In re Striker

2 Gibb. Surr. 545, 24 Misc. 422, 53 N.Y.S. 732

• Court: New York Surrogate's Court
• Decided: August 15, 1898
• Status: Published

Opinion

Fitzgerald, S.

Prior to the death of this decedent; the. •copartnership, of which he was a member, made a general assignment for the benefit of creditors, which included the property of the individuals constituting the firm. The firm assets were exhausted in the distribution, and the debts due the exceptants to the report of the referee remain unpaid. Judgments were not obtained by these latter creditors until after the death of the decedent. At the time of the assignment the-other members of tbe firm were, and remain, insolvent. Tbe fund to be distributed by tbe decree to be entered herein represents tbe proceeds of tbe sale of real estate acquired by tbe decedent subsequent to tbe discharge of tbe assignee. After making tbe assignment, tbe decedent incurred individual debts to a considerable amount, and tbe fund for distribution is insufficient to pay tbe claims of these latter individual creditors in full after tbe payment of tbe admittedly preferred claims. Tbe creditors of tbe assigning firm claim that they are entitled to participate ratably with these individual .creditors of tbe decedent and tbe exceptions relate to tbe refusal of the referee to accede to this proposition. Tbe doctrine of marshaling depends upon tbe principle that a person having a right to resort to two funds, in one of which alone another person has a junior lien, shall be compelled to exhaust tbe fund to which tbe other cannot resort, before coming' upon tbe one in which they both have an interest. In tbe case at bar this principle was applied at tbe time of the original assignment before any of the debts were incurred, to which the referee has accorded a preference, and before the asset was acquired to which the exceptants desire to have recourse. Tbe partnership funds having been exhausted, the partnership creditors had a right to resort to the individual estates of the partners of the assigning firm, subject only to the prior rights of the then existing creditors of the said members individually. Afler the partnership estate was exhausted they were postponed only to such existing creditors. Had they recovered judgment against either of the partners individually, as they had a right to do, they would have had a right against the present fund not only equal, but superior, to the present individual creditors. I do not see that the cases' relied upon by the referee go any further than to reassert the- well-established rule of marshaling assets as between ■ partnership and individual creditors. When the present individual creditors became such, there was no partnership; it was dissolved by the assignment. ■■ Counsel do not refer me to' a case where the facts existing here have been the subject of judicial inquiry; nor have I by diligent research been able to discover a case where the rights of parties standing in the position of the conflicting claimants here have been passed upon. The rights of the exceptants against the individual assets of the decedent arose prior in point of time to those of the successful creditors, and I know of no rule of equity which would postpone them in point, of right to persons whose rights were acquired subsequently. The report of the referee in this respect is overruled, and the exception sustained. A decree may be presented directing the distribution of the fund ratably between the creditors included by the referee in classes 1 and 2.

Report overruled and exception sustained.