Opinion
Spring Sessions, 1840.
Frame, for Bevan.
Bates, for Clark.
The sheriff returned a sale of the partnership goods of James F. Allee and John P. Allee, to the amount of $872 71, which was claimed by Clark, on his prior execution against James F. Allee, one of the firm, and also by Bevan on his subsequent execution against the firm. The sheriff brought the money into court; and Mr. Frame, for Bevan, moved for leave to take it out in payment of his execution. The firm was admitted to be insolvent.
Frame. — The creditors of the firm have a right to the partnership property in preference to the creditors of the individual members of the firm. A creditor of one of the partners may levy upon and sell the interest of such partner, but the purchaser would take subject to the debt of the firm. If the joint property be insufficient to pay the partnership debts, the separate creditor can have no part of it. (Cary on Partnership 152; 5 Law Lib. 61; Gow on Partnership, 225.) The levy by a separate creditor on partnership property affects nothing else than the partner's interest in the surplus, after payment of all the debts of the firm; it follows, that if the concern be insolvent the separate creditor's levy takes nothing, although prior to any execution against the firm.
Mr. Bates supposed that the principles cited applied only to the purchaser of a, partner's interest; such purchaser standing himself in the relation of a partner is, therefore, subject to the debts of the concern. He knew no reason why the creditors of both the partners should be preferred in the payment of debts to the creditors of one of them. No such principle has been decided by our courts; nor understood, by the public to be the law of our State. He cited Collyer on Partnership, 72-6-7. Where one partner's share of the partnership property is sold, the interest of the purchaser is necessarily measured by the amount of that share, after payment of partnership debts, in any question as between the partners; but it does not necessarily follow, that the partnership goods shall be liable to be taken in execution by a partnership creditor to the exclusion of a prior execution creditor of one of the partners.
Mr. Frame agreed that the question had not been decided in our courts, because it had never been raised; it had never been thought doubtful; and was not in truth debateable. If the notion of the other side be correct; it would make a solvent partner liable for all the private debts of his insolvent co-partner, besides defrauding all the creditors of the firm, who have trusted them with the partnership property, of their debts, to pay the private debts of the individual partners.
The principle at the root of the whole matter is the well settled and hitherto unquestioned law, that the partnership funds are first subject to the partnership debts; the creditor of the individual partner can levy upon, and the purchaser can buy, no more than such partner's interest in the partnership; that is, the partnership property after paying the partnership debts.
In this ease, as in every case of insolvency, the interest of James P. Allee has brought nothing; the whole amount of sales of the joint property not being sufficient to pay the partnership debts.
The Court:
The interest of a partner in the corpus of the partnership property is only his share of what remains after taking the partnership accounts. (4 Ves. 396) The sheriff, therefore, on execution against a separate partner, should not sell the partnership effects, but should levy upon and sell the share or interest of the partner in the partnership property, which gives his vendee the right to an account and to the partner's share of the surplus, after payment of all claims against the partnership. (16 Johns. Rep. 102.) When, however, the sheriff has sold the partnership effects, and brings the money into court under our act of assembly; the court will, in the case of actual insolvency, order the payment to the creditors of the former, claiming as in this case under a levy, though subsequent to an execution creditor of one of the firm.
Ordered accordingly.