How v. Kane

2 Pin. 531, 2 Chand. 222

• Court: Wisconsin Supreme Court
• Decided: June 15, 1850
• Status: Published

Opinion

Stow, C. J.

Did the bill in this case depend upon its name, or any name, it would be difficult to sustain it. It is not technically a creditor’s bill. The complainant’s counsel, in answer to an inquiry from the bench, says, that it is not a bill in aid of an execution. And, as far as it seeks to subject the defendant Kane, personally, to a decree for the payment of the judgments against his partner Oogswell, it is clear that it cannot be supported. Yet, taken altogether, rejecting a good deal of the stating and charging part as impertinent, and denying the principal relief sought, we are of opinion that the bill should be sustained as to the discoveiy, and as to some portion of the relief which it seeks.

The bill was filed by the complainants Howe and eight others, judgment creditors of the defendant Cogswell, in behalf of themselves and all other judgment creditors of Cogs-well. It states that the defendants were partners in mercantile business, and that their partnership commenced in 1844 ; tbat Cogswell was tbe active and only ostensible partner; tbat tbe debts on wbicb tbe judgments were obtained were contracted on account of tbe partnership, and in tbe way of its business; and tbat executions have been issued on tbe judgments, and returned unsatisfied. It further states, tbat in 1846, Cogswell ceased to be tbe active and ostensible partner, Kcme becoming such ; tbe business of tbe concern, however, continuing tbe same as before; tbat at about tbat time Cogs-well, pretending to be insolvent, and being in dread of attachments against him, transferred, or pretended to transfer, all bis interest in tbe concern to Kane, receiving therefor a consideration wbicb is alleged to have been merely nominal, and tbat this transfer was made on the eve of attachments against Cogswell, for partnership debts, being about to be levied on tbe partnership property; tbat this property, or tbe avails of it, is now in tbe bands of Kane, and is in equity bable to the payment of tbe judgments, and tbe bill seeks to subject it to tbat purpose. Tbe bill also claims tbat Kane, having been originally bable with Cogswell, as a partner for tbe considerar tion of ab tbe judgments, and having now in bis possession ab tbe assets of tbe co-partnership, is personaby bable to a decree for tbe amount of tbe debts, and wbicb decree, among other things, it prays.

This bib has been taken as confessed, against Cogswell. Kane has demurred, and has assigned as special causes of demurrer:

1st and 2d. Tbat tbe writs of fieri facias on tbe several judgments were not returnable on tbe first day of any term of court, nor were abowed by any order of tbe judge, to be made returnable on tbe days on which they were returnable; nor were returnable on any day on wbicb by law they could be made returnable without such order, and tbat they were therefore void.

3d. Tbat tbe bbl sets up tbat the defendant Kane was Cogswell's partner, and jointly bable with him to tbe com-plateante, at the time of the accruing of the indebtedness, and of the recovery of the judgments, and that, 'therefore, the complainants have a complete remedy at law, and, consequently, none in equity.

4th. General want of. equity in the bill.

Several other causes of demurrer have been assigned, or have been attempted to be assigned, ore terms, on the argument of the appeal.

For the understanding of this demurrer, it is necessaiy to refer to the bill more particularly than has been done in the general summary already given. It states that all the judgments, except that in favor of the complainants, Van Burén and Churchill, were obtained in the Milwaukee county circuit court, on the 3d day of September, 1849, and on which writs of fieri fiadas were issued the fifth of that month, returnable the eighth. And that the judgment in favor of Van Burén and Churchill was obtained in the late territorial district court of Milwaukee county, the eleventh of May, 1848, and on which & fieri facias issued September 20,1849, returnable .the next day.

To this last judgment the objection is interposed, ore tenus, that at the time of its rendition, May 11, 1848, there was in fact no territorial district court of Milwaukee county — the territorial government, with all its machinery and incidente, having been abrogated by the adoption by the people of the state constitution, in March preceding, and that, therefore, the judgment is absolutely void, as being coram non judice.

It is to be borne in mind, that though our state constitution was voted upon and adopted by our people, in March, 1848, it was not sanctioned by congress, and the territory admitted into the union as a state, until the 20th of May following.

The objection to this judgment of Van Burén and Churchill, raises the question, whether the adoption by our people of then state constitution did, in fact, of itself, abrogate the territorial government, and thus, ipso facto constitute us a state; or, whether that political change was effected only by congress sanctioning our constitution, and admitting ns into the Union ?

This is a subject which is now convulsing the nation, but it is one on which I do not entertain, and never have had, a doubt.

I know no wilder or worse political or legal heresy, than this new-fangled doctrine of a territory constituting itself a state, and being, at the same time, within and without the nation. The proposition involves a confusion of ideas, and cannot be expressed without a solecism in terms. Could such a thing be conceived and be carried into actual practice, it would be attended with the worst confusion, and the most disastrous results; first anarchy, and then the destruction of the federal constitution. By no means intending any disrespect to the very able and candid counsel who have argued for the defendant, I cannot countenance, even by an argumentative denial, any such doctrine. It is of the same school, and involves the same principles as that of the right of secession— in plain, but bad English, the right of nullification- — a doctrine which has had but few disciples in our countiy, and none where free air is breathed; and of the two I think it the worst. Politicians even such as approach the grade of statesmen, may assert this doctrine, and pretend to believe it, and,

“Convincing others, half convince themselves;”

but no American judge, sensible of the obligations of his oath, and of his duty to our whole country, can give it any sanction. In our political system a territory can become a state only by the action and assent of the national government, and there is not, and cannot be, any such thing as an American state outside the federal Union. With us, and probably with no people or government, is a claim of protection, equality and fraternity recognized, which is accompanied with a disclaimer of dependence, obligation and allegiance.

Our territorial courts and all the other machinery of our territorial government were in the full legal and effective exercise of their appropriate functions, until, on the 29th of May, 1848, the United States congress, by approving of our constitution, and admitting us into the Union, emancipated us Rom provincial pupilage, and made Wisconsin an integral part of the American republic.

We therefore hold that Van Burén and OhurcivUVs judgment, as far as the objection of want of jurisdiction in the district court is concerned, was valid, and that all judgments obtained in the territorial district courts up to May 29th, 1848, if in other respects unobjectionable, are also valid. What may be the virtue and condition of judgments obtained during the interregnum between that time and the 28th of August, when the circuits went into operation, it is not necessary, nor is it proper to decide.

The first cause of demurrer assigned on the record is, that the executions were returnable out of term, without an order having been first obtained from the judge for that purpose, as required by the statute. Waiving the objection that this demurrer is speaking, in setting up matter not contained in the bill, the answer is, that this court cannot take notice of such an irregularity. Williams v. Hogeboom, 8 Paige, 469. The executions were not void, but at most voidable; and the proper course for the defendant, if he wished to be relieved from them, was to have applied to the court from which they issued to set them aside.

A further cause of demurrer was attempted to be assigned here, though not in the court below, that the judgment in favor of the complainants, West, Oliver and Oharles, does not appear from the bill to have been founded on a partnership debt. Without deciding whether a demurrer, ore tenus, not resorted to on the argument below, can be entertained here on appeal, we think, taking the whole context of the bill, that this debt is in fact stated to have been that of the partnership. But whether this be so or not is immaterial, as we are of opinion that the whole of the partnership property, if liable at all, is as much, liable to judgments against Cogswell, the only ostensible partner, for his individual as for his co-partnership indebtedness. And this brings me to the consideration of the only question of principle (except that of the jurisdiction of the late district courts) involved in this case; and that is: Is the property belonging to two partners (one of whom is dormant and unknown), in their co-partnership capacity, liable on a judgment against the visible partner ?

It'is remarkable that upon a question like this, and which commercial transactions must or might have often given rise to, but little authority is to be found.

The general doctrine no doubt is, that personal property in the possession, and subject to the control of the debtor, and of which he is the ostensible owner, is liable for his debts. This rule, it is true, is subject to many exceptions, some by the lenity and policy of the common law, and more by fraudulent legislation ; but among these exceptions I am not aware that the latent right of a dormant partner is one. To say nothing of the original character of the debt, whether it may have been in fact contracted as a private one, or on account of the partnership, and in the course of its business, such a withdrawing from process of the debtor’s property, or of that of which he was the apparent owner, and on the faith of which it may be presumed the credit was acquired, is not permitted, either by the common law or by any statute. It is a palpable fraud; and though by common-law process the creditor may have redress by selling the property, and contesting the legal right in a subsequent action, yet, where the parties confederate and have involved it in such disguise and confusion that an execiition cannot readily reach it, I can conceive of no possible objection to a court of equity lending its aid. It is the right of the creditor to invoke that aid, and the duty of the court to grant it.

■ Now, what is this case? The defendants, Cogswell and Kane, form a partnership in 1844 (I lay out of view all badges of fraud in the inception of the partnership, the motives for Kane's being kept in the background, and the roguish correspondence appended to, and made part of the bill), by which they engage in mercantile business, Oogswell to be the known and ostensible partner, and Kane a secret aud unknown one, the business to be conducted in the name of Oogswell alone, but for the equal and joint benefit of both. Under this arrangement they continue in business for years, the ostensible partner contracting large debts in his own name, but -for the benefit of the partnership, among which debts are the judgments, to enforce the collection of which this bill is filed. After these debts, or some of them, had become due, and attachments had been issued against Oogswell, and were about being levied, he transfers, or attempts to transfer, the whole of the partnership property in his possession to his secret partner, Kane, without any consideration, or any actual change in their relations, as a mere manoeuvre to defraud, hinder and delay their creditors by making Kane, instead of Oogswell, the ostensible owner and active partner. Judgments are obtained against Oogswell; executions — the validity of which for the purpose of this bill, we have already seen, is not to be called in question — are issued, and the sheriff, finding no property in the hands of Oogswell, returns them nulla bona. The specific property transferred by Oogswell, or its avails and equivalent in the shape of real estate, it is alleged .is still in the hands of Kane.

The question then recurs: Is this properly, thus situated, subject in equity to the judgments against Oogswell f We think it is.

In the case of French v. Chase, 6 Green, 166, the chancellor of New Jersey held, that the prior right of a partnership creditor to be paid out of the common property, in preference to the separate creditor of the ostensible partner, did not exist in case of a dormant partnership, and that in such a case the whole of the partnership property in the hands of the ostensible partner was liable for bis individual debts. This doctrine, in tbe absence of conflicting or overruling authority —and it is difficult to conceive how there can be any — we regard as the law, and Ave give it our unqualified sanction.

This view of the subject disposes of the objection so confidently asserted, that a court of equity cannot go behind the judgment at law and inquire into its consideration. Eor, as has been already observed, it is wholly immaterial whether the debt was contracted by the ostensible partner in his partnership or individual capacity. And here I may remark, that the proposition that you cannot go behind the judgment and inquire into its consideration, is subject to many qualifications and exceptions. Cases arising under our insolvent and exemption laws are familiar and in point.

We therefore hold that the circuit court was right in deciding that Kane was bound to disclose and account for so much of the partnership property and its avails in his hands, as was formerly in the possession of Cogswell, while acting as the ostensible partner. And that in the meantime it was proper he should be restrained by injunction from disposing of it.

It has already been observed, that as tar as the bill seeks to subject the defendant Kane, personally, to a decree for payment of the judgments against Cogswell, it cannot be sustained. The complainants having elected to pursue Cogswell alone at law, and having merged their claims against the partnership in judgments against him alone, cannot now fall back upon a court of equity for the purpose of asserting their original right. The law on this subject is too well settled to be called in question at this day. Smith v. Black, 8 Serg. & R. 142. And so are all the authorities, with one solitary exception, and that is the case of Sheehy v. Mandeville, 6 Cranch. That case, great and deserved as is the respect and deference of the whole American bar and bench for the late illustrious chief justice of the United States, has never been regarded as law. It is one of the few — tbe very few — instances in which that great judge erred.

One ground of the appeal is, that the defendant should not have been ordered to answer fully. It is almost always as a mere favor that a party demurring, and whose demurrer has been in the whole overruled, is allowed to answer at all; and it is a matter of discretion with the court to impose such terms as the circumstances of the case may seem to warrant.

The decree of the circuit court must be affirmed, with costs.

Decree affirmed.