Meyer-Marx Co. v. Masters
Meyer-Marx Co. v. Masters
Opinion of the Court
Bill in equity by creditors of. Masters & Smith to set aside mortgage to Barnard and general assignment to Childers.
The partnership of Masters & Smith carried on the saloon business in Jasper, Ala., from some time in 1894 to July 6, 1896, when it was dissolved. The bill avers that on the dissolution (erroneously stated, according to the evidence, to have been on the 13th of July), Masters sold his interest to Smith, and the witnesses, by way of conclusion, give the transaction that character; but the undisputed facts show that the partners divided 'the assets of the firm between themselves, Masters receiving money and accounts amounting to about $360, and Smith the residue of the assets, the value of the goods and fixtures, not including notes and accounts, being-estimated at $1,800 or $2,000. Smith thereafter continued to carry on the business at the same place and under the same license, until the 15th of July, when he executed to Childers a general assignment of all his property of every description, not excepting exemptions, for the benefit of all his creditors. The undisputed evidence shows that Smith then owed no debt to any one except to the partnership creditors of Masters & Smith, and a portion of the Barnard debt presently to be referred to, and that Childers knew that fact at the time of the assignment. The assignment, on its face, appropriated the property to the payment of Smith’s debts, saying nothing as to how they accrued.
The evidence, as against Smith and Childers, is sufficient to show that the firm and each individual member were insolvent and to charge Childers with notice thereof when he accepted the assignment.
On July 14th Smith executed to Henry Barnard a mortgage on specified articles of the fixtures, etc., which had been of the' firm of Masters & Smith, to secure a recited indebtedness of $791.90 due by two promissory notes, one bearing date December 31, 1895, for $500, and payable March 1, 1896, and the other for the balance, bearing even date with the mortgage and payable one claj'- after date. The articles, after being specified, are described thus: “Being the same bought by Masters & Smith from S. J. Adler and now in use in my barroom in Jasper, Alabama; and also one certain cash register bought from National Cash Register Company of Day
From this it results that there is no case against Bar
The next question, then, is as to the validity of the general assignment to Childers.
In averring the execution of the assignment, the bill uses this language: “That on the 15th day of July, 1896, said J. A. Smith conveyed all the other property purchased by him from said Masters as aforesaid, to S. P. Childers, as assignee, for the benefit of creditors. A copy of the deed of assignment to Childers is attached to this bill as a part thereof and marked exhibit ‘B.’ ” The exhibit is an individual assignment by Smith to Childers of all his property, in general terms, for the benefit of his creditors. The partnership of Masters & Smith is not mentioned. The supposed vitiating facts (quoting the language of the bill), are: “Complainant charges that said Henry Barnard and said S. J. Childers, when said conveyances were made to them, respectively, as aforesaid, had notice of the partnership existing between said Masters & Smith, as aforesaid, and of their
Without similarly affecting the partnership creditors of Masters & Smith, the division of assets between the partners vested in Smith, individually, as between him and Masters, the title to the property retained by him, and as between him and Childers that title passed to the latter by the assignment, without regard to the question whether the deed, on its face, on account of its individual character, would have been efficacious to pass title to partnership property in which there had been no severance of interests.
There can be no doubt that the purpose and effect of the division (though not charged to have been infected with actual intent to defraud), was to divert from partnership channels and uses, and to appropriate to the individual use of Masters, the portion of the assets retained by him, and that its effect was to hinder the creditors in reaching those assets, and that the transaction was consequently fraudulent as to creditors, opening the entire partnership assets (not affecting lawful 'incumbrances) to seizure at the suit of creditors in equity or by attachment; but it appears from the undisputed evidence that the part retained by Smith, comprising the greater portion of the assets, remaining intact, so to speak — the former business being continued with the same, at the same place and in the same name.
The first question, therefore, which suggests itself is whether Smith, thus acquiring individual ownership and possession against his partner of the goods retained by him, might not lawfully have devoted the property by a fair and honest assignment to an’honest trustee, to the equal payment, so far as it would go, first, of the debts owing partnership creditors and then his individ
It is earnestly contended by counsel for complainants that the deed, on its face, secures to the individual creditors of the assignor priority over the firm creditors, and it appearing that there Ayas an individual creditor of Smith, to-wit, Barnard, the assignment could not be carried out without paying that creditor before any distribution could be made to firm creditors. We are compelled to hold this position to be Avell taken. The respondents sought to avoid it by proving that Smith owed no individual debt, Avhereby the entire assets would ha\’e gone to firm creditors, but the proof shows that $291 of the Barnard debt Avas contracted by Smith after the dissolution of the partnership. The answers, or some of them, also allege that Simth, on buying out Masters, assumed all the liabilities of the firm, but there was no proof of it; and if there had been, the firm creditors would still Imre been injured by the carrying out of 'he assignment, for the reason that it Avould have placed them on an equality with Barnard when (not referring tc the mortgage security, Avliich we have held valid) they Avere entitled to priority over him. It Avas impossible for the firm creditors to get Avhat they were entitled to Avithout setting aside the assignment and having
The cost of appeal will be adjudged against the appellees other than said Barnard.
. Affirmed in part and reversed, rendered and remanded in part.
Case-law data current through December 31, 2025. Source: CourtListener bulk data.