Weyer v. Thornburgh

• Decision Date: 30 November 1860
• Parties: Weyer and Another v. Thornburgh, Administrator of Reagan
• Court: Indiana Supreme Court

15 Ind. 124

Weyer and Another v. Thornburgh, Administrator of Reagan

Supreme Court of Indiana

November 30, 1860

APPEAL from the Morgan Common Pleas.

Affirmed, with costs.

O. J Glessner, H. C. Newcomb and John Tarkington, for appellants.

W. R Harrison, for appellee.

OPINION

Worden, J.

In 1855, Reagan & Olleman, as partners, executed to the appellants a promissory note. Subsequently Reagan died, leaving the note unpaid. The appellants brought suit upon the note against Olleman as the survivor, and recovered judgment, upon which execution was issued and returned nulla bona. The plaintiffs then filed the note as a claim against the estate of Reagan deceased, and it was duly allowed by the Court below, but it was ordered not to be paid until the individual creditors of Reagan were satisfied, his estate not being solvent, but probably able to pay 50 per cent. on the claims against it. The plaintiffs appeal, and complain of the order of the Court postponing their claim until the individual creditors of Reagan are paid, claiming that they have a right to share the estate pari passu with the individual creditors.

In the case of a joint contract, as in this case, if one of the parties die, his executor or administrator, at common law, is discharged from liability, and the survivor alone can be sued. 1 Chitty's Plead. p. 50. In equity, however, the rule is different. Says Mr. Justice Story, "The doctrine formerly held upon this subject seems to have been, that the joint-creditors had no claim whatsoever, in equity, against the estate of a deceased partner, except when the surviving partners were at the time, or subsequently became, insolvent or bankrupt. But this doctrine has been since overturned; and it is now held, that in equity, all partnership debts are to be deemed joint and several; and consequently the joint-creditors have in all cases a right to proceed at law against the survivors, and an election, also, to proceed in equity against the estate of the deceased partner, whether the survivors be insolvent, or bankrupt, or not." Story on Part. § 362.

We advert to these elementary principles, as showing that the appellants' claim is one that could be enforced in equity only, against the estate of the deceased, and, therefore, that it must be subject to such equitable rules as obtain in reference to the payment of partnership, and individual debts.

The general rule in this respect, is thus stated by a standard author: "The joint-creditors have the primary claim upon the joint fund, in the distribution of the assets of bankrupt or insolvent partners, and the partnership debts are to be settled before any division of the funds takes place. So far as the partnership property has been acquired, by means of partnership debts, those debts have, in equity, a priority of claim to be discharged; and the separate creditors are only entitled in equity to seek payment from the surplus of the joint fund, after satisfaction of the joint debts. The equity of the rule, on the other hand, equally requires that the joint creditors should only look to the surplus of the separate estates of the partners, after payment of the separate debts. It was a principle of the Roman law, and it has been acknowledged in the equity jurisprudence of Spain, England, and the United States, that partnership debts must be paid out of the partnership estate, and private and separate debts, out of the private and separate estate of the individual partner. If the partnership creditors can not obtain payment out of the partnership estate, they can not in equity resort to the separate and private estate, until private and separate creditors are satisfied; nor have the creditors of the individual partners any claim upon the partnership property, until all the partnership creditors are satisfied. The basis of the general rule is that the funds are to be liable on which the credit was given. In contracts with a partnership, the credit is supposed to be given to the firm, but those who deal with an individual member rely on his sufficiency." 3 Kent's Com. 74.

This, as a general rule, we think well established, although it may have been doubted or denied in some of the States of the Union. Vide McCulloh v. Dashiell and notes, 1 Am. Lead. Ca. 460. It is applicable to cases where the assets to be applied to the payment of debts are legal, as contra-distinguished from equitable. Where the assets are equitable merely, and can only be reached through the interposition of a Court of equity, it may be doubtful whether this rule applies. Vide notes to Silk v. Prime, vol. 2, part 1, Lead. Ca. Eq. 72.

There is, however, an exception to this rule, recognized in some of the cases, which would be applicable to the case at bar, and if admitted, would seem to take the case out of the general rule. The exception is this, that where there is no joint property, and no living solvent partner, the joint creditors are entitled to share...