Opinion
06-19-1939
WILLIAMS et al. v. STEVENS et al.
Norcross & Farr, of Camden, for petitioner. Lewis T. Stevens, of Cape May, for receiver.
Action by Frank B. Williams, executor of the estate of John W. Mecray, deceased, and others, against S. Irwin Stevens, receiver of John W. Mecray & Brother, a partnership, and others, wherein the Federal Deposit Insurance Corporation presented a claim to the receiver. The receiver disallowed the claim, and the claimarlt appeals.
Affirmed.
Order affirmed in 11 A.2d 435.
Norcross & Farr, of Camden, for petitioner.
Lewis T. Stevens, of Cape May, for receiver.
SOOY, Vice Chancellor.
The Federal Deposit Insurance Corporation presented a claim to the Receiver of John W. Mecray & Bro., a partnership formerly consisting' of John W. Mecray, Frank B. Mecray and S. Irwin Stevens. The Receiver disallowed the claim and Federal appealed.
Federal's claim was based upon two promissory notes, one for $1,730 dated September 21, 1936, and the other for $70. The claim on the latter note was abandoned by the petitioner at the hearing before me.
It appears that the trade name of John W. Mecray and Bro. is of frequent use in Cape May City and, while mostly confined to a grocery business, is also used in connection with the operation of a hotel.
Originally John W. and Frank B. Mecray constituted the firm of John W. Mecray & Bro, but in January of 1929 these gentlemen retired and a new partnership was established, consisting of John H. Mecray and George B. Batten. John H. was the son of John W. and Batten a son-in-law. These gentlemen continued until January 28, 1931, or possibly to March of that year, when they turned the business over to John W. and Frank B. Mecray. These gentlemen continued until December 1, 1934, when the partnership consisting of John W. and Frank B. Mecray and S. Irwin Stevens was established and this firm continued until after the death of both Mecrays and is now being wound up by Stevens as Receiver, appointed by this Court.
All of the aforesaid partnerships were conducted under the same firm name of John W. Mecray & Bro.
The partnership under John H. Mecray and George B. Batten filed its trade name certificate in the County Clerk's office, as did that under the two Mecrays and Stevens.
As between the partners, in all but the last partnership there appears to have been no written agreement. As to the last partnership there is a copy of such agreement in existence.
Just what the agreement was when John W. and Frank B. Mecray turned the business over to John H. Mecray and Batten is not entirely clear, but it would seem that it was upon the theory that Batten and Mecray were assuming the old debts of John W. and Frank B. Mecray. As to what happened on the re-transfer from the former to the latter it is impossible to determine. It would appear that the boys (Batten and Mecray) had reached the end of their financial ability to continue the business and that the old firm of John W. and Frank B. Mecray undertook to straighten out the affairs of young Mecray and Batten. But it would also seem that the two older gentlemen did not relieve the boys of the firm's indebtedness, because it appears that all subsequent payments on account of principal and interest on the note in question were paid by John H. Mecray and that his uncle, Frank B. Mecray, knew nothing of it. It is true that John W. Mecray signed the firm's name to the renewals and endorsed the renewals, but it does not appear that the firm name so signed by John W. was intended to be the trade name of the co-partnership consisting of John W. and Frank B. Mecray, and certainly not of the partnership consisting of John W. and Frank B. Mecray and S. Irwin Stevens and, in this connection, it appears that the note in question was a renewal of prior notes made before the present partnership was formed. I think the evidence justifies the thought that the note in question was a renewal of one or more notes made while John W. and Frank B. Mecray were partners, but certainly not later than when John H. Mecray and Batten began to trade as John W. Mecray & Bro.
There is absolutely no testimony that the present partnership, consisting of the three members, ever got any benefit from the note or that any of its assets were augmented by it or that any of its assets represented stock or merchandise handed down from any former partnership. Stevens never knew of the note. It was not a part of the co-partnership bookkeeping records. The last interest was paid by John H. on December 15, 1937, amounting to $121.40.
In this chaotic state of proofs, I cannot find that the petitioner has established its claim as against the three member partnership.
As to the present partnership, Stevens bought and paid for a one-third interest. He paid John W. and Frank B. Mecray and an entirely new partnership was then formed between them under a writtenagreement and the trade name of the new co-partnership was registered. There was no assumption of debts of the old firm by Stevens. John W. and Frank B. Mecray remained liable for the old debts and while creditors might have proceeded against John W. and Frank B. and have realized out of the partnership assets, none did so. There is no showing that any of the assets of the old firm are in the Receiver's hands and the conclusion is justified that no such assets came into the hands of the Receiver in this case.
Section 42:1-41 of the Uniform Partnership Act, N.J.S.A. 42:1-41, provides: "When all the partners or their representatives assign their rights in partnership property to one or more third persons who promise to pay the debts and who continue the business of the dissolved partnership, creditors of the dissolved partnership are also creditors of the person or partnership continuing the business." Petitioner relies on this section, but under the evidence in this case, Stevens did not promise to pay "the debts" of the old partnership. It may well be that he continued the business of the dissolved former partnership but not only did he not promise to pay the debts of the old partnership, and particularly the note in question, but he did not know of the existence of the note.
There is no conduct on the part of Stevens or the new co-partnership from which an express or implied agreement to assume the debts of the old co-partnership may be gathered.
Petitioner also relies on 47 Corpus Juris, 1030, Section 590, wherein it is stated: "The new firm will be liable for the debts of the old firm which it succeeds if it has assumed their payment by express agreement, or by conduct from which such an agreement may be implied."
As before said, there is no assumption of petitioner's debt by an express agreement of the new co-partnership, nor has there been any conduct on their part from which an agreement to pay may be implied.
Petitioner also cites Section 42:117 of the Uniform Partnership Act, N.J.S. A. 42:1-17, which provides: "A person admitted as a partner into an existing partnership is liable for all the obligations of the partnership arising before his admission as though he had been a partner when such obligations were incurred, except that this liability shall be satisfied only out of partnership property."
Even if it be conceded that Stevens was admitted as a partner into an existing partnership, still it does not appear that the note obligation was ever an obligation of the partnership into which Stevens was admitted as a partner, and surely there is no evidence that establishes that any of the assets of the old co-partnership are in existence out of which the note liability could be paid or satisfied. It may be that John W. and Frank B. had assumed the payment of the note in question before the formation of the present co-partnership. I can find no direct testimony so indicating. In fact, the only evidence is that John H. assumed its payment as a debt owing by the firm when he and Batten gave up the business and when John W. and Frank B. attempted to assist John H. and Batten, and the mere fact that the father and uncle of John H. and Batten may have been legally obligated to pay (I do not so decide) would not make the note a debt of the new firm.
It seems to me that the petitioner has clearly failed to carry the burden imposed upon it in this case and the refusal of the Receiver to approve its claim is affirmed.