Hapgood v. Cornwell

• Decision Date: 30 September 1868
• Parties: CHARLES H. HAPGOOD et al.v.CORNELIUS CORNWELL et al.
• Court: Illinois Supreme Court

48 Ill. 64

1868 WL 5048 (Ill.)

95 Am.Dec. 516

CHARLES H. HAPGOOD et al.

v.CORNELIUS CORNWELL et al.

Supreme Court of Illinois.

September Term, 1868.

APPEAL from the Superior Court of Chicago; the Hon. JOHN A. JAMESON, Judge, presiding. The opinion states the case.

Mr. GEORGE PAYSON, for the appellants.

Messrs. JONES & GARDNER, for the appellees.

Mr. JUSTICE LAWRENCE delivered the opinion of the Court:

Amory Bigelow, Gilbert F. Bigelow, and David Burr, were partners in business in Chicago. Hapgood, the appellant, as trustee for Amory Bigelow's wife, had loaned to him a considerable sum of money, which had come to her from her grandfather. Fearing that the money was in peril, he urged Bigelow to secure it, and suggested to him to buy out his partners and turn over to him the stock. Bigelow did this, whereupon the appellees, who were creditors of the firm, and had obtained a judgment, brought a bill in chancery against Hapgood and the members of the firm, and the court decreed the payment of their judgment by Hapgood. From this decree he appealed.

The first question in this case is, was Hapgood practicing a fraud or a wrong upon the creditors of the firm, by suggesting that Amory Bigelow should buy the interest of his partners and secure the debt to him with the firm assets. It would undoubtedly have been a wrong, if the law recognized the firm creditors as having a superior equity to that of individual creditors, for payment from the partnership assets. But it does not. It recognizes the members of the partnership as having a superior lien on the partnership property for the payment of the firm debts and allows the creditors to avail themselves of this lien, to the exclusion of individual creditors, where it has not been surrendered by the partners. But it is the equitable lien of the partners that is worked out for the benefit of the creditors, and not a lien inhering in the creditors themselves. Thus, if all the members of a firm agree to the appropriation of firm property in payment of an individual debt, due from one of the members, the creditor would take the property discharged of any claim or equity of the partnership creditors, and this, because the members of the firm have expressly parted with their lien, and the creditors have none except through the partners. The same result follows from a sale to one partner by the others. The purchasing partner may use the goods in payment of the partnership or of his individual debts, as he may prefer, and it cannot invalidate the transaction that the purchase is made with the express intention of turning over the goods to the creditor of the purchasing partner. If that can be done directly with the consent of all the partners, it can certainly be done through the indirect medium of a sale to one of them. It also necessarily follows, if the law holds such a transaction legal, and acknowledges no inherent claim to priority on the part of firm creditors, that an individual creditor is guilty of neither wrong nor fraud in requesting his debtor to procure the consent of his co-partners, either by purchase or otherwise, to a surrender of partnership...