Appeal of the York County Bank , 32 Pa. 446 ( 1859 )

The opinion of the court was delivered by

Thompson, J. —

'The opinion of the learned judge of the District Court, on the points involved in this case, is so entirely satisfactory that we need add but little to what is therein laid down.

Taggart, the appellee, had the first execution and levy on the property from which the fund for distribution arose, but it was against Keys alone. The York County Bank issued and levied subsequently on an execution against John B. Moore & Co. With these writs in his hands, the entire stock alleged to have been partnership effects was sold by the sheriff, and the money brought into court for distribution. The appellant claims to have his execution, although subsequent in time, first satisfied out of the proceeds of sale, on the ground that his was a partnership debt, and the property sold was partnership property. The appellee claims the priority of satisfaction, on the ground that, as between the partners, there was no joint property, that it all belonged to Keys, and that, as his separate creditor, he is entitled to be paid out of it his individual debt in its order of priority. The auditor appointed by the District Court to make distribution of the proceeds of the sale, finds that, by the terms of the articles of co-partnership entered into between Moore and Keys, on November 20th 1855, “Keys was to furnish all the capital, and to have exclusive ownership of the whole, until the said John B. Moore places in the concern certain sums as specified thereinafter.”

The appellant complains that the court below erred in determining, that under the stipulation, the exclusive possession of the property remained in Keys, notwithstanding the creation of the firm, unless Moore contributed his proportion of funds to the concern, and that as it did not appear that he had done so, the articles of copartnership must be regarded as unfulfilled; and in decreeing distribution first to the execution of the appellee.

As between the partners themselves, and as necessary to define and fix their respective interests, something was to be done, essential to its completion as an executed contract, namely, the contribution of the stipulated funds by Moore. This was a positive act, prescribed by the agreement of the parties, as clearly evidenced by the written contract itself. He was to have no possession, and certainly no property in the effects, unless the consideration, in whole, or in part, necessary to invest him with an equity, were paid. A negation of any title, unless there should be a compliance, by express words in the article, was as unnecessary as it would be unusual. The law settles the relation of parties without this, if the condition upon which an interest is to vest is not complied with, and the possession is not changed. Here an interest was to vest, on contribution according to the agreement by Moore. There is no evidence that he did contribute, and in the absence of proof of this essential act to constitute him a joint owner, the fact must'be taken that it did not exist. The law deals thus with all affirmative necessary facts — if not proved, they do not exist, in contemplation of law, in the process of arriving at legal conclusions. The court could deal with it in no other way, and committed no error in so dealing with it. No doubt the advertisement of the partnership, and holding out to the world that it existed in a complete form, was quite sufficient to render Moore, in his private estate, answerable for deficiencies in means to satisfy creditors of the firm, but this does not change the relation of the parties to the firm as between themselves. And this brings us to the question of the rights of creditors, in regard to the property claimed as partnership property.

Between partners themselves the assets of the firm constitute a fund for the payment of their liabilities, and each member has an equity which he can enforce to accomplish this result, and of consequence a lien on the property to this extent — 6 Ves. 119; 11 Ves. 8; Story on Part. § 360 — provided he has not parted with it. But if he has sold out, relinquished, or never has in fact, as in the present case, consummated an interest by compliance with his agreement, there can he no lien. Now it is well settled, beginning with Ex parte Ruffin, 6 Ves. 119, and recognised ever since in England, and in most of the states of the Union, and in our state, that the equities of creditors must be worked out through the medium of that of the partners: Baker’s Appeal, 9 Harris 76. When a creditor levies on the property of a firm, his execution fixes and attaches to this right to the same extent that it existed in the partners, and hence the preference over a separate execution-creditor in the distribution. All this is predicable of a case of joint property only. But where there was no joint property, the rule has nothing to operate on. The mere name is not enough in such case — there must be an equity. If that equity never existed, a creditor’s execution could not attach to any right, amounting to a lien, to have the assets appropriated to a partnership debt. That Moore has no interest in the firm property is found by the auditor. That this was a necessary conclusion from the article of copartnership, and a failure to comply with it, cannot be doubted. In fact, that the very appearance of claim was renounced by Moore, before the execution was issued by the appellant, was also an ascertained fact by the auditor. This being so, the property levied on was individual property in fact, although seized in the firm’s name. The appellant cannot work out his equity through the partners, for they, as such, did not exist, inter se, and the individual owner could not give him this right over a prior execution against him individually. The property was all individual property, and priority of seizure gave priority of right in the distribution. To the complaint that the property was in appearance firm property, and that it is a fraud on a creditor of the firm not to hold it so in fact, notwithstanding it may not have been so, it may be answered, that a creditor can seize no more than belongs to the debtor, and succeeds only to his rights as defined by law, and that he can blame no one but himself for becoming a creditor. But if the rule were not so held, the separate creditor might with more reason complain; he might point to the fact that the property was separate, not joint, and claim that as he was first in lien and seizure, he ought not to be last in the distribution, because the property was but partnership in appearance, while separate in fact. He might with propriety complain, if a fiction should prevail over the reality. This whole doctrine, however, I consider settled by the cases of Doner v. Stauffer, 1 Penn. R. 198, and Baker’s Appeal, 9 Harris 76, and they fully sustain the ruling of the learned judge of the District Court.

Decree affirmed at the costs of the appellant.

Read, J., dissented.