Slatter v. Carroll

2 Sand. Ch. 573, 1845 N.Y. LEXIS 546, 1845 N.Y. Misc. LEXIS 39

• Court: New York Court of Chancery
• Decided: July 22, 1845
• Status: Published

Opinion

The Assistant Vice-Chancellor.

The proofs in the cause, sufficiently establish the liability of Luke Tiernan as one of the acceptors of the bill of exchange in question.

At the time of its acceptance he was a member of the firm of Tiernan, Cuddy & Co., which was a co'mmercial partnership, transacting business in New Orleans. The bill was accepted there, and it was there negotiated to the complainants, one of whom was a resident of New Orleans.

The testimony taken since the first hearing, renders it unnecessary for me to examine the interesting questions which were so ably argued, upon the nature of Luke Tiernan’s liability according to the laws of Louisiana, and upon the adaptation of our local remedies to the exigencies of the obligations imposed by those laws.

Assuming that the acceptors of the bill are to be deemed jointly liable for its payment, as they would have been on its being drawn and accepted in this state; I cannot accede to the doctrine that the contract is to be considered several in equity, so far as to permit the creditor to proceed at once against the representatives of the deceased partner without first exhausting the legal remedy against the surviving partners, or showing that a resort to such remedy would be fruitless.

Our law confers upon the survivors the title to all the effects of the copartnership, and with it the burthen of paying the debts. It would therefore be oppressive in many cases, and unjust in still more, if the creditors were permitted to resort to the deceased partner’s individual property for payment, leaving the primary fund for such payment in the possession of the surviving partners.

I am aware that in the case of The Trustees of the Leake and Watts Orphan Asylum v. The Executors of Augustine H. Lawrence, (MS. October 27, 1841,) my learned predecessor gave his assent to the recent English decisions of Sir John Leach and Lord Brougham, which were cited in support of the doctrine of an immediate several liability in equity.

But on the appeal in that case, the Chancellor adhered to the decisions in this country. He says, “ The weight of authority, is in favor of the principle, that as the remedy at law survives, the creditor is bound to resort to his legal remedy against the surviving debtors, unless he can show some ground of necessity for coming into this court for relief against the estate of the deceased debtor.” And he declares his opinion to be, that the estate of a deceased copartner or joint debtor in the hands of his personal representatives, cannot be reached by a suit in this court, without stating in the bill of complaint, a sufficient excuse for not proceeding at law against the surviving debtors to obtain payment. (Chancellor’s Opinion, May 7, 1844, MS.; 5 Barbour’s Abstract of Chancellor’s Decisions, 17.)

With the'additional testimony furnished to the court, the complainants have brought their case within the established rule as stated by the Chancellor.

The partners at the date of this acceptance were Luke Tiernan, Charles Tiernan, J. McGill Cuddy, and Calvin Tate. Luke T. died in 1839, and Cuddy in the summer of 1840.

The complainants proceeded in November, 1840, in the Commercial Court of New Orleans, against Charles Tiernan as the surviving and liquidating partner of the firm; (see Civil Code-of Louisiana, art. 1131 to 1135;) and recovered a judgment against him in that capacity, for the amount of the acceptance. On this judgment, an execution was issued, without effect; and after the present suit was commenced, another one was issued on which C. Tiernan says a small amount was collected. The lawyers who were examined as witnesses in Louisiana, testify that this judgment gave to the plaintiffs therein, the right to collect the amount from C. Tiernan individually, and out of the partnership property of Tiernan, Cuddy & Co. in his possession; and that such would be its effect though C. Tiernan had been previously appointed liquidator of the partnership concern and effects by the District Court

G. Tiernan in his testimony speaks of himself as being such liquidator; but in another place he says he was appointed syndic by the court, on the application of a majority of the creditors. He once speaks as if he deemed liquidator and syndic as synonymous; and as there is no record evidence or reliable testimony produced to show that he was syndic, I shall have to assume that he was only the liquidator of the firm.

From the magnitude of this duty as disclosed in the proofs, it is probable that C. Tiernan spent most of his time in 1840 in Lou-, isiana, although his residence was in Baltimore. At all events,

I find neither allegation or proof that he had any property in Baltimore which the complainants could have reached by a suit at law in Maryland. Moreover the testimony is satisfactory that he was insolvent before November, 1840.

Thus it is shown that the remedy at law against the property of the firm, as well as against C. Tiernan, was tried and exhausted by the complainants.

It is also proved that Calvin Tate, the other surviving partner, became insolvent as early as 1839, and so continued until he was discharged under the bankrupt law in July, 1842. The complainants were therefore entitled to proceed in equity against the estate of the deceased partner. Luke Tiernan.

This brings me to the objections raised to their proceeding in the courts of this state.

Luke Tiernan resided and died in the state of Maryland. His executors reside there, and received their letters from the Orphans Court in that state.

No administration has been taken out in this state. One of the complainants resides in Baltimore, and the other in New Orleans.

But these facts, which were made so prominent at the hearing, are quite subordinate to the grounds upon which this suit really stands.

In September, 1839, Luke Tiernan was the owner in fee of a large tract of land in Western New York, for the sale of which Mr. Carroll, a resident of this state, had long been his agent. At that tíme L. Tiernan conveyed the land to Mr. Carroll; vesting him with the whole title, in trust; 1. to sell the same from time to time on certain terms specified, and to receive the proceeds of the sales. 2. To remit of the first net proceeds received, the sum of $15,000 from time to time, to Alexander Neill of Baltimore, to be paid by the latter to L. Tiernan’s creditors. 3. To remit $12,000 of the ensuing net proceeds to Mrs. Tiernan, or her appointee, and next $4450 for L. T. Brien ; (which sums are undisputed obligations of Luke Tiernan’s.) And 4. To remit all the residue of the proceeds of the sales to Mr. Neill, from time to time, .to be applied by Neill to the payment of the debts due from Luke Tiernan. If the same proved insufficient to pay all his debts, then to be distributed rateably; and if there should be a surplus, Mr. Neill was to pay the same to L. Tiernan, his heirs, executors, administrators or assigns.

Under this trust deed, Mr. Carroll has sold a portion of the lands, and has remitted to Mr. Neill between eight and nine ■thousand dollars. Mr. Neill is one of the executors of Luke Tiernan, but he retains this remittance as receiver under the trust. He has nothing to do with it as executor.

Indeed, the executors have no interest or concern in the matter, ■except that on the improbable contingency of there being a surplus, they are entitled to receive it by force of the trust deed.

This is therefore, far from being a suit against the executors of L. Tiernan to compel them to pay this debt.

It is a suit by creditors of Tiernan, for whose benefit he has conveyed lands in this state to assignees, against those assignees, $o have the assignment carried into effect. The non-residence of the assignee who is made the sole distributor of the fund, does not affect the point of jurisdiction. The great mass of the fund is here. It is real estate, governed and to be disposed of, by our laws. The assignee who is to sell and convey it, and receive the price, resides here. Instead of there being any difficulty about the jurisdiction of this court, I do not perceive how any other court can administer this trust as against the principal trustee. The Court of Chancery in Maryland cannot reach or affect Mr. Carroll residing here, nor can their decree compel him to sell the lands or account for the proceeds.

But it is said that the legal representatives of L. Tiernan are necessary parties to a suit for closing the trust. As I have stated, there is a remote possibility of interest in those representatives, and this renders it proper that they should be made parties. I am not prepared to say that it would be held indispensible, in a case where the assignor was dead, and the bill charged that his estate was all assigned, and was hopelessly insolvent.

In this case the executors are not necessary parties in respect of the sale of the property, or the distribution of the trust fund to the creditors. The trust deed devolves the one duty upon Mr. Carroll and the other upon Mr. Neill; and it is through and by the latter, and not the executors, that a court of equity, whether here or in Maryland, would effect such distribution.

This being so, and there being an express direction in the assignment, to remit to Mr. Neill the surplus, as well as the fund designed for the payment of debts ; would not the Court of Chancery here sufficiently discharge its duty, by ordering such surplus to be transmitted to Mr. Neill, or to be left in his hands, after providing for the demands of the creditors ? Another mode open for its adoption, is to bring such surplus into court.

Without relying wholly upon this ground, I am satisfied that in view of all the circumstances, this court is warranted in proceeding with the parties who are now defendants.

It is agreed on all hands, that the two defendants who are described as executors of L. Tiernan, are such executors; appointed by his last will and testament, and duly qualified by the probate court having jurisdiction at the place of his domicil. They are therefore, the chief and principal legal representatives. If an administrator were appointed here, his functions would he ancillary and subsidiary to those of the defendants. It not only appears to the court that Messrs. Neiil and Somerville, are the persons to whom in the due execution of the trust, the surplus must be paid; but Mr. Neill the executor and Mr. Neill the trustee, are one and the same person.

If the distributing trustee were not also an executor, and resided elsewhere than in Maryland, yet his voluntary payment of the surplus to the executors there, would be a compliance with his trust and a valid discharge. And if such payment were brought into question in this state, our courts would recognize the office of such executors, and their right to receive the surplus.

We do not, it is true, permit foreign executors ito sue here in their representative capacity; but suits against them for acts done in that capacity, are sometimes entertained.

In McNamara v. Dwyer, (7 Paige, 239,) the Chancellor sustained a suit for an account against a foreign executor, on principles which will amply sustain this bill. Here the executors have appeared, so that the suit is not liable to the objection of its proceeding in default of jurisdiction of their persons.

The trust in question being for the benefit of creditors generally, a non-resident creditor is as much entitled to file a bill to enforce it, as a creditor residing here.

The circumstance that one of these creditors resides in Baltimore, would have weight in determining whether .the account and distribution should take place here, or should be remitted to, Baltimore, provided this were a case of ancillary administration. (Harvey v. Richards, 1 Mason’s R. 380.)

But this is a trust, in which the fund is here; and here is the principal trustee. The Court of Chancery in this state, has jurisdiction over the subject matter, more appropriately and effectually than any court in another state can have. If the decree should direct a sale of the lands and a transmission of the funds to Mr. Neill, but half its duty to. the creditors would be discharged ; for in order to compel him to proceed and distribute the fund, they would have to institute another suit against him in the equity courts of Maryland.

As to the argument of inconvenience derived from the domicil of the debtor and the residence of the creditors, it is not decisive. The decree can be so framed and executed, as to enable creditors in Maryland to be notified as effectually, (so far as publication can give notice,) and to prove their debts with nearly as little expense, as if it were made in the courts of that state. While in point of fact, judging from the lists of the creditors of Tiernan, Cuddy & Co., the greater part of L. Tiernan’s debts are due to persons in and about New Orleans ; and such persons would be more likely to receive notice, by way of advertisement, if the accounting were conducted in New York than they would if it were conducted in Baltimore, with equal convenience for proving their demands. The only advantage which occurs to me in favor of the Maryland forum is this, that creditors probably have placed their demands in the hands of agents in that state, in order to have them presented to the executors; and those agents would be more likely to learn of a proceeding for an account against these trustees if it were conducted there, than they would if it were conducted here. But this may be obviated in a great measure by suitable directions in the decree of this court.

And as there should be but one accounting of both of these trustees, and one of them resides in this state; it is my conclusion that such accounting and the consequent distribution ought to be made here.

There is no difficulty in this case growing out of different rules for distribution among the creditors of decedents, prevailing in Maryland, from those which are enforced in this state. The trust deed is the guide for the distribution; and the rule it prescribes, is that of entire equality. It being a trust for the sale of lands in this state, any direction repugnant to our law would have rendered it voidable by the creditors.

It was suggested at the hearing that there was no ground for proceeding against Mr. Carroll the trustee; and that the court ought not to interfere to expedite the closing of the trust contrary to the intent of L. Tiernan in creating it.

As to Mr. Carroll, the bill makes no charge of neglect of duty against him, nor is any imputed by a decree.

As to hastening the sale of the lands, there is no doubt of its propriety, or of the right of the court to direct it. Any specific direction to the contrary made by an insolvent debtor in such an assignment, would subject it to the charge of an intent to delay and defraud creditors.

A decree for a sale will not impair-the rights of the trustee. It effects in behalf of the creditors, what L. Tiernan should have directed in his assignment, and precisely what would have been accomplished ere this by due process of law, if no conveyance in trust had been made.

There must be a decree establishing the complainants debt as against the trustees and the fund; and directing a sale of the lands and a conversion of the trust assets.

And the usual provisions, together with special clauses will be inserted for bringing in all the creditors, passing the accounts of the trustees, and distributing the fund. The surplus, if there be any, to be paid to Mr. Neill as trustee. If} however, his co-executor desires that it should be paid to the executors, such will be the decree.