Hartley v. White

• Decision Date: 03 May 1880
• Citation: 94 Pa. 31
• Parties: Hartley v. White.
• Court: Pennsylvania Supreme Court

94 Pa. 31

Hartley v. White.

Supreme Court of Pennsylvania.

May 3, 1880

March 15, 1880

1. Where a partner, for the purpose of paying his individual debts, sells firm property without the knowledge of his co-partners and with the intent to defraud firm creditors the purchaser acquires no title as against said creditors.

2. A judgment was entered in such a form as to contain a reference to an Act of Assembly and to a case in the Law Reports. Held, that such an error was not fatal, and that it could be amended by striking out the references.

Before SHARSWOOD, C. J., MERCUR, GORDON, PAXSON, TRUNKEY and STERRETT, JJ.

GREEN J., absent.

Error to the Court of Common Pleas of Susquehanna county Of July Term 1878, No. 43.

Attachment-execution by Norman White and D. K. Morss, assignee of said Norman White, against M. J. Decker and Andrew Halstead, defendants and Silas Hartley, garnishee. Service was had on Halstead one of defendants, and Hartley. A rule was taken on the garnishee to take interrogatories, who filed answers and the same day pleaded " nulla bona. "

At the trial, it appeared that in 1870 Decker & Halstead were in partnership in the mill and lumbering business, and about that time borrowed $2000 from White for the use of the partnership. On July 27th 1872, White entered judgment on the note given for this loan. After their property had been sold by the sheriff, White assigned to Morss one-half of the judgment entered, under a stipulation that White's part of the judgment was to be paid out of the proceeds of the sheriff's sale, and if anything remained it was to apply on that part of the judgment assigned to Morss. Under the auditor's report, Morss received $105.57, and at another time about $101. The rest of the judgment, $1250.20, remained unpaid. And for this, on June 24th 1875, Morss issued this attachment-execution against Hartley as garnishee, on the ground that he had in his possession property which belonged to the firm of Decker & Halstead.

It appeared, that on December 2d 1872, Hartley bought from Halstead certain notes and judgments, taken by Decker & Halstead in their firm business, amounting in the aggregate to $2050, for which he paid him $753, of which sum, $35.21 was a debt due by the firm to him, and the rest in notes which he held of Halstead individually, except $225, which he paid on a note of Halstead's, held by one Stewart. When these notes were bought the firm was greatly involved, and they were sold without the knowledge of Decker, who had purchased Halstead's interest in the firm. Some time after the notes were sold the firm became insolvent. Hartley, as he alleged, collected about $700 of the notes.

In the general charge, the court, Morrow, P. J., inter alia, said: " Hartley claims he purchased of Halstead, about December 2d 1872, notes and judgments owned by Decker & Halstead, amounting to $2050, and paid him therefor $753, of which $35.21 was a debt held against them, and the rest was in notes he held against Halstead alone, except $225, which he paid on a note one Stewart had against Halstead. He swears that he considered many of these notes almost or entirely worthless, but that the purchase was made with the knowledge and express consent of Decker. This Decker denies in toto, except as to the Gifford note, as you will recollect his evidence in regard to that in connection with Mrs. Gifford's evidence. The plaintiff claims to recover the amount yet unpaid on his judgment against Decker & Halstead, $1250.20, if the jury find the notes in the possession of Hartley are of that value. If not of so great value, then to recover an amount equal to their value. He bases his right to recover on the ground that the transfer of the notes assigned to Hartley was fraudulently made, the fraudulent purpose being to pay the individual debts held against Halstead out of the firm property, and to prevent the same from being applied to firm debts. If the jury find the transfer was fraudulent, and was made for the purpose stated, and Hartley, colluding with Halstead, or with Decker & Halstead, obtained the notes, & c., knowing they were the property of the firm, it was void, and the plaintiff may recover whatever they were worth. This for the reason Hartley acquired no title as against the creditors of Decker & Halstead. They may follow and seize them in his hands as firm property. Or, if the jury find that Hartley obtained the notes and judgments from Halstead in payment of the debts against Halstead, without the knowledge or consent of Decker, knowing them to be firm property, the plaintiff may recover their value. This for the reason that by the action of Halstead the firm were not deprived of their title to this property, and could maintain suit therefor; this being the fact, the creditors of Decker & Halstead could reach and hold them upon attachment-execution.

One partner cannot use the property of the firm to pay individual debts, even if the act is honest and in good faith if his copartners had no knowledge of the transaction, if such transfer prevents the creditors of the firm from collecting their debts. A different rule prevails if both parties consent bona fide to the transfer. You will recollect that Hartley swears Decker did consent to it.

Fraud is not presumed; the burden is on the party alleging fraud to establish it by satisfactory evidence."

The court directed the jury to find a special verdict, and stated to them all the facts their finding should cover, calling their attention to evidence bearing upon each proposition they were to determine and find in their verdict.

The jury found the following special verdict: " We find that the money for which the note was entered in No. 715, August T. 1872, was borrowed by Decker & Halstead, copartners, and used in their partnership business, of which $1250.20 remain unpaid. Attachment execution served July 24th 1875. That Silas Hartley, garnishee, obtained from Andrew Halstead about the 2d of December 1872, notes and judgments amounting to about $2000, face value; that the notes and judgments belonged to and were the property of Decker & Halstead when so assigned and transferred. That he has collected on these notes $700, and has given up other notes to the makers and included in notes taken in his own name to the amount of $723. That the interest on $700 is $210, and on the $723 is $216.90, computed by us for five years. We find that the notes and judgments not collected, surrendered, were of the value of $125 when they were transferred to Hartley, interest on same for five years, being $37.50. We further find that the value of the notes surrendered by Hartley to the makers and new notes taken by him, and now uncollected, were of the value of $578.40, interest thereon for five years, $173.50. For all the notes and judgments which Hartley received from Halstead he paid Halstead $493.53 by delivering to him his notes and accounts he held against Halstead individually, and also paid a note of about $225, which one Stewart held against Halstead. He also applied payment of a debt he had against Decker & Halstead of $35.21, making a total of $753.74. We further find that the transfer of these notes adjudged was fraudulent and intended by Halstead and Hartley to be in payment of Halstead's private debts, and to prevent the same from being used and applied in the payment of the firm debts of Decker & Halstead, and the transfer was in the absence and without the knowledge or consent of M. J Decker,...