make such distribution of their assets as they chose, provided that it waC! not a fraudplent disposition; and it was not fraudulent for them to provide for the payment of the creditors of the individual I:nembers of th'.) firm out of the assets, as was done in this case. The rule invoked by tile complainants, that the copartnership creditors are to be paid out of the copartnership, is, of course, the rule followed by the courts, either in bankruptcy or in chancery, when the assets of the firm, and the a,i'sets of the individual members of the firm, are in the hands of the CI)L:rt rot· distribution; but until the assets come into the hands of the c011rt, ,tnt! while the firm is in possession and control thereof. such disposition the firm makes of its assets is hinding so long as it is not an actual fraudulent disposition, with intent to hinder and delay creditors; and the fact that the copartnership creditors did not get as much as they would have got had not provision been made for the creJitors of the individual members of the firnl,does not of itself constitute a fraud. These bills are, therefore. dismissed for want of equity.
NOTE. PARTNERSHIP-FIRM PROPERTY-!NDIVIDUAL DEBTS. So long as a firm is solvent aU its members assenting, the individual debts of the parties may be pRid out of the firm assets, Roop v. Herron, (Neb.) 17 N. W.·Rep. 353; and, there beiujl; no fraud ill faot, a partnership creditor cannot impeach as fraudulent in law, a conve,yanC'e of partner ship property in trust to secure an individual debt of the partners, GIn Co v. BanUOll. (Tenn.) 4 S. W. Rep. 831; but if the firm is insolvent at the time ihe transfer of the firm property to mllke such payment is made, it is fraudulent and void as to ex:sting creditors of the firm, Goodbar v. CaJ;'Y 16 Fed. Rep. 317; and one paJtn"r may not pay his private debts out of the assets of the firm, for this would be a fra1..d upon his partners, Gallagher's Appeal, (Pa.) 7 Atl. Rep. 237i....CaldweU v. Furniture Co., (Neb.) W. Rep. 336; Willis v. Bremner, (Wis.)' 19 N. w. Rep. 403; VerDOu v. Upson, ld. -1.01,; Powers v. Paper Co., (Wis.) 18 N. V!. Rep. 20. See, also, Johnston's Appeal, (Pa.1 9 At!. Rep. 76),. and note; Crook v.Rlndskopf, (N. Y.) 12 N., E. Rep. 174; Saunders '\. Reilly, ld. 1,0; Tait v. Murphy, (Ala.) 2 South. Rep. 317. An insolvent firm sold the firm effects to a creditor in consideration of a certain sum in cash, a.nd a further sum which was recited to be the indebtedness of the firm to the but which in fact embraced indebtedness of the individual members of the firm. tleld that, in thus securing a. pecuniary benefit beyond tha.t which the law would secure, the transaction was fraudulent as to other creditors, and void, not only as to the benefit thus reserved, but in toto. Pritchett v. Pollock, (Ala..) 2 South. Rep. 735.
CORBIN V. 130IES
(Oircuit Oourt, N. D. Illinois. April 30, 1888.)
P ARTNERSHIP-LIMI'l'ED P ARTNERsHIPS-INsoLVENCY'-PREFERENCES,
A limited partnership, practically insolvent ill August. 1882. was uissolved Octoher 17th following, but the notice of dissolution .was not published until December 2d following, and then only in a legal publication read by few persons besides lawyers. The remaining partners dissolved October 19th. nnd the notice of this dissolution was published aflhe sallle time as the other, but in a paper of extensive circulation. The busillcssstill went on,llOwever. and the defendant bank cashed the firm's checks. although their account was overdrawn, and advanced them money on goods as' collateral. This bank was friendly to G., the special partner, and it had been assurefl by hIm. as far back as:Angust. that he·.G., would see that the checks were Ulade good. an-i had received further assurances from F., the managing pUl'tJJ.cr, that. In case
COBBiN II. BOIES.
ber 28.1882, and January 20, 1883. the bank accepted unsecured notes of the general partners to a large amount in settlement Of notes of the limited partnership maturing between those dates. On January 20,1883, judgment was oonfes8ed by the partners in favor of the bank, and the special partner, and execution so leVIed on the stock in trade that the bank got the first lien and G. the second; thus shutting ont unsecured creditors of the limited partnership. The attorney of the partners, both special and general, was also the attorney of the bank. Held, that the bank had knowledge of the insolvency of the limited partnership. and was a party to the scheme to protect G.. 8S against creditors of that firm, and that the judgment confessed in its favor was therefore void, under 2 Starr & C. St. Ill. c. 48. § 22, forbidding prefer· ences by such partnerships in contemplation of insolvency.
the concern got Into trouble, the bank would be protected. Between Decem,
In Equity. Bill by Chester C. Corbin, an unsecured creditor of Boies, Fay & Conkey, to set aside certain judgments confessed by them, as in fraud of the Illinois limited partnership act, (2 Starr & C. St. Ill.c. 84, pp. 1564-1568.) Wm. J. Manning, for complainant. . Ffnwer, Re:rny « Gregory" and Turnbull, Washburn & Robbim, for retlpondent bank. GRESHAM, J. On March 30, 1882, William A. Boies, Benjamin B. Fay, Lucius W. Conkey, anqJulius K. Graves, formed a limited partnership under the firm name of Boies, Fay & Conkey, to carryon the busmess of wholesale grocers for five years, at Chicago. Graves, a special partner only, was a resident of Dubuque, Iowa, where he remained; and, whether the business proved profitable or unprofitable, interest was to be paid on his capital of $50,000, at the rate of 20 per cent. per annum. Fay and Graves were brothers-in-law, and the former became financial and chief manager of the firm. In August, 1882, about five months after Graves became a limited partner, an inventory was taken of the assets, from which the book-keeper made a statement, showing the firm's financial condition. This statement embraced all the bills receivable, and although some of the debts due to the firm were then uncollectible and worthless, no deduction was made on that account. If such deduction had been made it would have appeared that the liabilities exceeded the assets. If the partners did not then know that the firm was insolvent, they must have known it was seriollsly threatened with insolvency and bankruptcy. This statement has not been produced, and Fay testified that a copy of it which was furnished him by the book-keeper had been lost or destroyed. under which this limited partnership was formed The Illinois provides that it shall not be lawful for any such firm, or allY member thereof, in contemplation of bankruptcy o'r insolvency, and with the intention of preferring or securing one or more creditors to the exclusion of others, to make any sale, transfer, or assignment of their property or effects, or to confess any judgment, or create any lien all the \)roperty or assets, and that· all preferences so made shall be utterly 'Void. Instead of suspending in August, 1882, and holding
(2 Starr 8; C. St.
m. p. 1568, 0. 84, I 22.)