Hundley v. Farris

• Decision Date: 02 February 1891
• Citation: 15 S.W. 312,103 Mo. 78
• Parties: Hundley, Appellant, v. Farris, Administrator
• Court: Missouri Supreme Court

15 S.W. 312

103 Mo. 78

Hundley, Appellant, v. Farris, Administrator

Supreme Court of Missouri, First Division

February 2, 1891

Appeal from Buchanan Circuit Court. -- Hon. J. P. Grubb, Judge.

Affirmed.

James W. Boyd and A. D. Kirk for appellant.

(1) The appellant is entitled to an unconditional judgment against the estate of Madison S. Farris. R. S. 1879, secs. 184, 185 and 212; McLean v. McAllister, 30 Mo.App. 107. (2) Because appellant is not only a partnership creditor of the firm of M. S. Farris & Co. but is also an individual and separate creditor of Madison S. Farris, and is entitled to share pari passu with the other individual creditors of the estate. R. S. 1879, secs. 658, 3467; McLean v McAllister, 30 Mo.App. 107; Shackelford's Adm'r v. Clark, 78 Mo. 491. (3) Under the statutes of this state (secs. 658, 3467) each member of a firm is liable individually and separately to a creditor of the firm. Therefore, every creditor of a firm is an individual and separate creditor of each member of the firm. 30 Mo.App. 107; Gates v. Watson, 54 Mo. 585; Bank v Cottey, 70 Mo. 150; Bryant v. Hawkins, 47 Mo 410; R. S., secs. 658-9. And if he is an individual creditor of the estate he is entitled, even at common law, to come in equally with the other individual creditors, although he may also be a firm creditor.

B. R. Vineyard for respondent.

The estate of a partnership must be settled, in case of dissolution by death, entirely on equitable principles, and they would require that the claims of the several creditors and those of the joint creditors should be kept entirely distinct, each having its separate fund, and passing over to the other only in case of a surplus. Upon such dissolution, the assets are placed in the custody of the law for distribution. Parsons on Partnership [2 Ed.] side p. 447-8; 2 Bates on Partnership [Ed. 1888] secs. 825, 828; 2 Lindley on Partnership [Ewell's Ed.] pp. 1054-5; Story on Partnership [4 Ed.] sec. 363; Collyer on Partnership [Perkins' Ed.] sec. 920; 3 Kent's Commentaries [12 Ed.] side p. 65; Level v. Farris, 24 Mo.App. 445; Bank v. Bank, 94 Ill. 278; Rainey v. Nance, 54 Ill. 35; Black's Appeal, 44 Pa. St. (8 Wright) 503; Wilder v. Keeler, 3 Paige Ch. 171-4; Murrill v. Neill, 8 How. 426; Bond v. Nave, 62 Ind. 505; Weyer v. Thornburgh, 15 Ind. 124; Gray v. Chiswell, 9 Vesey, 118; Jarvis v. Brooks, 23 N.H. 136; Crockett v. Crain, 33 N.H. 542; Holton v. Holton, 40 N.H. 77; Moody v. Downs, 63 N.H. 50; Bagwell v. Bagwell, 72 Ga. 92; Irby v. Graham, 46 Miss. 425; McCulloh v. Dashiell, 1 Harr. and Gill (Md.) 96; 3 Redfield on Wills [2 Ed.] p. 257, sec. 9; Phelps v. McNeeley, 66 Mo. 558; Cowan v. Gill, 11 Lea (Tenn.) 674; Davis v. Howell, 33 N.J.Eq. 72; Toombs v. Hill, 28 Ga. 371; Smith v. Mallory, 24 Ala. 628; Rogers v. Meranda, 7 Ohio St. 179. (2) Independent of statute, equity has always construed all partnership contracts to be joint and several. 3 Kent's Commentaries [12 Ed.] side p. 64; Wilder v. Keeler, 3 Paige, 167; Irby v. Graham, 46 Miss. 428; McCulloh v. Dashiell, 1 H. & G. (Md.) 96; Story on Partnership, sec. 362; Level v. Farris, 24 Mo.App. 459-60-1. Yet in the distribution of the estate of a deceased partner equity has always held that the individual creditors of that estate had a prior claim upon its assets, and must be paid in full before the partnership creditors could share therein. See authorities cited in division 1 of this brief. (3) The statute of this state (sec. 658) requiring all joint contracts to be construed as joint and several, and making provision (sec. 3467) for a suit against anyone liable, or his administrator, without the necessity of uniting with him as defendants the other joint contractors, was intended only to affect the mode of procedure, "and does not affect the law of contracts as it existed prior to its enactment." Clark v. Cable, 21 Mo. 225; Ryan v. Riddle, 78 Mo. 522; Level v. Farris, 24 Mo.App. 460. (4) "Statutes making partnership debts joint and several were not intended to affect the distribution of funds, and do not give the joint creditors a right to participate pari passu with the separate creditors after exhausting the joint estate." 2 Bates on Partnership, 1888, sec. 828; Level v. Farris, 24 Mo.App. 445; Irby v. Graham, 46 Miss. 425; Smith v. Mallory, 24 Ala. 628. (5) The statutes of this state, providing for the classification of demands against the estate of deceased persons (sec. 184) and for the payment thereof (sec. 212) were not intended to disturb the prior rights of creditors already existing. "The equality required by them is subordinate to the settled equities and priorities of different grades and classes of creditors." Rogers v. Meranda, 7 Ohio St. 192, at top; Irby v. Graham, 46 Miss. 431-2; Level v. Farris, 24 Mo.App. 461-2; Smith v. Mallory, 24 Ala. 628; Black's Appeal, 44 Pa. St. 508, approving the separate opinion of Mr. Justice Gibson in Bell v. Newman, 5 S. & R. 91, and disapproving the conclusions of the rest of the court in that case.

Sherwood, P. J. Barclay, J., dissents.

OPINION

Sherwood, P. J.

This cause originated in the probate court of Buchanan county, from whose judgment plaintiff appealed to the circuit court where the cause was tried on the following agreed statement of facts:

"That during the whole of the year 1882, and thereafter, up to the time of the death of Madison S. Farris, the said Madison S. Farris and Michael Farris were partners, doing business in the city of St. Joseph and Platte county, Missouri, under the firm-name of M. S. Farris & Co.; that during the time they were so in partnership, to-wit, on the first day of February, 1884, said firm borrowed from plaintiff, for use in their business as such partners, the sum of $ 10,000 and gave their note in their firm-name therefor, payable to plaintiff one day after date, which note is on file with the transcript from the probate court of Buchanan county, sent up in this case; that on said note there was paid September 4, 1884, $ 3,075.83, and on July 1, 1885, $ 1,234.70, which said payments were made by Michael Farris, as administrator of the estate of M. S. Farris & Co., and as dividends on claims allowed by the probate court.

"Said Michael Farris, as surviving partner of said firm, was appointed and qualified as administrator of said partnership estate within one year before January 30, 1884, and the balance due on said note, no payments having been then made, was duly presented and allowed by the probate court of Buchanan county, Missouri, against said partnership estate; that John Farris was duly appointed and qualified as administrator of the individual estate of Madison S. Farris by said probate court, and, within one year after the granting of letters of administration on said individual estate, this said note was presented for allowance against said individual estate, subject to the dividend so paid; that said John Farris has already paid of individual claims allowed against said individual estate, within said first year of his administration, other than the one in controversy, nearly all the money realized from the assets of said estate, and there is not sufficient of said assets to pay in addition on the claim in contest a per cent. thereof equal to the per cent. already paid on said other individual claims so allowed; that the individual estate is not sufficient to pay more than fifty cents on the dollar of the individual claims allowed within the first year against said individual estate, exclusive of the note or claim in contest in this suit; that the partnership assets have been about exhausted and will not pay more than fifty per cent. on partnership demands.

"The partnership estate of said M. S. Farris & Co. is not sufficient to pay more than fifty per cent. of the claims allowed against said partnership estate; that this claimant has received his full pro rata of the assets of said partnership estate, the assets of said partnership estate being fully exhausted; that said Madison S. Farris died on the day of 1884."

This was all the evidence introduced or offered in the case on either side. The note mentioned in the agreed statements of facts was not read in evidence, nor is a copy of it preserved in the bill of exceptions. There were no instructions or declarations of law asked or given. The court, on the agreed statement of facts, allowed plaintiff's claim against the individual estate of Madison S. Farris, deceased, but, finding it to be a partnership debt of M. S. Farris & Co., allowed it subject to the payment in full first of the individual debts theretofore allowed and proved in the probate court against the individual estate of said deceased, and rendered its judgment accordingly. The case was tried at the January term, 1886, of the circuit court, and at that term motions for a new trial and in arrest were filed by the plaintiff, overruled by the court, and the case appealed to this court.

Touching the principle involved in this litigation, Chancellor Kent remarks: "The joint creditors have the primary claim upon the joint fund, in the distribution of the assets of the bankrupt or insolvent partners, and the partnership debts are to be settled before any division of the funds takes place. So far as the partnership property has been acquired by means of partnership debts, those debts have, in equity, a priority of claim to be discharged; and the separate creditors are only entitled in equity to seek payment from the surplus of the joint fund after satisfaction of the joint debts.

"The equity of the rule, on the other hand, equally requires that the joint creditors should only look to the surplus of the separate estates of the partners, after payment of the separate debts. It was a principle of the Roman law, and it...