Gay v. Ray

Decision Date01 March 1907
PartiesGAY v. RAY et al.
CourtUnited States State Supreme Judicial Court of Massachusetts Supreme Court
COUNSEL

Rogers, North & Johnson and Melvin M. Johnson, for plaintiff.

William A. Knowlton, John E. Hannigan, and Isidor Fox, for trustee in bankruptcy.

OPINION

SHELDON, J.

We are of opinion that the temporary injunction issued in this case on February 6, 1904, created an equitable lien upon the interest of the defendant Ray in the partnership of the defendants which is valid against the trustee appointed in bankruptcy proceedings begun on January 11 1906. We regard this question as settled by the decisions in Snyder v. Smith, 185 Mass. 58, 69 N.E. 1089, Metcalf v. Barker, 187 U.S. 165, 23 S.Ct. 67, 47 L.Ed. 122 and Pickens v. Roy, 187 U.S. 177, 23 S.Ct. 78, 47 L.Ed 128. And see 5 Cyc. 365, and the cases there cited. It was assumed that this was the correct rule in Mauran v. Crown Carpet Lining Co., 23 R.I. 324, 50 A. 331, 6 Am. Bankr Rep. 734, relied on by the trustee in bankruptcy, though there the equitable lien did not avail because it antedated the bankruptcy proceedings by less than four months.

But the trustee in bankruptcy contends that the rule of Snyder v. Smith, ubi supra, ought not to govern this case, because here no tangible assets have been attached, but simply an interest depending upon a contingency. He contends that there was no tangible thing to which the lien could attach itself, and draws the inference that for this reason there could be no lien in existence. But this conclusion does not follow. There is no greater difficulty in attaching an equitable lien to an interest which, though contingent, is hereafter to be worked out and made tangible by proceedings in equity, than there is in attaching a common law lien to a tangible and visible entity. So the ordinary attorney's lien upon a judgment obtained by him may be extended by statute to cover a mere cause of action upon its being put in suit. Smith v. C., R.I. & P. Railroad, 56 Iowa, 720, 10 N.W. 244; Wood v. Anders, 5 Bush (Ky.) 601; Kansas Pacific Railway v. Thacher, 17 Kan. 92. Our statute expressly provides that in such a suit as this, 'the interest of the defendant in partnership property may be reached and applied in payment of the plaintiff's debt.' Rev. Laws, c. 159, § 3, cl. 7; St. 1902, p. 483, c. 544, § 23. Full effect could not be given to this statute and the legislative intent would be frustrated if it should be held that the rule of Smith v. Snyder did not cover such a proceeding.

The interest of Ray which was held by this process was manifestly him share in the partnership, that is, the balance which would become due to him after the payment of all the firm debts and the adjustment of the accounts of the partners. Moore v. Rawson, 185 Mass. 264, 272, 70 N.E. 64; Pratt v. McGuinness, 173 Mass. 170, 172, 53 N.E. 380; Sanborn v. Royce, 132 Mass. 594; Tobey v. McFarlin, 115 Mass. 98; Foot v. Hunkins, 14 Allen, 15, 17; Peck v. Fisher, 7 Cush. 386; Allen v. Wells, 22 Pick. 450, 455, 456, 33 Am. Dec. 757; Hawes v. Waltham, 18 Pick. 451. The statute which gives this remedy expressly provides that unless the bill is brought to recover a judgment debt, 'the business of the partnership shall not be enjoined or otherwise interrupted further than to restrain the withdrawal of any portion of the debtor's share or interest therein until the plaintiff's debt is established.' Rev. Laws, c. 159, § 3, cl. 7; St. 1902, p. 483, c. 544, § 23. In this case accordingly, the injunction issued did not forbid the further prosecution of the business; and the defendants were at liberty, until the receiver was appointed on December 22, 1905, to carry on their business as before, and the right to dispose of their stock and duy new merchandise, to pay off old debts and to incur new ones continued; and the interest of both partners remained subject to the ordinary hazards of business. Plainly the rights of new partnership creditors whose claims accrued in the meantime must be superior to the rights of either partner; and it is equally plain that the plaintiff can hold the interest of Ray only as that interest was found to be, when the court finally interposed, took hold of the partnership property through its receiver, and proceeded to wind up the partnership affairs, and so to reach an actual determination of the amount of Ray's interest--the amount to which he would be entitled after payment of all the firm debts and a settlement of all the partnership accounts. If there is found to be any such interest in existence, the plaintiff is entitled to hold it; if not, the plaintiff's lien is lost by the destruction of the fund upon which it was a charge. The value of Ray's interest must therefore be settled as of the time when it can be actually determined, that is, at the time when the result of the liquidation of all partnership accounts shall have been reached.

It may be that the present state of affairs is such as to make it now evident to the parties whether the final liquidation of the partnership will show that the firm property is insufficient to pay the firm debts or whether there will be a balance left belonging to Ray which the plaintiff can hold. If the former is the case, then, subject to the payment of his fees and charges, the receiver appointed by the Supreme Judicial Court should turn over the property and assets in his hands to the trustee in bankruptcy. Mauran v. Crown Carpet Lining Co., 23 R.I. 324, 50 A. 331; Kimball v. Gafford, 78 Iowa, 65, 42 N.W. 583, 4 L. R. A. 398; Wilson v. Parr, 115 Ga. 629, 42 S.E. 5...

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  • Gay v. Ray
    • United States
    • United States State Supreme Judicial Court of Massachusetts
    • March 1, 1907
    ...195 Mass. 880 N.E. 693GAYv.RAY et al.Supreme Judicial Court of Massachusetts, Suffolk.March 1, Report from Supreme Judicial Court, Suffolk County. Action by Nelson M. Gay against George W. W. Ray and others. Reported. Exceptions of trustee in bankruptcy to master's report overruled. Certain......

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