Stump v. Wilson

• Citation: 100 W.Va. 227
• Decision Date: 27 October 1925
• Docket Number: No. 5343,5343
• Parties: Wilbur Stump, Trustee ei als. v. Charles P. Wilson et als.
• Court: Supreme Court of West Virginia

100 W.Va. 227

Wilbur Stump, Trustee ei als.

v.Charles P. Wilson et als.

No. 5343

Supreme Court of Appeals of West Virginia.

Submitted October 20, 1925.

Decided October 27, 1925.

1. Partnership Claim of Retiring Partner Against Firm, Cannot be Paid Until Debts of Partnership Creditors Are Discharged.

The claim of a retiring partner against the firm is inferior to the claims of the partnership creditors. His demand cannot be paid until the debts of such creditors are discharged, (p. 230.)

(Partnership, 30 Cyc. p. 618.)

2. Same Retiring Partner May be Restrained From Securing Preference of Claim Over Those of Partnership Creditors.

A retiring partner may be restrained from securing a preference of his claim over those of the partnership creditors, (p. 232.)

(Partnership, 30 Cyc. p. 542.)

(Note: Parenthetical references by Editors, C. J. Cyc. Not part of syllabi.)

Appeal from Circuit Court, Kanawha County.

Suit by Wilbur Stump, trustee, and others, against Charles P. Wilson and others, to enjoin G. 11. Pierson from taking further action to obtain a judgment against Charles P. Wilson and others, doing business as the People's Hardware Company. Decree for defendants, and plaintiffs appeal.

Reversed; injunction perpetuated.

Payne, Minor & Bouchelle and Staige Davis, for appellants.

Morton, Mohler & Peters, for appellee Pierson. Lon II. Kelley, for appellee Chas. P. Wilson, Gibson, and Vernon Wilson.

Hatcher, Judge:

In July of 1920 a partnership was formed by C. P. Wilson, E. M. Gibson and G. II. Pierson, under the name of Peoples Hardware Co., which engaged in a general hardware business in the city of Charleston. Wilson and Gibson contributed $4500.00 and Pierson $2000.00 to the partnership. On March 15, 1921, Pierson sold his interest in the partnership to the other two partners for $3700.00, of which amount all has been paid except $1800.00 and its accrued interest. Gibson and Wilson agreed with Pierson to take over all of the firm assets and be responsible for the firm's liabilities. After Pierson's withdrawal from the partnership, one Vernon Wilson bought an interest therein. The partnership became heavily involved, and in Jan., 1922, by agreement between the partners and the merchant creditors, a creditors committee took charge, and negotiated a sale of the partnership assets. To effectuate the arrangement it was agreed between the partners and the committee that all proceeds arising from the sale of the partnership property, together with the proceeds of the sale of some real estate owned by the partners, should be paid to Wilbur Stump as a trustee, who should distribute such funds to the creditors. Pierson was not a party to this ar- rangement and was not present at any meeting of the other creditors.

In March, 1922, Pierson instituted an action in debt in the circuit court of Kanawha County, against the Wilsons and Gibson as partners doing business as the Peoples Hardware Co., for the recovery of $1335.92, this being the balance due Pierson from the sale of his interest to the firm, with the exception of a $500.00 note which was not then due.

This action now before us is a suit in equity brought in said court by Wilbur Stump, trustee, the Elk Banking Co., a corporation, and the J. W. Sparks Co., a corporation (the two latter being heavy creditors of the partnership) for the purpose of enjoining Pierson from taking further action to obtain a judgment against the partnership. The bill herein sets up the foregoing facts and alleges among other things, that all of the defendants were insolvent, that no notice was given by Pierson to the creditors at the time of his withdrawal from the firm, that the firm was heavily indebted at that time, that the Wilsons and Gibson had stated to the creditors committee that $1800.00 of the purchase price of Pierson for his interest in the firm was for estimated profits, that they would furnish evidence for the purpose of resisting the demands of Pierson, but that the partners subsequently confederated with Pierson to defraud the creditors in the amount of the notes held by Pierson, and were making no defense to the Pierson suit, A temporary injunction was granted on this bill. Pierson on the one hand, and the two Wilsons and Gibson on the other, filed separate answers admitting the main chain of events set forth in the bill, but denying all allegation of fraud, alleging that the Elk Banking Co. and the J. W. Sparks Co. had notice of the withdrawal of Pierson from the firm, and that the sale to Pierson was a plain sale of offer and purchase, without reference to estimated profits.

A large amount of testimony was taken which bears mostly on the representation made to the creditors committee by the Wilsons and Gibson, and on whether the two plaintiff corporations and the Lowenstein and Sons Hardware Co., and the Van Camp Hardware Co., who were also creditors of the partnership, had notice of the withdrawal of Pierson therefrom. The first partnership was shown to have been heavily in debt on March 15, 1921, but the amount of its indebtedness and a list of its creditors on that date was not disclosed.

Upon a mass of conflicting evidence the circuit court found that the two plaintiff corporations had notice of the retirement of Pierson from the first partnership, and that its...