October 1, 2012

Hatchell, et. al. v. Chew, et al., Pulaski, 1900

HATCHELL et al. v. CHEW et al.

COURT OF APPEALS OF KENTUCKY

58 S.W. 816; 1900 Ky. LEXIS 283; 22 Ky. L. Rptr. 738

October 19, 1900, Decided

PRIOR HISTORY:  [**1] Appeal from circuit court, Pulaski county. Consolidated actions,—the one by Willis Hatchell against J. H. Chew for the settlement of partnership accounts, and the other by J. H. Chew against Atwood Davis to recover personal property. Judgment for J. H. Chew in each action, and Willis Hatchell and Atwood Davis appeal.

DISPOSITION: Reversed.

COUNSEL: James Denton, for appellants.

O. H. Waddle, for appellees.

JUDGES: PAYNTER, J.

OPINION BY: PAYNTER

OPINION

 [*816]  PAYNTER, - J. Hatchell and Chew were partners doing business as the Enterprise Coal Company. They were operating a coal mine and running a general store, and on March 26, 1898, the firm was in debt $800 or $900. On that day the partners agreed upon terms of dissolution, and reduced them to writing, which reads as follows: "This agreement, made this day by and between Willis Hatchell and J. H. Chew, witnesseth, that the said Willis Hatchell has this day sold his one-half interest in the Enterprise Coal Company (the same purchased of said J. H. Chew on November 1, 1897) upon the following terms and condition, to wit: Said J. H. Chew agrees to pay within ten days ($873.00) eight hundred and seventy-three dollars for the said Hatchell's one-half interest as above stated. Said Chew to have all  [**2] the debts due said firm, and to pay all liabilities of said firm. It is agreed that Atwood Davis remain in charge of the business until the contract is complied with." It is so universally understood that one partner has a lien upon the partnership assets for any advancements which he may make for the benefit of the firm, whether in furnishing money to carry on the business, or in the payment of the debts of the firm, it is deemed unnecessary to make a citation of authorities to sustain the proposition. It is equally as well understood that a creditor of an individual member of a firm cannot acquire a lien by execution or mortgage upon partnership as sets superior to a claim of a partner for advancements, etc., without the consent of the member making such advancements. So Hatchell had the right in law to see that the firm assets were applied to the payment of firm liabilities. He could have disposed of his interest in the firm to Chew, and converted the assets into the individual property of Chew, and thus enabled Chew to have pledged the property to the payment of his individual debts. The question here is, did Hatchell retain, by the writing quoted, his right to have the partnership  [**3] assets subjected to the partnership liabilities? While it is recited in the writing that he sold his interest in the partnership property to Chew, still that was qualified by the clause in the writing, to wit, "It is agreed that Atwood Davis remain in charge of the business until the contract is complied with." If by the term of the contract it had been provided that Hatchell was to remain in possession of the property until Chew paid $873, and also the firm liabilities, certainly his right to see firm property applied to firm liabilities would have remained. This being true, in effect he remained in possession through Atwood Davis. This writing manifests a clear intent of the parties that Hatchell was not to surrender his rights, as a partner, to see that the property was applied to the payment of the firm liabilities. By the terms of the writing, Chew agreed to pay the liabilities of the firm, as well as the amount that was going to Hatchell. Both of these things were to be performed by him, and were part of the contract. To comply with the contract, it was essential that he should do both. It is  [*817]  said, however, that it is not possible that the parties could have intended such an  [**4] effect, because he wanted to carry on the business, and to do so it was essential for him to have possession of the property. The question before us is not what he should have been prompted to do by a sound business course, but is, what did he agree to do? In our opinion, Hatchell retained his right as a partner to see that the partnership property should go to the payment of the partnership liabilities. The business of the Enterprise Coal Company was conducted on rented premises belonging to the Greenwood Railway & Coal Company. Hatchell admits that he was liable for the rents which accrued before the partnership dissolved, on March 26, 1898, but denies that the firm assets are liable to the payment of rents which accrued subsequently. As we have said, he held the possession of the property for the purpose of enforcing his rights, and the property thus held continued to be liable for the rents which accrued under the contract. He cannot claim his rights in the partnership property, and at the same time have it adjudged that it is not liable for rents during the time he thus retained it.

Between November 1, 1897, and March 26, 1898, Chew gave a mortgage to the Curry Grocery Company  [**5] for an individual debt on his interest in the partnership. After the contract was entered into, on March 26th, he gave another mortgage to the same firm. It is insisted that the Curry Grocery Company thus acquired a lien upon it. It must be admitted that the first mortgage did not give a lien, so as to affect the rights of Hatchell in the partnership assets. He having retained the right, as a partner, to see firm property pay firm liabilities, the second mortgage could not affect his interest. Therefore the court erred in adjudging that the Curry Grocery Company should be paid out of the assets in preference to him. The judgment is reversed for proceedings consistent with this opinion.

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