High v. Lack, 62 N.C. 175, 1 Phil. Eq. 175 (1867)

Jan. 1867 · Supreme Court of North Carolina

62 N.C. 175, 1 Phil. Eq. 175

WM. H. HIGH, Trustee, v. GEORGE A. LACK and H. L. SALOMONSKY.

A transfer, in terms absolute, of all the effects of a firm (consisting of goods and choses in action of an unascertained value) having been made in the firm name by one partner without the consent of his copartner, for a certain sum, being the amount of the firm debts; Sold, not to be-absolute, but only a security for the firm debts;

Also held, that, as any surplus after payment of the firm debts belonged to. the individual members of the firm; therefore,

An injunction granted at the instance of the non-assenting partner, should be continued to the hearing, and in the meantime a receiver should be. appointed.

{Beeler v. Barringer, Win. Bq., 5, cited and approved.)

Bill for an injunction' and sequestration, and for specific-relief, filed to Fall Term, 1866, of the Court of Equity for Wake.

The facts, so far as they are necessary to an understanding of the opinion, are as follows:

Charles M. Farriss, one of the complainants, and the defendant Lack, became partners as merchant tailors in Raleigh, in the latter part of the year, 1865. The copartnership was. unsuccessful, and by the month of May, 1866, had contracted debts to the amount oí $5,560.75, of which $4,880.98 was due the firm of. Salomonsky & Co., of Norfolk, Ya. On the 9th May, the defendant Salomonsky, a member of that firm, proposed to the defendant Lack that he would, for Salomonsky & Co., take the effects of Farriss & Lack, including all their-choses in action, in payment of their debt, of $4,880.98, and assume the other debts of Farriss & Lack., The proposal was accepted, and Lack, in the name of Farriss & Lack, executed the following paper:

NORTH CAROLINA— Cray of Raleigh.

In consideration of five thousand, five hundred and sixty dollars and 75 cents, ($5,560.75,) the receipt whereof is acknowledged, we bargain and sell to Salomonsky & Co., of Norfolk, Va., all our stock of cloths, cassimeres, vestings, tailor’s trimmings, gentlemen’s furnishing goods, ready made •clothing, hats, caps, boots and shoes, and all other goods now used by usjas merchant tailors; also all the store fixtures and shop fixtures in the storehouse now occupied by us; and for the said consideration, we hereby assign unto .said Salomonsky &jCo., all the debts owing us as partners, whether by note or account.

Witness our hand, the 9th day of May, A. I)., 1866.

(Signed) FARRIS & LACK.

In return Salomonsky, in the name of Salomonsky & Co., ••signed a receipt for the amount of their claim against Farriss & Lack, and also agreed in the name of Salomonsky & •Co., in writing, to pay the other debts, amounting to $679.77.

This transaction was completed without the consent or knowledge of the complainant Farriss, and upon being informed of it, he refused to be bound by what had been done; .and on the day following, the 10th of May, he executed a deed of trust of his interest in the effects of Farriss & Lack,

• (with certain of his individual property) to the complainant High, to secure certain individual debts, and especially to indemnify the other complainants, J J. Ferrell and J. D. Pullen, his sureties in bank to a large amount. Immediately thereafter this bill was filed, praying that the complainant Pligh, as trustee, might be put in possession of Farriss’s interest in the partnership effects, and in the meantime, that the defendants, of whom it was alleged that Lack was involved, and Salomonsky a non-resident, might be enjoined from disposing of or removing the goods, &c., and that the same might be sequestered.

The injunction and sequestration were grauted by Battle, J., at chambers, and the complainants required to enter into .bond in the sum of $4,000, to indemnify the defendants.

The answers were put in at Fall Term, 1866, ancl at a special term in December, upon motion before Barnes, J, it was ordered that the injunction be dissolved and the sequestration removed. From this order the complainants appealed.

Moore, Rogers & Batchelor, and Haywood, for the complainants.

1. One partner cannot make an assignment of the whole of the partnership property, even to pay the partnership debts. Dickinson v. Legare, 1 Dessaus., 537; Dana v. Lull, 17 Vermont; MaddeweU v. Keener, 8 Watts & Leary, 63.

2. At least one partner cannot make such general assignment against the known wishes of his copartner, or without his consent express or implied. Kirby v. Lngersoll, 1 Doug., (Mich) 477; Egberts v. Wood, 3 Paige, 517; Havens v. Hussey, 5 Paige, 30; Pierpoint v. Graham, 4 Wash. O. C., 232; Story on Part, secs. 101 and 310; 1 Parsons on Cont., 178, notei.

3. The following cases rather confirm than conflict with this last position, for they rest on special circumstances, to-wit: the absence of the copartner in a foreign country. Harrison v. Sterry, 5 Oranch., 300; Anderson v. Tompkins, 1 Brock., 456.

4. It has even been held that an assignment by one partner of his individual interest, to his individual creditors, was valid against the partnership creditors, (but it is not necessary to our case to press this principle.) Wilson v. Bowden, 8 Rich. L,, 9; Norris v. Vernon, Ibid, 13,

Bragg, and Phillips & Battle, for the defendants.

1. A sale made by one partner in the firm name to satisfy antecedent debts of the firm is valid. The right to make such conveyance results from the nature of copartnership. How, 73, 74; Collyer, secs. 394-95; Pierson v. Hooker, 3 Johns, 70; IAvingston v. Roosevelt, Rogers v. Bachelor, 1 Am. Lead. Cas., 258, and notes; Mills v. Barber, 4 Day, 430; Lamb v. Durant, 12 Mass. R., 54; Harrison v. Sterry, 5 Cranch, 289; Watt v. Johnson, 4 Jon., 190. In Dickinson v. Legare the decision was to the contrary; but there the assignment was to an alien enemy by a partner in prison.

2. Where all the creditors are admitted (as in this case) the assignment is valid, though made without the knowledge or consent of a copartner. 3 Kent’s Com., 44, and cases cited in notes to late editions.

3. Here the bill asks relief for the creditors of one of the partners as against firm creditors. No suggestion is made that the effects are more than sufficient to pay firm debts. The bill cannot be sustained on principle. Bank v. Fowle, 4 Jon. Eq., 8.

4. The only ground for continuing the injunction, &c., is that there may be a surplus after paying firm debts. The bill does not allege that there can be such surplus, and the answers aver that the firm debts exceed the assets.

Reads, J.

Whether one partner has the right to sell out the whole of the partnership effects, without the consent of his copartner; and if he has, whether he has the right to sell the whole or any part, against the known ivill of the other partner; and if he has this for some purposes, whether he has for all purposes, without fraud; are some of the interesting questions which were discussed at the bar. But it is unnecessary to decide them, because we are satisfied that the transfer in this case, though absolute in terms, was only intended to be, and therefore can operate only as, a security for the debts of the copartnership — that is, the debt to Salomonsky & Co., and the other debts assumed by them, which comprises, as was admitted at the bar, all the debts of the copartnership of Farriss & Lack. To this extent the transfer was legitimate and proper, because it enured to the benefit of both partners; and to this extent it will be upheld. That it was not an ordinary out-and-out sale is apparent from the fact that there was an unknown quantity of goods of various kinds, and of debts due the firm by notes and open accounts, and they were all lumped together at a given price — that is, at precisely the amount of the debts of the firm. We could not regard such a transaction as an absolute sale, without attaching to it a badge of fraud against the non-assenting partner. But so far as it is for the common advantage of both partners, and for the legitimate purpose of paying the debts of the firm, it will be upheld. And if, after paying the debts, there shall be a surplus, it will belong to the members of the firm. Peeler v. Barringer, Win. Eq., 5.

Salomonsky is a non-resident, and if allowed to take away the effects conveyed to him, beyond the jurisdiction of' the court, the complainant’s loss might be irreparable. The injunction therefore ought to be continued to the hearing, and there ought to be a receiver appointed to sell the goods and collect the debts.

It is unnecessaryat this time to decide the rights of the complainants as among themselves.

There is error in the decretal order dissolving the injunction. ' Let this opinion be certified to the court below, to the end that the order may be reversed and the injunction continued until the hearing.

Per Curiam.

Decretal order reversed with costs.