Cox v. Russell

Day, J.

-I. It is urged that the court should have rendered judgment against Ledlie for the whole amount of plaintiff’s elaim against Russell, because Ledlie had in his hands due Russell at the time of the garnishment, $3,866, which is more than the judgment against Russell in plaintiff’s favor. This claim is based upon the assumption that the evidence shows that Ledlie bought the interest of Russell in the hardware store, and agreed to pay therefor the sum of $3,866. As already stated, the evidence does not support this claim, but sustains the position of the garnishees that the firm of Mathews & Ledlie purchased the store from the firm of Russell & Mathews. This fully disposes of the first error assigned and discussed.

l. partneroitt^attachT .ment II. It is next urged by appellant that the garnishment of Mathews & Ledlie held all the interest of S. A. Russell in the firm of Russell & Mathews; that the debts of the -^usse^ & Mathews have no preference for payment out of the partnership funds, nor out of the interest of the said Russell therein, over the plaintiff’s attachment, and that it was the duty of the garnishees to pay off the plaintiff’s claim before they paid the debts of the firm of Russell & Mathews. In support of these positions they cite Frank v. Peters, 9 Ind., 343 ; Shaiffer v. Fithian 17 Ind., 463 , and Scudder v. Delashmut, 7 Iowa, 39 .

The law is well settled that the creditors of a partnership have a preference over creditors of a member of the firm, for payment out of the partnership property. Pierce v. Wilson et al., 2 Iowa, 20 ; Hubbard v. Curtis, 8 Id., 1; Richards, Crumbaugh & Shaw v. Haines et al., 30 Id., 574; Switzer v. Smith & McGowan, 35 Id., 269. In Hubbard v. Curtis, *561 it is held that the purchaser at au execution sale, under a levy upon the interest of a member of a firm, takes only the interest of the judgment debtor, and as he held it, subject to the payment of the partnership debts. If the creditor of an individual member of a firm cannot, by levy and sale of that member’s interest, deprive the creditors of the partnership of their prior right to the satisfaction of their claims out of the partnership property, it is a necessary conclusion that the individual creditors cannot obtain priority by the process of attachment. It is claimed by appellant that the rule that partnership property must first be applied to partnership debts, is applied only when the property is in the hands of trustees, or the powers of equity are invoked in the distribution' of the property among creditors. It cannot be that the creditor of an individual member of a firm can, by the simple selection of forum, deprive the creditors of the partnership of their superior rights.

2. —: —r: risdietion.3,1 Under section 2974 of the Code, where an attachment is levied upon firm property in an action against a member thereof, the plaintiff acquires simplj'- a lien on the interest of the defendant therein, and he may commence an action by equitable proceedings to ascertain the nature and extent of that interest. Where the process of garnishment is resorted to, it cannot be claimed that the creditor acquires a greater interest in the property of the debtor than where tangible property is attached. In such case the creditor acquires only a lien upon the interest of the member of the firm whose property is attached. This interest is measured by the rights of his co-partner, who has a lien upon the property for the amount of his share, and for monej^s advanced beyond it for the use of the firm, and is also dependent upon the rights of the creditors of the firm, for they are entitled to be first paid from the partnership funds. Richards, Crumbaugh & Shaw v. Haines, 30 Iowa, 574 . Where, under the process of garnishment, all parties are before the court, and the proper issues are joined for the determination of the partner’s interest, it may not be necessary to resort to a separate action in equity to determine the partner’s interest. But, in some way, that interest must be determined, and that alone *562 can be subjected to tbe payment of bis debt. The court did not err in holding that the garnishees were not liable for the sums paid in settlement of the debts of the old firm of Bus-sell & Mathews.

3 _._. . garnishment. III. Mathews became a surety of Bussell on a note to B. E. Allen, for the sum of $600. On the 14th day of September, 1874, Bussell executed a writing authorizing Mathews to provide for the payment of this note out of the proceeds of the sale of Bussell’s interest in the hardware store. The court below allowed Mathews to reserve out of the interest of Bussell sufficient to reimburse him for the payment of this note. It is urged that this was erroneous. Upon a question of accounting between Mathews and Bus-sell, it is clear that Mathews would have had a right to this sum to indemnify him for his liability, for it is secured to him by express contract. Is it possible, then, by the garnishment of Mathews, to render him liable to the creditor of Bussell for a greater amount than his liability to Bussell himself? We think not. The garnishee’s liability is to be measured by his responsibility and relation to the defendant; his rights are to be regarded, and he is to be charged only in consistency with, and subject to, his contract with the defendant. Williams & Cunningham v. Housel, 2 Iowa, 154 . Under no circumstances is the garnishee to be placed in a worse condition than if the defendant was himself enforcing his claim. Smith, Twogood & Co. v. Clarke & Henley, 9 Iowa, 241 , and cases cited. We are satisfied that the court did not err in the matter now under consideration.

4..-: gar-paid accounts, IY. It is urged that thfe court erred in not rendering judgment against the garnishees for one-half the amount of notes and accounts in their hands. It would not be proper to render the garnishees absolutely liable upon notes and accounts which may be worthless. It is claimed, however, that the garnishees should have, protected themselves by turning the notes and accounts over to the sheriff, and that, having failed to do so, they are liable. Code, section 2986. The answer is that these notes and accounts do not belong to the defendant, Bussell. The garnishee, *563 Mathews, had an interest in them, and he cannot, under the process of garnishment, be required to protect himself from absolute liability, by surrendering his own property.

Y. The court found that at the time of'judgment, the debts of the old firm of Russell & Mathews were $50; and that at that time Mathews & Ledlie owed the firm of Russell & Mathews $1,551.11. The court further found that T. P. Mathews was indebted to the firm of Russsell & Mathews in the sum of $738.33. The agreed statement of facts shows that Russell was indebted to the firm in the sum of $531.86. The difference between these sums, or $206.47 — constitutes assets in the hands of Mathews due the firm. Carl v. Knott, 16 Iowa, 379 . The entire assets of the old firm in the hands of the garnishees, less debts, and not including the notes and accounts before referred to, are $1,707.58. Of this the agreed statement of facts shows that Russell is entitled to $126.52 more than Mathews. Russell’s share is therefore $917.05. Of this Mathews is entitled to retain on account of amount paid on the B. F. Allen note $660. There is, then, in the hands of the garnishees, exclusive of notes and accounts, belonging to Russell, the sum of $257.05. The garnishees should not be left to their discretion to collect this amount. They owe it, and judgment should be rendered against them for it. Of this amount the defendant, Mathews, is indebted $103.28, and the firm of Mathews & Ledlie $153.77. For these sums plaintiff, at his election, may have judgment in this court, or in the court below. As the plaintiff could probably have had this judgment in the court below, if the attention of the court had been directed specifically to the matter, he will not recover costs in this court. If any errors have been made in the foregoing computation, they will be subject to correction on motion. Thus modified, the judgment is

Aeeirmed.