As the grounds of this decree, the bill states that the mortgage aforesaid, was executed November 2d, 1848, and, at that time, said Hunt was a partner, in said company and liable for, the debts thereof, which he assumed upon becoming a partner, and that the mortgage was ante-dated to secure to him a priority over the general partnership creditors; that, for some time previous to the *Page 300 mortgage, said Hunt had been the agent and manager of the company, and, as such, contracted a great part of the debts; and that, as mortgagee of the shares of John Worsley and Samuel L. Hunt to their full value, and of the share of Cornelius S. Tompkins to a certain amount, and as the real owner of an interest standing in the name of Leonard Fuller, he had been actually interested in the business previous to the 2d of November and the execution of said mortgage; and that he had continued a copartner, acquiring by purchase and foreclosure the interests of the said Samuel L. Hunt, Worsley and Stevens, until September 21st, 1849, when the company was dissolved. That during all this time the mortgaged property had been in the possession of the company; that the greater part of the partnership liabilities were debts, contracted prior to the 2d of November, 1848, and that the assets, including the property covered by the mortgage were insufficient for the payment thereof; that the transfer of said mortgage was not recorded until after the company was dissolved; and that said Chandler and Stimson received said notes and the mortgage, with full notice that said Hunt was a copartner, and the mortgaged property copartnership property, and could therefore claim no greater right than Hunt himself.
The defendants, in their several answers, deny that Hunt was a copartner when the mortgage was made, and state that the company was at that time solvent, having a large surplus over their liabilities, and continued in good credit at the time of the transfer of the notes and mortgage to said Chandler and Stimson, and that said transfer was made in the regular course of business, in good faith, and for the considerations above stated.
The cause was heard upon bill, answer and proofs. *Page 301 While a copartnership is solvent and going on, the creditors, strictly speaking, have no equity against the assets *Page 303 of the partnership. Hence the company may sell any portion of the joint property to one of the partners, and, if such sale be in good faith and for a valuable consideration, it will be valid against any claim by the partnership creditors. And, even in case of a dissolution of the company where such dissolution is voluntary, the partners may agree that the joint property of the firm shall belong to one of them, and, if such agreement be bonafide and for a valuable consideration, it will transfer the whole property to such partner, free from the claims of the company creditors. Story on Part. § 358, and the cases there cited.
This results from the rule, that the application of the company property to pay company debts is the equity of the partners and not of the creditors, and if waived by the partners in good faith, the creditors are bound.
So the firm may, in good faith and for a valuable consideration, give a note to one of the partners and the endorsee of such note may enforce it at law against the company.Smith v. Lusher, 5 Cowen, 68; Burney et al. v. Lyman, 1 Story, 423. It is valid and can be enforced in equity against the partner, the original promisee.
If the firm can make a valid note to one of the partners, they may make a valid mortgage to secure its payment.
In this view of the law, it is immaterial whether Hunt was a partner or not, at the time he received the notes and mortgage in question. They were given in good faith and for a valuable consideration, and so far from any view to the bankruptcy of the company, that, at the time they were given, Hunt agreed to become partner in the firm and to assume the debts and did assume them.
But if Hunt had retained the notes and mortgage until the company had gone into bankruptcy, he could not be permitted to enforce them against the assets of the company, *Page 304 to the exclusion of the company creditors, or pari passu with them. Being himself liable to the creditors he could make no claim until they were paid.
Instead of retaining the notes and mortgage, Hunt sold and endorsed one of the notes to Mr. Chandler in February, 1849, for cash, and in May following, assigned the mortgage and endorsed the other note to Mr. Stimson, as collateral security for his endorsement of the notes of Hunt to the amount of three thousand dollars.
At the time of these transactions and for several months afterwards, the company continued to carry on their usual business. We think the loan of money by Mr. Chandler and of credit by Mr. Stimson was made in good faith on the part of these gentlemen. We think Mr. Hunt also acted in good faith in the matter, and, so far from having any view at the time to the insolvency of the company, his object was to strengthen their credit and enable them to go on with their business.
Mr. Chandler, when he received the note, did not take any assignment of the mortgage, but he is equally entitled to the benefit of the mortgage security to the extent of his debt. Mr Stimson's endorsement was to the amount of three thousand dollars, which he has since paid. The plaintiff contends he is entitled to a dividend, out of the proceeds of the mortgage, on this account only, and the remaining five hundred dollars are to be considered as belonging to Hunt, and so not to be paid out of the proceeds of the mortgage. In our opinion, Stimson as holder of the note is entitled to a dividend on the whole amount thereof, until he is paid the full sum due him.
Bill dismissed with costs to the respondents, costs to be a charge on the general fund. *Page 305