8 S.W. 170 (Mo. 1888), Lyons v. Murray

• Judge: Black, J. Ray, J., absent.
• Citation: 8 S.W. 170,95 Mo. 23
• Date: 07 May 1888
• Docket Number: .
• Parties: Lyons et al., Plaintiffs in Error, v. Murray, Administratrix
• Court: Missouri Supreme Court

Page 170

8 S.W. 170 (Mo. 1888)

95 Mo. 23

Lyons et al., Plaintiffs in Error,

v.

Murray, Administratrix

Supreme Court of Missouri

May 7, 1888

Error to Hannibal Court of Common Pleas. -- Hon. Theodore Brace, Judge.

Reversed and remanded.

W. H. Biggs for plaintiffs in error.

(1) If one partner pays the debts of his firm with his individual money or property, he to that extent becomes a creditor of his firm, and is entitled to be paid as such. Kendall v. Rider, 35 Barb. 100; Morris v. Morris, 4 Gratt. 293; Averell v. Loucks, 6 Barb. 477: Bisby v. Lawrence, 11 Paige, 387; Adams v. Sturgis, 55 Ill. 468. Where the creditors of a firm have resorted to the separate estate of one of the partners, thereby exonerating the partnership estate so as to produce a surplus of firm assets, in case of the insolvency of the partner whose property has been taken, his separate creditors will have an equitable lien on such surplus to the extent to which the individual property of the partner has been applied to the discharge of firm obligations. Ex parte Reid, 2 Rose [Eng.] 84; Story on Partnership [2 Ed.] 583; Averell v. Loucks, 6 Barb. 477; Bisby v. Lawrence, 11 Paige, 387. The authorities cited establish the doctrine that when one partner, either voluntarily or otherwise, pays the debts of his firm with his individual money he thereby becomes a creditor of his firm, and has the right to be subrogated to all the rights of the creditor whose debt he has paid. (2) Plaintiffs are without any remedy at law. Murray was dead at the time this suit was instituted and plaintiffs' only remedy was a bill in equity in the nature of a creditor's bill or an equitable garnishment. Pendleton v. Perkins, 49 Mo. 565; Lackland v. Garesche, 56 Mo. 271; Pickens v. Dorris, 20 Mo.App. 1; Luthy v, Wood, 1 Mo.App. 167; Carr v. Parker, 10 Mo.App. 364.

Smith, Silver & Brown and W. P. Harrison for defendant in error.

(1) The petition cannot be sustained on the theory that it is a bill to set aside a transfer of property in fraud of creditors. (a) It is not averred that Luce received the money with notice of any intent on the part of Murray to defraud his creditors. Wise v. Weimer, 23 Mo. 237; Spaulding v. Myres, 64 Ind. 265; Klein v. Horne, 47 Ill. 430; Kinder v. Nacy, 7 Cal. 206; Skinner v. Stewart, 39 Barb. 206. (b) It is not averred that Murray had any intent to commit or to participate in any fraud. Authorities, supra. (c) The money was paid under an order of distribution to pay an allowance of the probate court, and was paid to satisfy a firm debt which the firm had not paid. Both the allowance and order of distribution were judgments of the probate court. Smith v. Sims, 77 Mo. 269; State ex rel. v. James, 82 Mo. 516; Johnson v. Beazley, 65 Mo. 250. (d) Where a creditor seeks aid as to personal property alleged to have been transferred in fraud of creditors, he must not only show a judgment against his debtor, but an execution sued out and pursued to every available extent. Jones v. Green, 1 Wallace, 330; Young v. Frier, 9 N. J. 465; Barrow v. Bailey, 5 Fla. 9; Kerr on Fraud, 45, note. (e) Being assets of the partnership estate, which was in the probate court in process of administration, the plaintiffs cannot maintain their bill to subject the money in question to their specific debts. The probate court has exclusive jurisdiction over assets of the estate. Titterington v. Hooker, 58 Mo. 595. (2) Partnership property must first be applied to the payment of partnership debts, and the actual interest of each partner in the partnership stock is the balance found due him after payment of all partnership debts and the adjustment of partnership accounts between the partners. Sheedy v. Bank, 62 Mo. 18; Lyndon v. Gorham, 1 Gall. 367; Dyer v. Clark, 5 Met. 575; Taylor v. Farmer, 6 West. Rep. 710; Baily v. Brownfield, 20 Pa. St. 45; Fessler v. Hickernell, 82 Pa. St. 152. (3) Where one partner has paid a firm debt he is not entitled to subrogation against his partner until an account is settled between them, for such account is necessary to determine which is the debtor partner. Baily v. Brownfield, 20 Pa. St. 45, supra. (4) The petition does not state a case for an account between partners. It neither states nor prays for an account. Pope v. Salsman, 35 Mo. 362. (5) The petition cannot be sustained on the theory of an equitable garnishment, for the latter must necessarily have for its basis a claim which Luce, the party sought to be charged as such garnishee, could enforce in equity against Murray. Atwood v. Hale, 17 Mo.App. 81; Freeman on Ex., sec. 160. (6) Luce received the money under an order of distribution, made in pursuance of an allowance in the probate court. Both were judgments of the court, and if not appealed from are assailable for fraud only in their procurement. Smith v. Sims, 77 Mo. 269; State ex rel. v. James, 82 Mo. 516; Johnson v. Beazley, 65 Mo. 250; Rowden v. Brown, 9 Mo. 429. (7) If the money was paid by Murray and received by Luce in fraud of creditors, as charged in the bill, and which plaintiffs are estopped to deny (91 Mo. 560), Murray could not recover it back from the former. Larrimore v. Tyler, 88 Mo. 661. (8) The petition cannot be sustained as a bill to marshal assets, because our statute of administrations has superseded the equitable doctrine in that regard. Titterington v. Hooker, 58 Mo. 593. Besides such marshalling can be asserted in equity only where a creditor has a lien on two funds in the hands of the same debtor, and another creditor has a lien on only one of the funds; in such case the first may be compelled in equity to make his debt out of the fund to which the other cannot resort. Fessler v. Hickernell, 82 Pa. St. 153; Ex parte Kendall, 17 Ves. 514. This case is further complicated by the fact that the fund is in the hands of Luce's estate, a stranger to plaintiffs. (9) Nor can the petition be sustained as one directly assailing the order of distribution under which Murray paid the fund in question to Luce. (a) It does not charge fraud in the procurement of said order. Smith v. Sims, 77 Mo. 269. (b) A petition of that character should state facts constituting the alleged fraud; even charging that the order was fraudulently obtained would be insufficient. Smith v. Sims, supra. (c) The order of distribution was a judgment of the probate court and assailable only as such. State ex rel. v. James, 82 Mo. 516; Rawden v. Brown, 91 Mo. 429. (d) The payment of the allowance before the order of distribution was made might have been a good defence to such order,...