Conroy v. Woods
Before: Baldwin
Synopsis
The lien of firm creditors is paramount to the lien of individual creditors.
And, where one partner buys out his copartners, agreeing to pay the debts of the firm, the partnership property remains bound for firm debts, just as before the sale. The lien of firm creditors attaching, must be preferred to the lien of an individual creditor of the remaining partner, attaching first.
A lien by attachment enables a creditor to file a creditor’s bill, without waiting for judgment and execution.
Partners may make a bona fide sale of their property any time before their creditors acquire a lien; but such sale cannot include a sale directly or indirectly to one of the partners, with a stipulation, that he will pay the firm debts, there having been no credit given by the individual creditor on the strength of an apparent sole ownership in the vendee.
The fact that an individual creditor obtains judgment, issues execution, and levies on firm property, gives him no right to the property as against firm creditors, who have not yet obtained judgment.
In such case of conflict between the individual and firm creditors, equity has jurisdiction. Ño action lies against the Sheriff for levying the execution of the individual creditor, and a sale to different purchasers might result in a loss of the property.
Baldwin, J. delivered the opinion of the Court— Terry, C. J. concurring.
Bill states that on the 22d of April, 1857, plaintiffs sued out attachment against Bonny, Brooks & Moore, a mercantile firm in San Francisco, and had it levied on certain goods; that shortly afterwards, plaintiffs got judgment in their suit, which has not been paid, and execution issued with directions to the Sheriff to levy on the property attached; that the debt of plaintiffs was for goods, due by this firm at and before the 9th of April, 1857, and this property attached had belonged to and been in possession of said firm; that about this last date, these defendants dissolved [630]partnership, by Brooks and Moore selling out to the defendant, Bell, who bought subject to the payment of the debts of the firm; that no notice was given of this dissolution to plaintiffs until the 16th of May, 1857; that Bell bought for Bonny, and after-wards transferred his rights to Bonny; that at the time of this sale, all these parties knew of this indebtedness to plaintiffs; that on the 10th of April, 1857, defendant, F. H. Woods, commenced a suit in this Court against E. Bonny, and attached the property as his individual property, and afterwards obtained judgment. Execution issued and levied upon the property and it was advertised for sale as Bonny’s. The bill then charges various matters of fraud in the sale to Bonny, and in the note and suit of Woods and Bonny.
Several parties appeared as intervenors, claiming to be entitled to come in as judgment creditors of this firm, and alleging substantially the same facts as the plaintiffs. Woods demurred on several grounds, which will be noticed hereafter, and, the demurrer having been overruled, answered. The answer denies that the plaintiffs attached the property or any part of it, or took it in execution; also denies that on the 9th of April, 1857, the partnership of Bonny, Brooks & Moore existed, says it was dissolved on the 4th of April, 1857, the dissolution was notorious and plaintiffs had notice of it. On the 10th April, 1857, defendant commenced suit against Bonny, and attached property, recovered judgment, and caused property to be taken in execution. At this time defendant had no knowledge of the claim of the plaintiff; the property was that of Bonny, and in his possession, and defendant, by his attachment, acquired a lien on it. Defendant was, at the time of his suit, the sole owner of the note sued on by him, and that it was all justly due and owing to defendant by Bonny; of the amount, eleven hundred and thirty dollars, was a debt due from Bonny, Brooks & Moore; denies that he aided in bringing about the dissolution of the firm; and also all fraud or connection with any; or all knowledge of any trust or lien, or condition for benefit of creditors, in the sale to Bonny by the parties; and denies it to be the fact that it was so transferred; that one Alison brought suit for the property; that this defendant pleaded that the property was the individual property of Bonny and his attachment alien on it; that the suit
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