Benson v. Ela

35 N.H. 402

Opinion

Sawyer, J.

The claim of the plaintiff in this case is for damages against the defendant, a deputy sheriff, for neglecting to levy an execution recovered by the plaintiff against James Briggs and John Andrew, as surviving partners of Joshua and John Briggs, upon property claimed by the plaintiff to have belonged to the firm of James Briggs & Brothers, of which the four were members.

The property in question originally belonged to that firm as partnership property.

Upon the death of one of the members of a partnership, the title to the partnership property vests in the survivors, and the debts and liabilities of the partnership survive against the surviving members, as their proper personal debts and liabilities. The creditors of the partnership are entitled to a preference in the application of the partnership funds over the creditors of the individual members; and this right of the partnership creditors to priority does not rest upon the ground that the members of the debtor firm have a lien among themselves upon the estate belonging to the partnership, for the payment of the debts; but the claim is one which the law recognizes as appertaining to the creditor himself, and which may be asserted by him as his legal right. Ferson v. Munroe, 1 Foster 462; Jarvis & al. v. Brooks & al., 3 Foster 136. In the case of Jarvis & al. v. Brooks & al., it was decided that a corresponding preference is given by law to the separate creditors of a member of the firm, as to his private property, over the claims of the partnership creditors to his separate estate. The credit given to the partnership upon which the joint debt arose is considered as having contributed to augment the partnership funds, and that, given to the individual member, upon which the separate debt arose, as having added to his separate estate. Substantial justice consequently requires that the partnership creditor, whose funds have thus been added to the partnership property, should have the right, in the first instance, to receive payment out of the partnership property, in preference to the creditors of the individual member ; and, conversely, that the creditors of the partner whose separate estate has been augmented by the credit given to him personally, should first be paid out of his separate estate, in preference to any of the partnership creditors.

The grounds upon which these principles are held applicable to the cases of the conflicting claims of creditors of a partnership, and of one of its members, equally exist in the case of such conflict of claims between the respective creditors of two firms, one of which succeeds by survivorship to the right of property and liabilities of the other. The partnership property of the original firm is none the less subject to the lien of the creditors of that firm, because, by the consent and agreement of the survivors, it is held by them as the property of a new partnership which they have formed among themselves, as the successors of the old. Whatever may be the number of such successive partnerships, the property in the hands of the last survivor is held by him as survivor of the several firms, and all that is necessary, in order to enable the different classes of partnership creditors to enforce their priority in the case of conflicting attachments among themselves, or between them and the creditors of the survivor, for his several debt, is, that the property can be traced through the successive partnerships to the hands of the judgment debtor, as survivor of them all. The attachment or seizure upon execution, by a creditor of a preceding firm, founded upon his debt against that firm, of property which belonged to it, vacates all proceedings by way of attachment or seizure of the same property in favor of creditors of a succeeding firm, or of the surviv- or, so 'far as to secure to the creditor of the first firm his priority, unless those proceedings have been consummated by a sale of the property, and an application of the avails to the satisfaction of the subsequent debt. When property which belonged to the earlier firm, or its avails, are held by attachment at the suit of a creditor of the succeeding firm, or of the survivor, for his separate debt, it is the right of the creditor of the earlier firm to interpose an attachment, and thus secure his legal priority, or to place his execution, founded upon a debt against the earlier firm, in the hands of the officer, and require him to apply the property upon that, in preference to an execution founded upon a debt against the succeeding firm, or the survivor, regardless of the order of the attachments. If any doubt exists whether the property belonged to the earlier firm, or is held by the succeeding or by the survivor, under some other title than merely by right of survivorship, the officer is at liberty to demand indemnity before he can be required to make the application. No creditor of either class can subject him to liability for not making the application upon his debt, unless he furnish indemnity, if re-required, against the claims of other creditors. Having the right thus to be indemnified, the officer must decide upon the conflicting claims of the creditors at his peril.

Before proceeding to apply these principles to the present case, several preliminary questions require consideration. These relate to the authority of Merrill, the party in interest, and his proceedings, in presenting the execution to the defendant and requiring the levy. They involve the inquiry whether those proceedings were sufficient to render it the duty of the defendant to proceed with the levy, provided the plaintiff had the right, upon legal principles, to the priority which he claims.

It was contended by the defendant at the trial, that there was no competent evidence that the plaintiff’s execution was in the hands of the defendant at the time Merrill directed the levy. This objection has not been insisted upon in the argument, but we may not, perhaps, consider it as waived. We think there was competent evidence to be submitted to the jury upon that point in the proceedings which took place between Merrill and the defendant, as testified to by Smith and Hoit. The receipt by the defendant of the ten dollars as fees for levying, and of the bond to indemnify, containing the recital that the defendant had been requested to receive and serve the execution, and the want of any suggestion by the defendant at the time that the execution was not in his possession, tend to show that he had it in his possession, or under his control, and were sufficient to warrant the jury in finding that it had been put into his hands to be served.

Another objection taken at the trial was, that there was no evidence of a proper designation of the property on which to make the levy. The evidence showed that the defendant, residing in Meredith, at the distance of some miles from the mill in Holderness, where the property was situated, was requested by Merrill to come to his house in Holderness, which was but a few rods distant from the mill, and was told that he would point out to the defendant the particular articles on which he wished the levy made. It was necessary for the defendant, in order to ■make the levy, to go to the mill. Having accepted the money ■offered to him for this service, it was his duty, in reference to this point, to proceed and make the levy, unless, when he arrived ;at the mill, he should be at a loss to know upon what property to levy, by reason of Merrill’s failing to designate it. It was sufficient, until be went to tbe mill with a view to make the levy and gave Merrill opportunity to designate the property, that he was informed generally where and what it was, without a more specific designation.

Another objection was, that there was no competent evidence of the authority of Merrill to direct the levy. The testimony of Hiram Cross, if competent, clearly proved such authority; but this was objected to as incompetent, on the ground of his interest in the suit. His answers purge him of all such interest. The suit was not brought for him, nor by his direction. He would have no control over the judgment, if one should be recovered by the plaintiff, nor any right to the avails of it. The alleged neglect of the defendant, on which the action is founded, did not arise upon any proceedings of his, nor upon any duty owing from the defendant to him. In the request to levy the execution, and in all the subsequent proceedings in instituting and prosecuting this action, Merrill was acting in his own behalf and for his own interest, and the witness would in no other sense gain or lose by the event of the suit than that one of his debtors, Merrill, might in the end be found to have more or less funds at command to pay the debt, according as he may or not succeed in recovering damages in this suit in Benson’s name.

Besides, it is too late for the defendant to make the objection that Merrill had no authority to direct the levy, after receiving from him the execution for service, with the bond of indemnity and fees, without at the time making any question of his authority.

If, then, in June, 1852, when Merrill requested the defendant to levy the execution upon the machinery in the mill, and informed him that upon his coming to make the levy he would point out to him the specific property upon which to make it, there was in fact any property in the mill upon which the plaintiff might legally require his execution to be levied, the defendant neglected his duty in this behalf, and for any damages resulting from that neglect the party in interest, having the right to prosecute in the name of Benson, is entitled to recover.

At that time the property was under three attachments: viz. 1. Upon the writ in favor of Johnson & Dale, sued out on the 18th of October, 1851, and the attachment made on the same day; 2d, upon the writ in favor of the plaintiff, sued out on the same day, and the attachment made on the 20th; and, 3d, upon the writ in favor of David Shaw, on which the attachment was made on the 20 th, subject to the plaintiff’s. The plaintiff obtained judgment in his suit on the 24th of May, 1852, and execution issued thereon on the 26th, returnable at the November term, 1852. The two other actions were pending in court until the November term, 1852, and consequently were pending in June, 1852, when the defendant was required to make the levy, and from that time until the return day of the execution. The question then is, whether the property attached was held in June, 1852, and from that time forward, under the attachment upon either of the writs, one in favor of Johnson & Dale, the other in favor of Shaw, in preference to that under the plaintiff’s. In the order of time, the plaintiff’s attachment was prior to that of Shaw, and subsequent to that of Johnson & Dale. If the three suits had proceeded for the recovery of debts contracted by the same firm, it is clear that of Johnson & Dale would have been entitled to the preference. The declaration in the plaintiff’s writ proceeds against the survivors, James Briggs and John Andrew, as defendants for a debt alleged in the writ to have been contracted by the original firm, counting upon that indebtedness against them as survivors of that firm, and the judgment and execution, following the declaration, so describe them. In Shaw’s writ the declaration is laid against the same defendants, as survivors of the second firm, and for a debt alleged to have been contracted by that firm; while in Johnson & Dale’s the declaration proceeds against them, not as survivors of either of those firms, nor for a debt alleged to have been contracted by either, but as then copartners under the third firm, and for a debt alleged in the writ to have been contracted by them in that capacity. The property attached, originally belonging to the partnership composed of the four members, upon the death of Joshua Briggs came to the hands of the three survivors, subject to the right which the creditors of that partnership had to secure their debts upon it in preference to debts contracted by the three survivors. The lien of those creditors was not lost by the death of Joshua Briggs, nor by the formation of the new partnership among the survivors, and the devotion of the property by them to the purposes of that partnership. In any conflict of claims to the property, by attachment, between the creditors of the old firm and of the new, they would stand in this respect upon the same ground as if the conflicting claims had arisen before the death of Joshua, between creditors of the partnership and those of individual members. The debts of the new partnership would be merely the joint debts of three of the four members of the old firm. So, too, upon the death of John Briggs and the forming of the third partnership by the two survivors, the lien of the creditors of the original firm remained unimpaired, while at the same time the additional lien which attached upon forming the intermediate partnership, in favor of its creditors as against the creditors of its individual members, still continued, entitling them to preference over the creditors of the latest firm.

At the time of the attachments, then, in October, 1851, and from that time until after the request made by the plaintiff to the defendant to levy his execution, the property belonged to the judgment debtors, James Briggs and John Andrew, as surviving partners of the first and second firms, and it was also held by them as partnership property of the third firm, then existing. As such, it was subject in their hands to the claims of creditors of the original: firm, as the paramount lien; to those of the intermediate firm, as subordinate to that, but superior to the rights of creditors of the then existing firm, and to those of the existing firm in preference to the creditors of individual members ; and the question arises, how is it to be determined to which of the classes the three several attaching creditors in this case belonged ? Is it to be decided in each case upon the allegations of the writ and the indebtedness therein set forth, as the foundation of the suit ? Or is the question for the jury upon evidence which may control those allegations, and show, however it may appear in the writ and by the judgment and execution, that in fact the debt upon which they are founded was contracted by another firm than that set forth ?

This is not a question whether the judgment is or not, in reference to this point, conclusive upon the officer or the other creditors, according as it may be found upon legal principles that they are or are not parties or privy to it. It may be conceded that they are strangers to it, and therefore not bound by it as a judgment. Nevertheless, we think that considerations of great weight lead to the conclusion that, as between the judgment creditor, and others making claim to the property under their respective attachments, and as between them and the officer, they are to be considered as standing upon the same ground, in reference to this point, as though they were privy to the judgment, and therefore bound by it.

When the plaintiff, in a suit commenced by writ of attachment, declares against the defendant upon his sole promise, alleging the indebtedness upon which he counts as incurred by him alone, without setting it out as incurred by him jointly with his former partner, whom he has survived, we think he should be estopped thereby to claim, for the purpose of acquiring a lien to property under his attachment to which he would otherwise have no right, that the indebtedness upon which the action is founded was incurred in fact by the partnership. If the promise be such that he may declare upon it as joint or several, having elected in his declaration in which form to proceed, it must be understood that he has made his election with reference to the advantage, if any, to be secured by the attachment, either of the partnership property or of the private property of the partner. When he declares against the survivor as the sole promissor, he must be understood to do so because the indebtedness upon which he counts was contracted by the defendant solely and not jointly, with his former partner; and he proceeds in this form with a view to secure and perfect his lien upon the property of his debtor in his own right, and to obtain his priority over the claims of those who are creditors for debts contracted by him jointly with his late partner. On the other hand, if the declaration sets forth the promise as made by the defendant jointly with his late partner, whom he has survived, this must be because the indebtedness was incurred by the firm, and the object is to enforce the lien upon the property of the firm. In both cases the allegations of the writ, in reference to the nature of the promise, whether joint or several, are material, and, under the proper pleadings, must be proved as laid ; and the plaintiff in the action in either case may properly be held to be estopped to claim that his judgment is founded upon a debt other than such as is shown by his declaration, for the purpose of giving him a priority in levying his execution upon property to which the priority does not attach, in virtue of the indebtedness alleged in the writ. In this view, Johnson & Dale having declared against James Briggs and John Andrew as copartners under the existing firm, and not as survivors of either of the earlier partnerships, alleging an indebtedness of the existing partnership alone, is not at liberty to prove, aliunde, that the judgment and execution issuing thereon are in fact founded upon a debt contracted by the earlier partnership, contrary to the allegations of his writ, for the purpose of setting up a lien upon property to which, according to those allegations, he is not entitled. And if the plaintiff in the action is thus estopped, other parties, plaintiffs in actions in which the property is also attached, should in like manner be estopped to deny that a judgment founded upon a debt, which, according to the allegations of the writ, entitles it to priority, is not in fact founded upon such debt. According to the practice in our courts, any party, having an interest by reason of his attachment in property upon which another may claim a prior lien in his suit, has the right, on application to the court, to be admitted to defend the suit in which such priority may be claimed, for the purpose of defeating it. Upon being admitted to defend, he may defeat the suit by proof, under the proper pleadings, that the promise upon which the plaintiff counts was made by other parties than those set forth, or drive him to such an amendment of bis declaration as will have the effect to vacate the attachment or defeat the priority claimed under it. If he neglects to apply to the court for leave to make the defence, he may properly be held to have waived the advantage which he might thereby have secured. In the institution of a suit, and prosecuting it to judgment, the proceedings are attended with so much of publicity and notoriety that it may consistently he assumed that all persons, claiming liens which may be defeated by reason of the priority to which the debt declared on in the suit is entitled, have opportunity to make themselves parties to the proceedings. In proceedings which operate in rein, notice to all interested, and an opportunity to appear and assert their rights, are always presumed ; and this presumption lies at the foundation of the doctrine that judgments in rem are conclusive upon all persons. As to the priority to which the judgment is entitled by reason of the character of the debt on which it is founded, the judgment may be considered as being in the nature of one in rem. The debt when it is passed into judgment becomes merged in it, and the priority which attaches to the debt follows as one of the legal consequences of the judgment, binding the property, in the application of it to the payment of debts, to the preference to which the debt is entitled. In this view the judgment, in its effect and operation upon the property, is strictly in the nature of a proceeding in rem. Stark, on Ev., part 1, sec. 73. But whether so regarded or not, the judgment must be held conclusive upon the point that the priority to which it is entitled is such as belonged to the debt, which is shown by the record to be the debt on which it is founded ; for this priority belongs to it as one of the legal consequences of the judgment. To prove the fact itself, that the judgment has been rendered and the legal consequences of such a judgment, the record of the judgment is the only competent evidence, and of them it is evidence against the world. Stark, on Ev., part 2, secs. 57, 58. Any mode of determining the priority, other than by looking to the debt, as described in the judgment and the record, would be productive of much difficulty and embarrassment to the officer and all the parties in levying their respective executions. If the parties are at liberty to show that the debts were not contracted by the persons alleged upon the record, probably in every case where a conflict of claims might arise there would be no other practicable method for determining the priority, but by suits against the officer for a misapplication of the property. If there is to be a controversy on this point, the convenience of all would seem to be promoted by holding that it should be had while the suits are pending to which the property is to be applied, and in those suits, instead of opening the matter for controversy among the creditors, after the rendition of the judgments in those suits, by the institution of new suits against the officer for the sole purpose of determining the questions of priority which might have been readily determined upon proper grounds in the original suits.

Neither Johnson & Dale, then, nor Shaw, are at liberty to prove that the plaintiff’s judgment is not in fact founded upon such a debt as is alleged in the writ. If they are thus estopped, it is clear that the defendant in this action, representing them as he does in this contest for the property, is also estopped. In answer to the claim of the plaintiff to the priority, he sets up their alleged superior right, and in maintaining their right he can not take ground which they would not be permitted to assume.

As to the different classes of creditors making claims to the property, and as to the officer levying upon it, the judgments must be regarded as conclusive in this respect. The plaintiff’s debt is shown by the judgment to have been contracted by the original firm, and was thus entitled to the preference in the application of the property.

It is clear that the right thus to be preferred was not lost or impaired by the facts offered to be proved in connection with the management of the property subsequently to the death of Joshua Briggs, and the proceedings of the administrators of Joshua and John in relation to it. In all cases the property of a partnership in the hands of the survivors, after its dissolution by the death of one of the. partners, is to be managed by the survivors as their own, and if the survivors in this case obtained credit upon the partnership property, it was, as in every such case, upon their own property and not in virtue of any consent of the administrator. The administrator of the partner deceased has no right to intermeddle with it, or with any of the partnership concerns. If, upon the adjustment of all the partnership affairs by the survivors, a surplus remains in their hands to the credit of the deceased partner’s share in the concern, he has the right to demand and receive this surplus, and this is the extent of his right to intermeddle with the partnership affairs. But while the partnership property remains in the hands of the survivors, the lien which is given by the law to the creditors of the partnership in preference to the claims of creditors of the survivors individually, can in no way be affected by the mode in which it is managed among themselves, or by any transactions between them and the administrator which do not amount to an alienation or transfer of the title. The evidence in relation to these matters was properly rejected. The rulings of the court below upon all the points involved in the inquiry, whether the plaintiff is entitled to recover, being sustained, there must be judgment for the plaintiff for such damages as may be determined in the mode provided by the case. Those damages should be the amount of the judgment and interest thereon, if upon further investigation it shall be found that the property in the mill in June, 1852, to which the plaintiff’s priority attached, and upon which the execution might have been levied, was sufficient to have satisfied the judgment upon a levy and sale of the property, after deducting the probable expenses of the levy and sale; if less than sufficient for that purpose, then the damages should be the value of the property, as it would have been shown to be upon a sale in June, 1852, deducting therefrom the probable expenses of the levy and sale, and interest thereon from the return day of the execution.