LeVel v. Farris

• Decision Date: 08 February 1887
• Citation: 24 Mo.App. 445
• Parties: JAMES L. LEVEL, Appellant, v. JOHN FARRIS, Respondent.
• Court: Missouri Court of Appeals

24 Mo.App. 445

JAMES L. LEVEL, Appellant,

v.JOHN FARRIS, Respondent.

Kansas City Court of Appeals, Missouri.

Feb. 8, 1887.

APPEAL from Buchanan Circuit Court, HON. JOSEPH P. GRUBB, Judge.

Affirmed.

Statement of case by the court.

This action arose on a proceeding in the probate court of Buchanan county, on an allowance of a claim against the estate of Madison S. Farris, deceased. Said decedent in his lifetime was a partner with one Michael S. Farris, under the firm name of “M. S. Farris & Co.” The firm owed the claimant a debt. The partnership was dissolved by the death of said Madison Farris. The partnership assets proving insufficient to pay off in full the indebtedness of the firm, the claimant presented his demand, for the unsatisfied balance, for allowance against the individual estate of the deceased member of the co-partnership.

On trial had in the circuit court, on appeal from the probate court, the cause was submitted to the court on the following agreed statement of facts:

“That during the whole of the year 1882, and thereafter up to the time of the death of Madison S. Farris, the said Madison and Michael S. Farris were partners, doing business in the city of St. Joseph and Platte county, Missouri, under the firm name of M. S. Farris & Co.; that during the time they were so in partnership, to-wit, on the fourteenth day of February, 1882, the said firm borrowed from plaintiff for use in their business, as such partners, the sum of eight hundred and fifty dollars, and gave their note in their firm name therefor, payable to plaintiff twelve months after date, which note is on file with the transcript from the probate court of Buchanan county, sent up in this case; that on said note there was paid, March 1, 1884, $258.24, and on September 3, 1884, $238.83, and on July 1, 1885, $92.24, the last two payments having been paid by Michael Farris, as administrator of the estate of M. S. Farris & Company. Said Michael S. Farris, as surviving partner of said firm, was appointed and qualified as administrator of said partnership estate within one year before June 30, 1884, and the balance due on said note was duly presented and allowed by the probate court of Buchanan county, Missouri, against said partnership estate; that John Farris was duly appointed and qualified as administrator of the individual estate of Madison S. Farris, by the said probate court, and within one year before June 30, 1884, and within one year after the grant of the letters of administration on said individual estate, this said note was presented for allowance against said individual estate; that said John Farris has already paid of individual claims allowed against said individual estate, within said first year of his administration, other than the one in controversy, nearly all the money realized from the assets of said estate, and there is not sufficient of said assets to pay, in addition, on the claim in contest a per cent. thereof equal to the per cent. already paid on said other individual claims so allowed; that the individual estate is not sufficient to pay more than fifty cents on the dollar of the individual claims allowed within the first year against said individual estate, exclusive of the note or claim in contest in this suit; that the partnership estate of said M. S. Farris & Company is not sufficient to pay more than fifty per cent. of the claims allowed against said partnership estate; that said Madison S. Farris died on the ______ of ______, 1884.”

The claim was allowed by the court, but subject to the payment of claims of the individual creditors already allowed against the estate. From this judgment the claimant has appealed.

WOODSON & WOODSON, for the appellant.

I. The only question involved in this case is, whether or not the individual creditors of one member of a partnership firm have a priority or lien upon the separate or individual funds of that member who is dead, to the exclusion of the partnership creditors? We contend, not, and if not, the case must be reversed and remanded.

II. A creditor of one partner only, as to the separate property of such partner, has no priority over a partnership creditor. Shackelford v. Clark, 78 Mo. 491; Sparham v. Hubbell, 10 Metcalf (Mass.) 309; Brock v. Butcher, 25 Ohio St. 509; Randolph v. Daly, 15 N. J. (Eq.) 316; Gadsden v. Carson, 9 Rich. (S. C.) 252.

III. The obligation of partners, under our law, are several, as well as joint; consequently the right of the partnership creditor to resort at once to the separate estate of the partner, for satisfaction of a partnership debt, is precisely the same which attends the enforcement of any other several demand. Rev. Stat., sects. 660, 661; Shackelford v. Clark, 78 Mo. 491; Mason v. Tiffany, 48 Ill. 392; Story on Partnership, sect. 362; Collyer on Partnership, 560; Bank v. Cotterey, 70 Mo. 150.

IV. It has long been settled in this state that if the demand of the creditor consists of a personal obligation, he is at liberty to enforce it against the general property of the debtor, notwithstanding he may be possessed of security specially pledged and bound for its payment. Thornton v. Pico, 24 Mo. 249; Savings Association v. Mastin, 61 Mo. 425.

V. Upon a dissolution of the partnership each partner has a lien upon the partnership effects as well for his indemnity, as for his proportion of the surplus, but creditors have no lien (meaning an independent lien) upon the partnership effects for their debts; their equity is worked out through the equity of the partnership, assenting to the payment of the partnership debts. Parsons on Partnership [3 Ed.] 522; Shackelford v. Clark, 78 Mo. 491; 3 Kent's Comm. [5 Ed.] 65; Murray v. Murphy, 5 Johns. Ch. (N. Y.) 603; Bell v. Newlan, 5 Serg. & R. (Pa.) 78; Payne v. Matthews, 6 Paige (N. Y.) 19.

VI. The creditors of a partnership have a preference to have their debts paid out of the partnership funds, before the private creditors of either of the partners; but this preference is, at law, generally disregarded; in equity it is worked out through the equity of the partners over the whole funds. Shackelford v. Clark, 79 Mo. 492; 1 Story's Eq. Juris., sect. 675; Freeman v. Stewart, 41 Miss. 138.

VII. It is a settled rule in equity, that if a creditor holds two mortgages-- in a case like this, the books would style them quasi liens--upon two different estates to secure one debt, and a creditor of the same debtor has a later mortgage (or quasi lien), to secure his debt upon one only of the parcels, equity will require of the first mortgagee that he should exhaust the security he has in the parcel not covered by the second mortgage before he shall come upon the latter parcel. 2 Wash. Real Prop. [4 Ed.] 219; Evertson v. Booth, 19 Johns. 486; Adams' Equity [7 Am. Ed.] 272; Ingleheart v. Grau, 42 Ill. 261; Clark v. Bancroft, 13 Iowa, 329.

B. R. VINEYARD, for the respondent.

I. “The estate of the partnership would be settled, in case of dissolution by death, entirely on equitable principles, and we should have no doubt that they would require that the claims of the several creditors, and those of the joint creditors should be kept entirely distinct, each having its separate fund, and passing over to the other only in case of a surplus.” Parsons on Partnership [2 Ed.] side page 447-8; Story on Partnership [4 Ed.] sect. 363; Collyer on Partnership (Perkins' Ed.) sect. 920; 3 Kent's Commentaries [12 Ed.] side page 65; Bank v. Bank, 94 Ill. 278; Rainey v. Nance, 54 Ill. 35; Black's Appeal, 44 Pa. St. [8 Wright] 503; Wilder v. Keeler, 3 Paige, 171-2-3-4; Murrill v. Neill, 8 How. 426; Bond v. Nave, 62 Ind. 505; Wayer v. Thornburgh, 15 Ind, 124; Gray v. Chiswell, 9 Vesey, 118; Jarvis v. Brooks, 23 N. H. 136; Crockett v. Crain, 33 N. H. 542; Holton v. Holton, 40 N. H. 77; Irby v. Graham, 46 Miss. 425; McCulloch v. Dashiel, 1 Harr. and Gill. (Md.) 99; 3 Redfield on Wills [2 Ed.] p. 257, sect. 9; Phelps v. McNeeley, 66 Mo. 558; Cowan v. Gill, 11 Lea. (Tenn.) 674; Davis v. Howell, 33 N. J. Eq. 72; Toombs v. Hill, 28 Ga. 371; Smith v. Mallory, 24 Ala. 628.

II. Independent of our statute (Rev. Stat., sect. 658), making all contracts both joint and several (which it is submitted was only for the purpose of affecting the remedy) equity made all partnership debts, upon the dissolution of the partnership by insolvency, or the death of one of the partners, likewise joint and several, so that recourse could be had, in the first instance, against either the surviving partner at law, or the individual estate in equity for a partnership debt. But this could only be done subject to the priorities of the partnership creditors over the partnership estate, and of the private creditors over the private estate; so that our statute, making all contracts both joint and several, made no change in the law as affecting the priorities of the two classes of creditors. Authorities in Division I, especially Irby v. Graham (46 Miss. 425).

III. Even under the authority of Bank v. Keizer, 2 Duvall (Ky.) 169, S. C., 9 U. S. Digest, first series, page 879, sect. 1376, and Whitehead v. Chadwell, 2 Duvall (Ky.) 432, S. C., 9 U. S. Digest, first series, page 879 (both commented on in note to Brock v. Bateman in 15 Am. Law Reg. 216, 218), and under the authority of kindred cases cited by opposing counsel, permitting the partnership creditors, after the individual creditors shall have received from the individual estate a share of their claims equal to that which the partnership estate will pay to its creditors, to come into the individual estate as to the balance of the funds therein, and receive from such balance their pro rata proportion thereof, appellant has no merit in his appeal. The agreed state of facts shows that the individual estate of Farris will not pay more than fifty per cent. of the individual claims allowed against it, and that appellant will get, with what he has already received, that per cent. of his claim from the partnership estate....