The Opinion of the Court was delivered by
Caton, J.Although the want of jurisdiction was earnestly pressed by counsel, yet it seems to us that of all others, this bill states a case peculiarly within the jurisdiction of a Court of Equity. The complainants are the assignees of an account as collateral security for a pre-existing debt, of two members of a special partnership, against a third for the defendant’s proportion of losses, sustained in the adventure, and paid by the other two, and the assignors have become bankrupt since the assignment, and their residuary interest in the account, amounting to $7025, sold by the assignee in bankruptcy, and bid in by the defendant himself. As one of the objects of the bill is to adjust an unsettled account among partners, the jurisdiction of a Court of Equity is undoubted. As the complainants are seeking to enforce an equitable interest in the account, which a Court of Law would not recognize, they are driven to a Court of Chancery for redress. And then, again, the defendant became the purchaser at a sale which conveyed the legal title of a residuary interest in an account against himself. In this Court alone could the complainants enforce their rights.
Nor were' Sigerson & Harrison incompetent witnesses as was argued for the defendant. By their discharge in bankruptcy, their liability to the complainants ceased, and it was no interest to them whether anything should be recovered from the defendants or not. Admitting that they did not schedule Strong & Hall’s debt, it was still extinguished by their discharge, unless it was fraudulently omitted, which is not established by the evidence.
But it was insisted that the defendant was a bona fide purchaser of this demand at the assignee’s sale. But this is not so. Admitting that he had no notice of the complainant’s interest in the demand, still he took it subject to all the equities existing against it in the hands of the bankrupts. This question was fully settled by this Court in the case of Talcott v. Dudley, 4 Scam. 427, and it is unnecessary to review the authorities again. In that case, this Court said : “I take it to be a well settled principle of law, that by a decree of bankruptcy, the assignee succeeds immediately to all the rights and interests of the bankrupt to just the same extent that the bankrupt himself had, subject to and affectéd by all the equities, liens and incumbrances existing against them in the hands of the bankrupt,” and the same rule applies to the purchaser at the bankrupt sale, as will be found by an examination of the cases referred to and relied upon by the Court in that case.
The defendant admits that he was interested in the shipment of corn, but denies his connection with the operation in oats and flour. The allegations of the bill are, however, sustained by Sigerson & Harrison. They both state clearly and unequivocally, that Clawson was interested with them to the amount of one third in all those shipments, and that by their copartnership agreement, he was to share one third of the profits, and to sustain one third of the losses. The evidence also shows that the losses sustained amounted to $570-75, which were borne by Sigerson & Harrison, Claw-son’s proportion of which was $190-25. The evidence of all this is so clear that it is unnecessary to set it out particularly. This account Harrison swears he assigned to the complainants to pay a debt due to them from Sigerson & Harrison, the amount of which, however, he does not recollect, nor do we find it sufficiently ascertained in any other part of the record. As the complainants clearly show themselves entitled to relief, the decree of the Circuit Court" must be reversed, with costs; but as the amount to which they are entitled is not shown, the record will have to be remanded, with directions to the Circuit Court to refer it to a Master, to ascertain and report the amount of the debt due from Sigerson & Harrison to the complainants, to secure which this account was assigned, and upon the coming in and confirmation of the report, to enter a decree thereon in favor of the complainants against Clawson for the amount.
Decree reversed.