Johnson v. Shirley

• Decision Date: 19 April 1899
• Docket Number: 18,586
• Citation: 53 N.E. 459,152 Ind. 453
• Parties: Johnson et al. v. Shirley, Assignee, et al
• Court: Indiana Supreme Court

53 N.E. 459

152 Ind. 453

Johnson et al. v. Shirley, Assignee, et al

No. 18,586

Supreme Court of Indiana

April 19, 1899

From the Boone Circuit Court.

Affirmed.

Patrick H. Dutch and Winton A. Dutch, for appellants.

A. J Shelby, S. R. Artman, T. J. Terhune and Ralston & Keefe for appellees.

OPINION

Jordan, J.

On and prior to the 12th day of December, 1896, William S. Jett and George W. Johnson were equal partners engaged as merchants in the sale of hardware and implements at Lebanon, Indiana, under the firm name of "Jett & Johnson." On that day, the firm being insolvent, these partners made a voluntary assignment of its assets and property to the appellee, George C. Shirley, under the provisions of the insolvent laws, for the benefit of all of the creditors of said firm. The deed of assignment was duly recorded on that day, and appellee, as the trustee thereunder, assumed and entered upon the discharge of the duties of said trust. On the 11th day of December, 1896, George W. Johnson executed to appellant, his wife, a chattel mortgage upon the undivided one-half interest in this stock of hardware and implements. On the same day he also executed a chattel mortgage upon the same interest to his brother, James M. Johnson, a co-appellant herein. Both of these instruments were executed to secure antecedent debts owing by said mortgagor in his individual capacity, such debts being in no manner liabilities against the firm of Jett & Johnson. The mortgages were duly recorded on the 12th day of December, 1896, in the recorder's office of Boone county, Indiana. The debts secured by these mortgages aggregate $ 3,306. The mortgages upon their face, do not purport to be executed by the firm of Jett & Johnson, nor is there anything therein to indicate or show that they have any connection whatever therewith. They each recite that George W. Johnson, of Boone county, Indiana, etc., does "hereby sell and convey" to the mortgagee therein named "the goods and chattels described as follows, to wit: The undivided one-half interest in the stock of hardware merchandise, consisting principally of hardware, cutlery, firearms, nails, stoves, woodenware, implements, farm machinery," etc. The situs of the stock of hardware mentioned in the mortgage is stated, and it is provided in the instrument that, in the event Johnson, the mortgagor, paid the debt secured, etc., then the conveyance was to be void, and it was further provided therein that he was to retain possession of the property until the maturity of the indebtedness, etc. On the same day that Johnson executed this mortgage, his co-partner, Jett, also executed similar mortgages upon his undivided one-half interest in this stock of hardware to secure an antecedent indebtedness of his own.

Appellee, as assignee, presented a petition to the lower court for the purpose of obtaining an order for the sale of the partnership property assigned to him by this firm, the proceeds of such sale to be applied first in the payment of the debts of the late firm of Jett & Johnson. Appellants, together with the mortgagees, under the mortgages executed by Jett, were, on their own application, made parties defendant to this petition and each separately filed cross-complaints setting up his respective chattel mortgage, and asking that in the event the property was sold by the assignee under the court's order, he be directed first to apply pro rata the proceeds arising out of the sale upon the indebtedness secured by the mortgages held by the cross-complainants, etc.

On the issues joined upon the pleading, the court, upon hearing the petition and the matters in issue, ordered that the property be sold by the assignee, including that embraced in the mortgages, free from all liens, and that the proceeds arising out of the sale be applied as follows: First, to the payment of the costs and expenses of the assignment; next, to the payment in full of the claims and debts of the firm of Jett & Johnson; and that the remainder of such proceeds be applied one-half thereof pro rata to the indebtedness secured under appellants' mortgages, etc.

Appellants each moved for a modification of the judgment to the effect that the court order that one-half of the proceeds accruing from the sale of the property be applied first to the payment of the expenses of the assignment, and that the remainder of said one-half be applied to the payment in full of the claims held by appellants against George W. Johnson, and secured by the mortgages in question; and, if any portion of the undivided half of such proceeds remained after the payment in full of these individual claims, that it be applied upon the indebtedness of the firm of Jett & Johnson. These motions were each overruled, as were likewise the motions for a new trial, filed upon the part of appellants. The firm creditors of Jett & Johnson, upon application to this court, have been permitted to intervene in this appeal, and they, through their counsel, join the assignee in resisting a reversal of the judgment of the lower court.

The contention of the learned counsel for appellants is that the chattel mortgages in controversy are shown to have been executed to appellants by George W. Johnson, of the firm of Jett & Johnson, prior to the assignment, with the consent of Jett, his co-partner. Therefore the insistence is that they must be considered and held to be a lien upon the undivided one-half of the property held by that firm, and consequently that appellants thereby are preferred over the partnership creditors. On the other side it is insisted by the learned counsel for the appellees and the interveners that under the circumstances in this case the mortgages in question must be limited, and considered only as embracing the interest of Johnson in the firm property remaining after the payment of the firm debts and the settlement of the partnership accounts; hence, the application of the proceeds arising out of the sale of the property, as directed to be applied by the court, was proper.

It is contended that there is nothing in either of the mortgages in dispute to indicate that they were intended to cover the corpus of the firm property. Counsel say: "Each of the mortgages is executed by George W. Johnson in his individual capacity, and neither attempts in any way, upon its face, to be a mortgage by the firm upon firm property, or a mortgage by the individual member of the firm, with the consent of his co-partner, upon the corpus of the firm property." While in fact a partnership is composed of individual members, still a firm so constituted is recognized as a distinct legal entity different and distinct from the persons who compose it. Henry v. Anderson, 77 Ind. 361. Therefore, the principle is universally recognized that a partner's interest in or title to the firm property is not an interest in or title to any specific property. The effects or property of the partnership belong to the firm so long as it exists, and not to the members who compose it. The share or interest of each of its members is the ultimate balance of the firm's property or effects after the payment in full of its debts and obligations and the adjustment or settlement of accounts between him and his co-partners. Conant v. Frary, 49 Ind. 530; Meridian Nat. Bank v. Brandt, 51 Ind. 56, and cases there cited; Donellan v. Hardy, 57 Ind. 393; ...