Capital Food Co. v. Globe Coal Co.

Evans, C. J.

On December 1, 1902, the defendants Wheeler and Bothne entered into articles of partnership. The partnership was organized exclusively for the business of buying and selling coal. The business was to be in the personal charge of Bothne. Wheeler put in all the capital, which was “not to exceed ten thousand dollars unless -otherwise arranged for by special agreement.” In May, 1903, Bothne entered into a contract with the plaintiff for the purchase of a large amount of “stock food, *136 poultry food, lice killer,” etc. This contract was entered into by Bothne in the name of the Globe Coal Company. The plaintiff subsequently broughf an action on the contract against the Globe Coal Company by serving notice upon Bothne alone, and obtained a judgment against the partnership as such for about $1,400 and costs. No attempt has ever been made to obtain a judgment against Wheeler as a member of the partnership. So far as is disclosed by any evidence in this record, the contract of purchase with plaintiff was outside of- the scope of the partnership business, and could not be enforced against Wheeler. The only right claimed by the plaintiff is that it is entitled to collect its judgment out. of partnership property. Wheeler put up the capital for the Globe Coal Company to the full limit of $10,000, and advanced $3,000 additional. He claims to have been a creditor of the firm to the extent of $3,000. Upon the dissolution and settlement of the partnership as between the partners, his claim was agreed to by his copartner, Bothne, and all the assets on hand, amounting to $3,700, were turned over to him. The contention of the plaintiff is that the appropriation of the assets of the firm by Wheeler was such a violation of its rights that it was entitled to a judgment against Wheeler by reason thereof.

i. service' of notice °n party unaffected. I. The appellee has filed its motion to dismiss the appeal for failure of the appellant to serve notice of appeal upon Bothne. It is apparent from the record that Bothne can not be affected injuriously or otherwise by the result of this appeal. Indeed, it is not clear from the record that he is a party to the __ x tf case at all. His name is included in the caption. The decree recites his default; but there is no averment against him in the petition. He did not appear in the case except- as a witness, nor does it appear, except by inference, that he was served with notice. The petition asked no relief against him. The decree *137 awarded no relief against him, except that a judgment for costs was entered against “defendants.” The motion to dismiss must therefore be denied.

2. Judgmentsdfrect°attack: pieadmg. II. It is argued by appellant that he was not, and is not, bound by the contract entered into with the plaintiff, because it was outside of the scope of the partnership, and that for the same reason the partnership firm is bound thereby, and that he is theref0re en^|e(j ^o kaye ¿he judgment against the firm set aside. As an abstract proposition we may concede appellant’s contention in this respect. The difficulty with his position is that his only direct affirmative attack upon the judgment is contained in his argument, and not in his pleading. His answer is strictly defensive, and consists wholly of general and special denials. There is in it no affirmative averment, which can be considered as a direct attack upon the judgment. Ilis answer is in no sense a cross-bill. Defendants’ special denial that the judgment defendant, the Globe Coal Company, is identical with the company of which defendant was a member avails him little. The evidence is against him on that question. We must hold, therefore, that the defendant by his pleading presents no direct attack upon the judgment, and that the judgment must be deemed valid. The judgment, however, only purports to be against the firm as such. It does not purport to be against the defendant- personally. The defendant is not liable upon it personally, nor can his property be appropriated to the payment of it.

3. Partnership: advances of capital by one partnér: judgment creditors: disposition property. III. This brings us to the question whether Wheeler was guilty of any legal fraud upon the plaintiff in appropriating the assets of the partnership to the payment, of his own claims. That plaintiff could have levied an execution upon the assets of the firm while they remained such is manifest. It- did not do so. That Wheeler was a creditor of the Globe Coal *138 Company to the extent of $3,000 must be deemed a fact in the case. This was so recognized in the settlement between the partners. There is no evidence that he ever agreed to put up more than $10,000 capital against the labor of his copartner. If he was a creditor, he had a legal right to receive payment' of his debt out of the firm assets. And this is so even though he thus took priority over the plaintiff unless some fraud entered into the act. The charge of plaintiff’s petition is that he took such property fraudulently. No fraud is proved unless the act itself amounted to a legal fraud. But Wheeler sustained no personal relation to the plaintiff, nor owed it any personal duty. lie was not a party to its contract, nor to its judgment. In the collection of its judgment the plaintiff was limited to firm projierty alone. Nor did the plaintiff have any lien upon firm property. In so far as any assets were turned over to Wheeler with the consent of his copartner to discharge his claim as a creditor, such assets ceased to be firm property, and became the property of Wheeler. In the absence of fraud, the plaintiff has no legal right to attack such transfer, even though the firm was insolvent, and even though the appropriation of such assets did not leave sufficient property to pay the plaintiff’s claim. Poole v. Seney, 66 Iowa, 502 ; Smith v. Smith, 87 Iowa, 93 ; Sylvester. v. Henrich, 93 Iowa, 489 ; Johnston v. Robuck, 104 Iowa, 523 ; Bank v. Brubaker, 128 Iowa, 587 . We hold, therefore, that, in so far as Wheeler was a creditor of his firm, he was legally entitled to appropriate the assets of his firm with the consent of his partner to the payment of his debt.

4. Same. IY. As already indicated, the remaining assets of the firm amounted to $3,700, and Wheeler took them all. This was $700 more than the amount of his claim as a creditor. We think this must be regarded it „ . as the last remnant of the capital. As he-tween the partners, Wheeler was entitled to take it as a *139 •withdrawal of the capital. As against the plaintiff, however, we think he was not entitled to withdraw this capital, and that it must still be deemed as part of the capital of the firm for the purpose of this case. The decree of the court below will therefore be modified. Plaintiff will be permitted to take a decree against the defendant Wheeler for $700, with interest thereon from the date of the decree of the trial court. Appellee will pay the costs of this appeal.

As so modified, the decreé below will be affirmed.— Modified and affirmed.