Opinion
(December Term, 1827.)
1. A deed to a copartnership vests the property in the concern, not in the individual members. Each takes an entirety, and, by his own deed, can only convey his right to the residue after a settlement of the copartnership accounts.
2. A creditor who takes an encumbrance to secure an antecedent debt, without releasing a surety, is not such a purchaser as is protected by want of notice.
3. A mere creditor, who has not obtained a lien by judgment, has no right to ask the aid of a court of equity to follow the property of his debtor.
4. When lands conveyed to D. M. Co., and also to M. in trust for D. M. Co., were conveyed by M., who died insolvent, indebted to the company, and without personal representation, to secure his individual debt: It was held, upon a bill filed by a creditor of the copartnership to subject this property — first, that nothing passed by the deed, in the land conveyed to D. M. Co.
5. Secondly, that the creditor of M. was not a purchaser for value, within the meaning of the rule which protects them when they are not affected with notice.
6. Thirdly, that no decree could be made founded on the fact that M. was a debtor to the copartnership, until his estate was represented.
7. Fourthly, that the plaintiff, not having established his demand, and having no lien, had no right to ask a court of equity for assistance.
From CUMBERLAND. The bill alleged that Robert Donaldson, John McMillan, and James Thorburn, in 1803, entered into copartnership under the name and style of Donaldson, McMillan Co.; that in the course of their business they acquired real estate, which was either purchased upon speculation with the partnership funds or was taken as security for debts due it; that, from accident or mistake, or because the matter was not considered of importance, the assurances for the land thus acquired were not always made to the copartnership by its name, but were sometimes thus made, at others to Robert (104) Donaldson and John McMillan as tenants in common, and in some instances either to Donaldson or to McMillan, in severalty, as the one or the other happened to be the active agent in the purchase and assurance; that the copartnership was dissolved in 1808 by the death of Donaldson; that at the time of its dissolution it was insolvent, and was indebted to one Samuel Donaldson, of London, in a very large sum; that McMillan died in 1820, also insolvent, and indebted to the copartnership, and that he had no personal representative. The bill then averred that the executors of Samuel Donaldson, who died in 1813, for a valuable consideration had assigned to the plaintiff the debt due their testator by Donaldson, McMillan Co.; that Thorburn, the surviving partner, who was a defendant, had admitted this debt to be due, and in part payment thereof had assigned to the plaintiff all the interest which vested in him as surviving partner in the real estate in question. It was then charged that McMillan, before his death, had conveyed the land thus acquired with the partnership funds to the defendant Strange and one John Winslow, in trust to secure the payment of his individual debt due the defendant the Bank of Cape Fear; and after discharging that, then in trust for other creditors; that Winslow was dead, and that the land remained in the hands of the defendant Strange, unsold. It was insisted that McMillan was a trustee, of the lands thus acquired, for the creditors of Donaldson, McMillan Co., and that the defendants had notice of that trust. The prayer was that the defendant Strange might be compelled to convey to him all the estate he held under the deed from McMillan, and that all other parties having any interest in the land might join in the conveyance.
Gaston and Hogg for plaintiff.
Badger for Bank of Cape Fear.
(105) The heirs of Donaldson and of McMillan, and also the persons beneficially interested in the declaration of trust made in the deed to Strange and Winslow, were made defendants, and either filed formal answer or disclaimers. The bill was taken pro confesso as to Thorburn. The defendant the Bank of Cape Fear admitted in its answer the conveyance of McMillan to Strange and Winslow, and that it was in trust to secure a debt due it; that some of the property thereby conveyed was originally assured to Donaldson, McMillan Co.; but as to the fact that any part of that assured to McMillan was purchased with the funds of the copartnership, they denied any knowledge thereof, and put the plaintiff to the proof of it; and they insisted that they were purchasers for value and without notice. The defendant Strange, in his answer, insisted upon the same facts, claimed no beneficial interest in the property, and submitted to such a decree as should indemnify him.
This bill is filed by one who claims to be a creditor of the firm of Donaldson, McMillan Co., and also the assignee of Thorburn, the surviving partner of that firm. Its object is to reach certain real estates, mortgaged or conveyed in trust by McMillan, one of the partners, to secure an individual debt, before that time owing by him, to the defendant the Cape Fear Bank. It alleges, and it is admitted in the answers, that some of the land was held by the copartnership under legal titles vesting the estate in it. The bill also alleges that there were other lands, the legal title whereof was in McMillan, but that he held them in trust for the firm, having purchased them with the copartnership funds and for its benefit. The defendants put the plaintiff upon proof of this trust, and allege that if there was one, they are purchasers for value and without notice.
(106) As to that part of the property the legal title of which is in the company, the defendant has not the shadow of a claim until the debts of the firm are paid. Property thus situated is entirely unlike an ordinary joint tenancy. The partners have no moieties; the property resides in the company, not in the individual copartners. Each has only a contingent right to a part after the debts are paid and the copartnership ended; and therefore the transfer of one of the partners only passes that contingent right. The copartnership takes the entirety. To pass anything but the contingent right — that is, to pass the estate — the first must convey, for that is the owner. It is something like an estate granted to husband and wife; they take by entireties, and not by moieties. If the husband grants one-half, or the whole, nothing passes but by estoppel; and if the wife survives him, she takes the whole, notwithstanding the grant of the husband, for she is not bound by his estoppel. If, therefore, McMillan is indebted to the firm to the value of this property, the defendant can claim nothing until the debt is satisfied. If the land, the legal title to which vested in McMillan, was not held in trust by him for the copartnership, very clearly the plaintiff has no right. If it was so held, the defendant took it subject to that trust, unless he discharges himself from it. He says that he is a purchaser for value without notice. From the case as it appears at present I am inclined to think that the defendant the Bank of Cape Fear is not a purchaser for value, but a mere encumbrancer. For what value did the bank pay for the trust? Nothing; it was to secure a debt contracted before the trust was contemplated. As regards expenditure, the bank stood after as it did before the deed. Had the bank purchased with an antecedent debt, and no matter how old (I use the word purchased in its vulgar sense), the extinguishment of the debt would have been value sufficient. Here the debt remains as it was before the conveyance. Had the bank even released endorsers, I presume it would have been sufficient.
But the Court cannot decree for the plaintiff as a creditor, (107) because he had not obtained a judgment; he cannot pursue the property in the hands of the bank without obtaining a lien upon it. He appears as a mere creditor, and nothing is clearer than that a mere creditor cannot pursue his debtor's property in the hands of a third person. Nor can he sustain his claim as assignee to McMillan's part of the property, held by the copartnership, without showing that McMillan was indebted to it. However strong the evidence of this fact may be, unless the personal representatives of McMillan are before the Court, we cannot examine into it. His insolvency and intestacy will not do in a case like this, for upon his indebtedness depends the plaintiff's right. Neither is the defendant prepared for a hearing. It is quite probable — indeed, I am almost satisfied of the fact, from the uniform practice — that the bank had endorsers for McMillan's debt, who were discharged upon taking the trust or mortgage. I am unwilling, therefore, in a case so important as this finally to decide it, in its present state, but would recommend that it be remanded for the purpose of making amendments and preparing proofs.
PER CURIAM. Let the cause be remanded to the court below, each party paying their own costs in this Court.
Cited: Bethell v. Wilson, 21 N.C. 613; Holderby v. Blum, 22 N.C. 52; Brittain v. Quiett, 54 N.C. 330; Potts v. Blackwell, 56 N.C. 454; McKoy v. Gilliam, 65 N.C. 133; Ross v. Henderson, 77 N.C. 173.
(108)