contributed by the special partner, it must generally be for his interest to sustain as far as possible and safe the partnership when organized, and to prevent its failure or insolvency. If endeavoring to do this, he becomes a creditor, and still the partnership fails and becomes insolvent, he loses his capital, and his debt is postponed; at the same time he has not directed or managed its affairs. In cases of corporations, a fixed sum may be put in as capital; that sum is all that is put at hazard. The parties contributing it may be, and generally are the chief managers. If the stockholders loan to the corporation, they are put in case of insolvency upon the same footing as other creditors; their debt is not postponed. In limited partnerships, which are a kind of quasi corporations, the special partner who contributes his capital can have no voice in the management of the business, and if he loans to the firm, his debt must be postponed to those of all the other creditors; and we are now asked to say, that if any other firm of which he happens to be a meinber shall loan to such copartnership, even though it may be without his knowledge, or shall in the usual course of business or dealings become creditors of such copartnership, and such copartnership shall become insolvent, that then the debt of the creditor firm, or at all events, his interest in such debt must be postponed. We confess that we do not believe the Legislature so intended, and we do not think it has so said. Had the statute provided that the special partner should not directly or indirectly, neither individually or jointly become a creditor, and if he did that, then any debt due to him individually, or his portion of a debt due jointly, or his interest in any debt due to any other person or persons, corporation or corporations, or to any partnership, whether general or limited, should be postponed, the case would be different. As it now is, we consider that the Legislature simply intended to put the special partner so far as he is a creditor, upon precisely the same footing as if he were a general partner. We have seen that if Mr. Ketchum were a general partner, neither the debt due Ketchum, Rogers & Bement, or his interest in it, could be postponed, nor can their debt or Mr. Ketchum's interest in it be in this case postponed. N. Y. Superior Court.-Hayes v. Heyer, Ketchum and Bement. The bill does not in direct terms charge that the special partnership was insolvent, but as it might perhaps be amended in this respect, and as from the testimony it appears that it was insolvent, we have not considered this objection as material, and have preferred disposing of the case upon its merits. It is disclosed in the answer that a dividend of five hundred dollars was declared upon the note on which the judgment was obtained against the complainant, and yet after this dividend the defendants sought by execution to enforce the recovery of the whole judgment. The complainant having failed in the main object of his suit, cannot be entitled to costs, and defendants having neglected to give the complainant notice of the dividend, and having sought to enforce the collection of the whole judgment, do not stand before us in a position to entitle them to costs from the complainant; the five hundred dollars must be credited upon the judgment; the bill must be dismissed, but without costs. [January Term.-In Equity] Before CAMPBELL and MASON, Justices. JOEL N. HAYES V. JOHN F. HEYER, MORRIS KETCHUM and TO A ASSIGNMENT BY ONE PARTNER OF PARTNERSHIP PROPERTY TRUSTEE FOR THE BENEFIT OF CREDITORS, WITHOUT ASSENT OF CO-PARTNERS. One partner cannot make an assignment of the partnership property to a trustee for the benefit of creditors without the assent of his co-partners, the latter being present, and capable of acting. THE facts of the case appear in the adjudication. Horace F. Clark, for plaintiff. Ketchum and Fessenden, for defendant. By the Court.-CAMPBELL, J.-The bill in this case was filed for the purpose of setting aside an assignment made by the defendant Heyer with the assent of the defendant Ketchum, to the defendant Bement. The complainant and Heyer were the general partners, and Ketchum was the special partner in a limited partnership transacting a wholesale grocery business in the city of New-York, under the firm name of Hayes and Heyer. On the 11th of December, 1846, Heyer in the name of the firm executed a general assignment of all the partnership effects to Bement, providing for payment of all N. Y. Superior Court.-Hayes v. Heyer, Ketchum and Bement. the creditors rateably according to their respective claims. At the time of its execution, the complainant was in the city, and at the place of business of the firm, but did not learn that an assignment had been made until some days after, and has never given a direct or implied assent. The special partner consented to its execution. The complainant files this bill to set aside the assignment, alleging among other things, that under the circumstances of this case the defendant Heyer had no power to make it. We shall proceed to consider this point, without adverting to the others raised by the complainant, because if it is determined in his favor, the case is disposed of. "The title of the revised statutes relative to limited partnerships (1 R. S. 764,) appears to have constituted the effects of the firm a special fund for the benefit of all the creditors; which fund, in case of insolvency, is to be distributed among such creditors rateably, in proportion to the amount of their respective debts. If the insolvent partners neglect to place the partnership effects in the hands of a proper and responsible trustee to be distributed without delay among all the creditors of the firm other than the special partner, rateably in proportion to the amount of their several debts either due or to become due, any creditor may file a bill in this court in behalf of himself and the other creditors of the firm, and may have a receiver appointed." Innes v. Lansing, 7th Paige 583. If this firm was then insolvent, Heyer did no more than was his duty or that of the firm, in placing the funds in the hands of a proper party for distribution, provided he had the requisite power. When any partnership becomes insolvent, in equity the property constitutes a fund which, in case of disagreement of the partners, the court would place in the hands of a receiver for equal distribution. In relation to general or limited co-partnerships, we apprehend the rule is the same when distribution is made by the court, but when directed by the partners themselves in ordinary co-partnerships, they may give preferences to one creditor or class of creditors over others, while in limited co-partnerships the statute restricts that power, and prescribes the mode of distribution. But in both cases the question of the power of a single partner applies. In both cases, all the partners-at least all the general partners in a limited, as well as in an ordinary co-partnership, have an equal interest in seeing that the best disposition be made of the assets, that the trustees who may be appointed shall enjoy the confidence of all, and shall render the proceeds of the partnership most effectual in the discharge of the partnership liabilities. In this case, if the firm of Hayes and Heyer was insolvent, then Ketchum, Rogers & Bement, who were large creditors, might according to the decision in Innes v. Lansing, have at once filed their bill, and compelled an assignment of the effects of the special partnership to a receiver. It was not necessary to proceed to judgment. They would thus have obtained the object sought under the assignment, and would have deprived the complainant of all control. If, on the other hand, the firm of Hayes & Heyer was not insolvent, as contended by the de N. Y. Superior Court.-Hayes v. Heyer, Ketchum and Bement. fendants, then the assignment was clearly void, and would have been if made by all the partners, because it would manifestly operate to hinder and delay creditors. Certainly no individual or firm being solvent and having sufficient assets to pay his or their debts can be allowed to make an assignment for the purpose of thus preventing a sacrifice, and securing to the assignors a larger surplus than would remain if the property was forced to an immediate sale. It is evident from the testimony in this case that this firm was insolvent at the time of the assignment, though from the representations made by the general partners, it may well have been supposed by the special partner and the assignee that such was not the fact. We shall therefore proceed upon the ground that the firm was insolvent. Could then, Heyer and the special partner make the assignment, the complainant who was the other general partner being present at the place of business of the firm on the very day it was made, and who at the time did not know it was contemplated, and who remained for some time after in ignorance of its existence? It is true that on the following day the complainant consented to a dissolution, and authorized Heyer to collect the debts and to discharge the liabilities of the firm. But this assent to a dissolution, given on the following day, in ignorance of the assignment, cannot be considered as a ratification. That assent to a dissolution conveyed no authority to Heyer to appoint other trustees or assignees to wind up the estate, even if it had been made on the previous instead of the subsequent day. The assignment must stand or fall according to the determination of the question whether on the 11th of December, the day of its execution, Heyer had the power to make it. In mercantile co-partnerships, especially in the purchase and sale of goods, in the acceptance, drawing and endorsing of bills of exchange and promissory notes, the single partner acts within the scope of powers necessary generally to the very existence of the copartnership, and without which it would oftentimes possess neither vigor or vitality. In the general management of the business of the firm, "so intimate is the confidence, and so universal the community of interest and operation between partners," that it would be difficult to mark out the precise line which limits the power of the partner over the partnership effects, and indeed indirectly over the separate fortunes of the other members of the association. But the power which is necessary to direct, manage and control, to buy and to sell, to create and to discharge liabilities, and which, unless limited by express agreement, vests necessarily in each co-partner, is dependant upon the life, upon the actual existence of the co-partnership. While the partnership lives, this power is required as well for the convenience of the partners themselves, as for the protection of those who deal with them. When the partnership ceases, when it is dissolved by the death of any of its members, by bankruptcy or assignment, then the power exercised by individual partners is limited, for the necessity for its exercise no longer exists. One partner cannot by will introduce his executor or representative, or any other person into N. Y. Superior Court.-Hayes v. Heyer, Ketchum and Bement. the co-partnership, nor can he by assignment of this interest bring his assignee into the firm, nor in case of individual bankruptcy does the representative of the estate of the bankrupt partner become a member of the partnership. In short, whether by the accidents of death, or by the misfortunes of trade, the partnership becomes dissolved, the representatives of the deceased or failing partner possess only the power of compelling an account and settlement of the partnership business. We cannot therefore see upon what principle a single member of a failing firm possesses the power of appointing a trustee, and without consent or knowledge of the other partners, transferring to such trustee the entire partnership effects, and empowering him to compromise the debts due, and collect and distribute the assets. Such a power is not necessary, and ought not to be implied. We entirely concur in the views expressed in the case of Deming v. Colt,* and the decision in that case may therefore be considered as expressing the unanimous opinion of all the justices of this court, "that a partner can in no case make a general assignment to a trustee for the benefit of creditors, against the consent of without the concurrence of his co-partner, the latter being present, and capable of acting in the matter." We have looked into the cases cited by the defendants, and find nothing which induces us to change the views herein expressed. The case of Harrison v. Sterry, 5th Cranch, does not present circumstances like the present; there was in that case only a partial assignment. It did not extend to all the effects of the partnership. It was made by the managing partner residing in the United States, the other co-partners residing in England. It appears also that the managing partner who made the partial assignment held powers of attorney from his co-partners, though not deemed sufficient to empower him in terms to execute by deed in their name. The confidence and general trust reposed in him were however manifest. In the case of Anderson & Wilkins v. Tompkins and others, 1 Brockenburgh 456, Chief Justice Marshall certainly considers at length the question of the power of one partner to make a general assignment, and he comes to the conclusion that under the circumstances of that case, the partner had the power to make it. There the firm were transacting business in Virginia; one partner had left for Europe, and the firm having failed in business, the partner remaining made the assignment. In that case, however, he observes, "this power would certainly not be exercised in the presence of a partner without consulting him, and if it were so, slight circumstances would render the transaction suspicious, and perhaps fix on it the imputation of fraud." Also he says, "this reasoning applies with increased force when we consider the situation of these partners. The one was on a voyage to Europe, the other in possession of all the partnership effects for sale-the absent partner could have no agency in the sale of them-he could not be consulted-he could not give an * Case decided by Superior Court. Present, Oakley, Sandford and Vanderpool, justices. |