Russell v. Cole
| Decision Date | 22 October 1896 |
| Citation | 44 N.E. 1057,167 Mass. 6 |
| Parties | RUSSELL et al. v. COLE. |
| Court | United States State Supreme Judicial Court of Massachusetts Supreme Court |
Charles A. De Courcy and Walter Coulson, for plaintiffs.
Charles H. Sprague, for defendant.
The conveyance by Martin to Russell was, on the part of Martin fraudulent as against creditors, and in contravention of the statute relating to insolvency. But Russell had no knowledge of this fact, and did not in any way participate in the fraud. The contract, therefore, took effect according to its terms. Russell became a co-partner with Martin, and the goods sold became partnership property. The rights of Russell, who bought in good faith, for a valuable consideration, were not in any way affected by the fraud of Martin, of which he was ignorant. The property which thus became assets of the partnership under the contract could not afterwards be attached on a debt against one of the partners, and the defendant, as attaching officer, acquired no valid title. Sanborn v. Royce, 132 Mass. 594; Pelletier v. Couture, 148 Mass. 269-271, 19 N.E. 400.
The action was rightly brought in the name of both members of the firm, notwithstanding the proceedings in insolvency against Martin. Fish v. Gates, 133 Mass. 441; Fay v. Duggan, 135 Mass. 242; Hyde v. Food Co., 160 Mass. 559, 36 N.E. 585. The fact that Martin was guilty of a fraud in forming the partnership before the attachment was made does not prevent the maintenance of the action. The principle of the decision in Homer v. Wood, 11 Cush. 62, is not to be extended to cases like the present. As, according to the finding of the auditor, the goods became partnership property even as to creditors, notwithstanding the fraud of Martin, the suit against the defendant for attaching it wrongfully does not involve any question in regard to the right of Martin to rescind or repudiate the contract, nor bring his previous conduct within the issue. The defendant's act in attaching the partnership property was a trespass, and the owners of the property or parties in possession of it might sue for damages without regard to the question whether one of them, in a previous transaction, had been guilty of a wrong against third parties. Hall v. Corcoran, 107 Mass. 251; Newcomb v. Protective Department, 146 Mass. 596-602, 16 N.E. 555; Stillings v. Turner, 153 Mass. 534, 27 N.E. 671.
The remaining question in the case is whether the defendant is entitled to show, in mitigation of damages, that he delivered the property to the assignee in insolvency of Martin. After the commencement of the proceedings in insolvency, Russell alone had a right to the possession of the property. The assignee of Martin was only entitled to a share in the surplus of the partnership assets, if anything remained after paying the debts. The partnership, being solvent, through the solvency of the partner Russell, was not brought into the court of insolvency, and that court acquired no jurisdiction to settle its affairs. It is to be remembered that our courts of insolvency are creatures of the statute, and that they have no jurisdiction except that which the statute gives to them. Their only jurisdiction over partnerships is conferred by Pub.St. c. 157, § 120, et infra. It is only "when two or more persons who are partners become insolvent"--that is, when the partnership is insolvent through the insolvency of all the members of the firm--that a court of insolvency acquires jurisdiction to settle the affairs of the partnership; and in such a case a warrant is issued upon which the joint stock and property of the firm and the separate estate of each of the partners is taken. Until the enactment of St.1894, c. 164, courts of insolvency had no jurisdiction in equity, and that statute confers no jurisdiction to interfere in the affairs of a partnership which is not brought into the court of insolvency by regular proceedings by or against it, except in cases where incidentally to the proceedings...
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