Adams v. Woods & Haskell

Murray, C. J., delivered the opinion of the Court—Burnett, J., concurring. The bill is carefully drawn, and the facts constituting fraud are distinctly stated. The Court below permitted the intervention to be filed, but refused to stay proceedings in the case, or afford the parties any affirmative relief, but directed the receiver to proceed and distribute the money in his hands pro rata among the creditors; from which orders and rulings the intervenors have appealed.

The case made, involves two propositions :

1. Whether a creditor of the firm could pursue his remedy at law after the bill was filed and the receiver appointed, but before a decree of dissolution.

2. Whether a creditor could attack the whole proceeding on the ground of fraud and collusion between the parties.

It may be premised, in limine, that the bill filed by Alvin [156]Adams, did not warrant the appointment of a receiver. It does not allege insolvency or fraudulent conversion of the partnership assets, or danger of loss of the same, in the hands of the firm. It is true that equity has jurisdiction in matters of account, but it ought not, except in a clear case, to step between a debtor and his creditors3 neither should' it assume the position of banker and bailee, for those who, by their own showing, are sufficiently competent to manage their own affairs.

It will not be denied that the creditors of a partnership have no interest in a partnership suit or proceeding for account and dissolution, until after a decree of dissolution, and that, in the mean time, they may pursue their remedies at law, and thereby secure a preference or lien upon the partnership assets.

That until a decree of dissolution, it is not certain that the firm is insolvent, or that the Court will administer the assets. Under such circumstances, it would be obviously unjust to deny a creditor who was not a party to a suit, the right to prosecute an action for the recovery of his claim. There is another reason for this rule which is conclusive. These proceedings are under control of the partnership alone 3 they may be protracted indefinitely, or they may be dismissed at the will of the parties, and a Court of Equity would not allow itself to become an asylum for bankrupt and fraudulent debtors. It is contended, however, that the assignment by all the parties to Cohen, the receiver, was a voluntary surrender of the assets into the hands of the Court, to be administered for the benefit of all the creditors, and that this proceeding was thus turned into a creditor’s bill.