Kistner v. Sindlinger

Elliott, J.

It is insisted here, for the appellant, that the facts alleged in his answer constituted a valid bar to the foreclosure of the mortgage, and that the court therefore erred in sustaining the demurrer to it. This is the only question in the case.

.The facts presented by the answer are, in substance, as follows: In 1866, the defendant Schreiber and oneVogle were partners in the trade and business of manufacturing beer and ale at Shelbyville, in said county of Shelby, and' as such partners purchased the whole of the lot described in the complaint and erected thereon a brewery and place of business for said partnership, and in December, 1866, as such partners, they .purchased of the appellant and one *116 Rennex*, a copper brewing kettle, and other articles- and implements used in their business of brewing, fox* the price and sum of twelve hundred dollars, and paid thereon the sum of four hundred and sixty-six dollars, and thereupon set up and placed said kettle and other articles in their said partnership brewery on said lot; that afterwards, on the 10th day of January, 1867, said Schreiber and Vogle executed to said Kistner and Renner their partnership note for seven hundred and thirty-four dollars, payable in one year thereafter, being the balance of the price and purchase-money for said brewing kettle and other articles; that said note heing unpaid, said Kistner and Renner bi’ought suit thereon, and on the 2d day of March, 1868, recovered a judgment thereon against said Schreiber and Vogle, in the Court of Common Pleas of Shelby county, for the sum of $748.13, with costs of suit; that afterwards, on the 18th of March, 1868, an execution was duly issued on said judgment and placed in the hands of the sheriff* of said county, who levied the same on the lot described in the complaint, and after giving due notice of the time and place of sale, offered and exposed the whole of said lot for sale at public auction, to satisfy said execution and divers other executions then in his hands against said Schreiber and Vogle and then and there sold the same to the appellant, for the use of himself and said Rennex’, for the sum of seven hundred dollar’s, which he then paid, and of which there was applied to the execution in favor of said Kistner and Renner-, the sum of $246.93, leaving the residue thereof unpaid; that ever since the sale of said lot, the said firm of Schreiber and Vogle, and each of the members thereof, have been and are,-insolvent, having no other property or effects subject tj>-execution;.that the mortgage mentioned in the complaint was executed by said Schreiber long after said debt , due said Kistner and Renner was contracted by said firm of Schreiber and Vogle, and was given by said Schreiber alone, on an undivided half of said lot, to secure the private, individual debt of said. Schreiber, and not for or on *117 account of any debt due from or contracted by said partnership of Schreiber and Yogle. Nor has the said plaintiff or any other person redeemed or offered to redeem said lot from said sheriff’s sale. Wherefore, he says that the plaintiff is not entitled to a judgment or decree of foreclosure of said mortgage against said appellant, &c.

It is well settled, that one partner cannot apply the partnership assets to the payment of his individual debt, without the consent of his co-partner. And so, where a partnership is dissolved by the -death or bankruptcy of one of its members, the partnership effects must be first applied to the payment of the partnership debts, before creditors of the individual members of the firm can demand payment out of such effects. Holland v. Fuller, 13 Ind. 195 ; Weyer v. Thornburgh, 15 Ind. 124 . But this rule -does not -'apply to cases where the partnership still exists and the partners have the legal right to -dispose of their property as they please. Whilst such is the case, the partnership property may be applied, by the act or consent of both the partners, to the individual debt of one of them. The rule is only •applicable when the principles of equity are brought to interfere in the distribution of partnership property among the creditors. M’Donald v. Beach, 2 Blackf. 55 ; Frank v. Peters, 9 Ind. 343 ; Shaffer v. Fithian, 17 Ind. 463 .

But a sale by one partner of his interest in real or personal property held by and for the .use of the firm, does not affect the right of the other partner to have it subjected first to the payment of the partnership debts. Indeed, such a sale only confers on the purchaser .the rights or interest of the vendor in the property after the settlement of the partnership and the payment of all its liabilities.

Here, the answer shows that the whole lot was purchased for and used by the partnership, for the sole useof the firm, on which they erected their partnership brewery, and whilst It was so used and held, and after the debt due to Kistner and Renner was contracted by the firm, Schreiber alone, executed the mortgage sought to be foreclosed, to .secure *118 the payment of his individual debt, on an undivided half of the lot and the buildings thereon.

J. Schwartz, for appellant.

The mortgage was not executed by or in the- name- of the partnership. It is the individual act of Schreiber, one- of the partners, and only created a lien; on his interest in the-lot, subject to the liabilities- of the firm; and the appellant having become the purchaser of the lot under a judgment against the partners for a debt of the firm, his claim is paramount to that of the appellee under the mortgage.

Kistner having purchased the lot at sheriff’s sale on judgments against the firm, which, in equity, were paramount to Sindlinger’s mortgage, the latter was not entitled to a foreclosure of his mortgage, as against Kistner, without first redeeming, or offeringto redeem, that part of the lot covered by the mortgage from the sheriff’s- sale, which, it is averred, he did not do.

The answer was good, and the court erred in sustaining; the demurrer.

Judgment as- to Kistner reversed, with costs, and the • cause remanded, with direction to the court to overrule the demurrer, and for further proceedings not inconsistent with this opinion.