In re Smith

E.D. Virginia

In re Smith

22 F. Cas. 408, 16 Nat. Bank. Reg. 113, 1877 U.S. Dist. LEXIS 242

DecidedAugust 2, 1877

StatusPublished

This text of 22 F. Cas. 408 (In re Smith) is published on Counsel Stack Legal Research, covering District Court, E.D. Virginia primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook

In re Smith, 22 F. Cas. 408, 16 Nat. Bank. Reg. 113, 1877 U.S. Dist. LEXIS 242 (E.D. Va. 1877).

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Opinion

HUGHES, District Judge.

If this debt of the firm had not been paid out of the social assets, but had been paid out of the individual property of Harwood, then the question of subrogation as to half the debt, in favor of Harwood, might arise. But the debt having been paid with social assets, there is no right of subrogation as to Harwood’s half, so far as the debt specifically paid with social assets is concerned. If in the suit for settlement between the partners a final balance had been found due from Smith to Har-wood, and a decree rendered requiring Smith to pay that balance to Harwood; and after-wards this debt to Gordon had been decreed, and Harwood had paid it out of his individual means; then, and in that event, Harwood might have had a right of subrogation for half against Smith’s individual estate. There is no reason why a person who is a partner, has become surety for another happening to be a partner, and has out of his individual means, after final settlement of the partnership affairs, paid a joint debt, should not be subrogated to the rights of the creditor of both against the individual estate of the other partner, for the proportion of the joint debt for which his other partner was liable. See Will. Eq. Jur. (Ed. 1S75) pp. 107-117, and cases cited. But this right of substitution plainly cannot arise when the debt was a social debt, and was paid with social assets; certainly not as against the creditors of either partner. The debt to Gordon was a social debt, and paid out of social assets. The payment consumed, or well-nigh consumed, the whole assets of the firm, leaving Smith’s debt.to the firm, which amounted on the 3d of June, 1873, to ten thousand and seventy-five dollars and sixty-three cents, wholly or almost wholly due. If Harwood had obtained a decree against Smith for a definite sum as the balance due especially to himself, into which balance this debt paid to Gordon would indirectly have entered, the balance itself might have been claimed of Smith by Harwood, as any other creditor might claim an ascertained debt But Harwood cannot, in the absence of such decree of final settlement, go back of it to the suit of Gordon against the firm, and claim contribution out of Smith’s estate for half of the Gordon decree. The payment of that decree out of the social assets only created an item in the account between the two partners and their firm, and only indirectly fell upon Harwood for payment out of his portion of the social assets, or his individual estate.

The report of the commissioner in this respect, as in all others, must be confirmed; and I will sign a decree accordingly.

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HUGHES, District Judge.

If this debt of the firm had not been paid out of the social assets, but had been paid out of the individual property of Harwood, then the question of subrogation as to half the debt, in favor of Harwood, might arise. But the debt having been paid with social assets, there is no right of subrogation as to Harwood’s half, so far as the debt specifically paid with social assets is concerned. If in the suit for settlement between the partners a final balance had been found due from Smith to Har-wood, and a decree rendered requiring Smith to pay that balance to Harwood; and after-wards this debt to Gordon had been decreed, and Harwood had paid it out of his individual means; then, and in that event, Harwood might have had a right of subrogation for half against Smith’s individual estate. There is no reason why a person who is a partner, has become surety for another happening to be a partner, and has out of his individual means, after final settlement of the partnership affairs, paid a joint debt, should not be subrogated to the rights of the creditor of both against the individual estate of the other partner, for the proportion of the joint debt for which his other partner was liable. See Will. Eq. Jur. (Ed. 1S75) pp. 107-117, and cases cited. But this right of substitution plainly cannot arise when the debt was a social debt, and was paid with social assets; certainly not as against the creditors of either partner. The debt to Gordon was a social debt, and paid out of social assets. The payment consumed, or well-nigh consumed, the whole assets of the firm, leaving Smith’s debt.to the firm, which amounted on the 3d of June, 1873, to ten thousand and seventy-five dollars and sixty-three cents, wholly or almost wholly due. If Harwood had obtained a decree against Smith for a definite sum as the balance due especially to himself, into which balance this debt paid to Gordon would indirectly have entered, the balance itself might have been claimed of Smith by Harwood, as any other creditor might claim an ascertained debt But Harwood cannot, in the absence of such decree of final settlement, go back of it to the suit of Gordon against the firm, and claim contribution out of Smith’s estate for half of the Gordon decree. The payment of that decree out of the social assets only created an item in the account between the two partners and their firm, and only indirectly fell upon Harwood for payment out of his portion of the social assets, or his individual estate.

The report of the commissioner in this respect, as in all others, must be confirmed; and I will sign a decree accordingly.

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Bluebook (online)

22 F. Cas. 408, 16 Nat. Bank. Reg. 113, 1877 U.S. Dist. LEXIS 242, Counsel Stack Legal Research, https://law.counselstack.com/opinion/in-re-smith-vaed-1877.