Wilson, &C. v. Soper, &C.

• Decision Date: 30 December 1852
• Citation: 52 Ky. 411
• Parties: Wilson, &c. <I>vs.</I> Soper, &c.
• Court: Kentucky Court of Appeals

52 Ky. 411

Wilson, &c. vs. Soper, &c.

Court of Appeals of Kentucky.

December 30, 1852.

ERROR TO BOURBON CIRCUIT.

Judge SIMPSON delivered the opinion of the court.

Mark Duvall and Samuel J. Duvall were partners in merchandising, and at the time of the death of the latter, which occurred in September, 1849, the firm owed a debt of considerable magnitude. After his death, J. J. Moore administered on his estate, and in conjunction with Mark Duvall, the surviving partner, made an invoice of the stock of merchandise on hand; one-half of which the administrator sold to the surviving partner, and took his note for the price, with the understanding that the contract of sale was not to be considered executed until the purchaser gave security for the payment of the purchase money. The parties afterwards agreed that the purchaser should be appointed guardian for the children of the deceased partner, and when he was so appointed, and had given bond with security, the sale should be regarded as consummated, and the price of the goods remain in his hands as guardian. He was accordingly appointed guardian, and having executed bond with security, was considered as the owner of the goods by purchase, and used them as his own individual estate. He subsequently executed a deed of trust, transferring all the goods on hand, and all the debts due to the firm, and such as had accrued during the time that he had carried on the business in his own name after the death of his partner, and other individual property and effects to trustees, to be applied to the payment of certain designated debts in the order prescribed by the deed of assignment. — Some of his creditors exhibited their bills in chancery, impeaching the deed upon the ground of fraud. The administrator of the deceased partner filed a bill, insisting that he had a lien on the whole of the partnership assets for the payment of the partnership debts, and that this lien was available against the deed of assignment. Several of the partnership creditors were made parties in the suits, who also asserted a claim to a lien on the partnership effects for the payment of their debts. All the suits were consolidated and tried together.

The circuit court decreed that the partnership creditors were entitled to the proceeds of all the goods contained in the deed of trust, and also all the debts due for merchandise, including those that were created after the dissolution, as well as those that were due to the partnership, and also that they were entitled to the price of the goods sold by the administrator to the surviving partner, for which he and his sureties in his guardian's bond were held liable; but the property embraced in the deed of trust, which the guardian had conveyed for the indemnity of his sureties, and which was his own individual estate, was first subjected to the satisfaction of this liability.

The sureties in the guardian's bond, and the beneficiaries under the deed of trust, have appealed from that decree.

The circumstances relied upon to establish fraud in the execution of the deed of trust, we deem insufficient for that purpose, so that the questions presented for consideration, are those that arise out of the sale made by the administrator of the deceased partner, and the subsequent execution of the deed of trust by the surviving partner.

1. Upon the dissolution of a partnership by death, the personal representative of the deceased partner becomes tenant in common with the survivor of all the partnership property and effects in possession, there being a distinction between such property in possession, and mere choses in action, debts, and other rights of action belonging to the partnership, which vest in the survivor. (Gow on Part. ch. 5, § 4, p. 377; Story on Partnership, § 346, p. 517.) The surviving partner, however, has the right to control and dispose of the partnership effects for the purpose of paying the partnership debts and liabilities, and to settle and wind up the business of the firm.

2. As the administrator of the deceased partner was tenant in common with the survivor, of the partnership effects in possesson, it results that he had the power to sell and dispose of one undivided moiety of the stock of goods on hand, and thereby vest the surviving partner with the title to the whole stock. It is competent for the partners, in the case of a voluntary dissolution, to agree that the joint property of the partnership shall belong to one of them, and if the agreement be made in good faith and for a valuable consideration, it will transfer the whole property to such partner free from the claims of the joint creditors. (Story on Part. § 358, p. 536.) This result would seem necessarily to ensue in such a case, from the principle that the creditors of the partnership have no lien upon the partnership effects for their debts; but whenever such a lien can be asserted, it is derived from one of the partners, and is the equity of the partner operating to the payment of the partnership debts. (3 Kent's Com. 65; Story on Part. § 360, p. 538.) Being derivative merely, it fails whenever the partner has done any act by which he has divested himself of the lien, the benefit of which is claimed by the creditors. If the agreement by which the right to the partnership effects is transferred to one of the partners, by the other partner, be fraudulent, and done with the intent to defeat the creditors in the collection of their debts, they would have a right to apply to a court of chancery to be relieved from the effect of the fraud; but, in such a case, they would have an original and independent equity not derived from the partner who made the transfer, but founded on the fraudulent conduct and acts of the parties to the transaction.

We are not able to perceive any good reason why the sale made by the administrator, to the surviving partner, of the stock of merchandise on hand, should not have the same effect that a sale made by his intestate in his lifetime would have had. Such a sale would have invested the purchaser with a full and complete title to the property, discharged from the lien of his partner, and the quasi lien of the...