Shepherd v. Reeves & Co.

McCLELLAN, J. —

This is a bill by creditors of a partnership to subject to the payment of their demands a lot of land which, it is alleged, was purchased by one of the partners with partnership funds, the conveyance being made to his wife, and a house built thereon by the husband also with funds belonging to the partnership. W. PI; Shepherd, it is alleged, was the member of the partnership who so diverted its assets ; and in respect of him and'such diversion, the bill contains the following averments: “That said Shepherd was the business manager of the partnership and acted as salesman, collector, purchaser, &c., and, in fact, managed" and controlled the business in all respects and handled the cash thereof; and that said Shepherd, whilst said firm was indebted to complainants, but before judgment for the debts had been rendered, well knowing that the assets of said firm were wholly insufficient to pay its debts, and that said firm was in fact insolvent, took funds and effects of said firm from the general assets thereof, and therewith built and erected a two story residence for himself and family to live in, worth at least two thous- and dollars, upon a lot which he purchased and paid for with such funds, taken, as aforefaid, from the assets of said firm, with intent thereby to hinder, delay or defraud said creditors and complainants out of their just rights, and satisfaction of their just demands out of said funds so abstracted, as aforesaid from said business ;■ and complainants state and charge that they and said other existing creditors were entitled to and had a lien upon said funds for the payment of partnership debts which was superior to any right which said Shepherd had or could have acquired by reason of his appropriation thereof, as aforesaid, for the purchase of said lot and the erection of said dwelling house and other appurtenances; and, therefore, whatever might have been the intent upon the part of said Shepherd, with which he so appropriated said funds, the same legal effect would and did result or flow therefrom, that is to say, it is a transaction which the law condemns as fraudulent as against your orators *285and other creditors ; and that title or deed to said lot was taken in the name of said W. H. Shepherd’s wife, Mar.t-elia Shepherd, from the vendor to said W. H. Shepherd of said lot.” The answer (of Martelia Shepherd and W. EL Shepherd, we suppose, though not stated in the abstract) "denied the. averments of the bill as to the house and lot in question, and alleged that the lot was purchased and house built by Martelia Shepherd with her own means and at her own expense, that the partnership was largely indebted to her at the time, in an amount much greater than what she received from the company towards building the house and purchasing the lot.”

Both W. H. Shepherd and his wife, Martelia Shepherd, admit in their answers and depose as witnesses that money to purchase the lot and money and materials to build the house thereon was supplied by or came from the partnership, and out of its funds and effects ; and the answers and testimony exclude the idea that any money or effects of W. H. Shepherd individually were used either in the purchase or improvement of the lot. They aver and depose, however,-• that the partnership was indebted to her in the sum of $600, and the money and material supplied by the firm was in the way of payment of this indebtedness to her. So that the issue is brought down to this : Was the firm indebted to her in the amount of funds or effects belonging to it which went into this property, and were such funds or effects paid or delivered to her on this indebtedness? In the first place, W. H. Shepherd purchased the lot of land from Mrs. Berry in his own name, had a deed drawn and signed purporting to convey it to himself and wife, and paid for it in part by crediting an account which Mrs. Berry owed the firm, and in other part with money ■which must have come from the same source, as Shepherd testifies that none of his own money was so used, and Mrs. Shepherd claims neither that she furnished the money thus paid directly, nor that it was paid by the firm, for her as a credit on its indebtedness to her. Indeed, while she testifies that the residence on the lot was built with her money, she nowhere says that the lot was paid for with her money. So much, for the moment, as to the purchase money of the lot. In respect of the money with which the house was built, it appears from *286the books of the company that it w.as supplied, not to Mrs. Shepherd at all, but to W. H. Shepherd, that Shepherd himself took it from the funds of the company and charged it to himself. This, in our opinion, made a prima facie case for the relief' prayed as to the house and lot, and put upon Mrs. Shepherd the burden of showing that the firm was indebted to her, and that the money and material expended and used in building the house were furnished on that account. We do not think she has discharged that burden. To begin with, it is an iiifirmative circumstance that she took no note or other evidence of the firm’s alleged indebtedness to her. Again, if it had been so indebted and set about the payment of such debt, it is to the last degree improbable and unreasonable that it should have charged the payments as ordinary items of indebtedness to W. H. Shepherd instead of entering them as credits on her account against the partnership. Moreover, not only does it not appear that she had any evidence or even memorandum of her claim against the firm, but it does not appear that there was any account whatever between her and the firm, either of debit or credit,, on its books. Then, too, her testimony as to the sources whence she had or received the money she claims to have loaned the firm is far from satisfactory. She says “the money came from my property, from my father’s estate,” and she gave a mortgage on a place and borrowed $300 of the $600 that was in the store, but the mortgage is not produced, nor its date given. She says she had about $150 a year rent on a place; but whether more or less than $150, and how much more or less, and what place, is not specified; and that the firm “had about two years’ rent of this place.” These indefinite places thus mortgaged and rented came, she says, from her father’s estate. He died about thirty years before she was testifying. She confessed her inability to state the value of the property which thus came to her, and also state the value of her own and her husband’s estates. And she makes no pretense whatever that she at the time of these transactions had any money except what the firm owed her, so that she could not have supplied the money which in part paid for the lot. Add to all this the fact that the deed which was originally drawn, signed and delivered,-but not attested or acknowledged, was surrendered by Shep*287herd., and another made at his request to Mrs. Shepherd alone, more than six months after the original deed and after the house had been built with the funds of the partnership taken by Shepherd and charged to him, and the conclusion is fairly and reasonably assured that this whole idea about the lot being purchased and paid for and the house being built with her funds is an afterthought, having existence only as a part of a scheme to save the property from the just demands of the partnership creditors, these complainants among the number ; and we concur with the chancellor that they were entitled to subject it to their debts as in truth and in fact assets of the firm.

Whatever may be the present value of the house and lot, we do not find that any money or material entered into the purchase of the one or the erection of the other which did not belong to the partnership ; and there is, therefore, no merit in the suggestion that in any event the compainants are entitled to only so much of the proceeds of a sale of the property as will equal the amount of partnership assets affirmatively and certainly traced into it.

Affirmed.