Franklin Sugar Refining Co. v. Henderson, Pfeil & Co.

Citations

• 86 Md. 452
• 38 A. 991
• 1897 Md. LEXIS 140

Syllabus

<p>Partnership—Firm Creditors Entitled to Priority of Payment Out of Partnership Assets—Fraudulent Conveyances—Assignment of Interest in Insolvent Firm by Retiring Partner—Attachment— Assignment for Benefit of Creditors.</p> <p>Creditors of a partnership have a right to insist upon the payment of their claims out of the partnership assets before those assets are appropriated to the payment of the separate debts of any members of the firm.</p> <p>Any act of the partners which is destructive of this right of the firm creditors to be first paid out of the firm’s property, is an act which the law regards as delaying and defrauding such creditors, if the partnership is insolvent.</p> <p>A transfer by one partner of all his interest in the firm to his co-partner, when the firm is insolvent, is fraudulent as against partnership creditors, because it destroys their preference in the distribution of the partnership assets.</p> <p>The same principle is applicable when the transfer is made by one retiring partner to two or more of his copartners who continue the business, because in such case the claims of the creditors of the former firm are subordinated to, or placed on an equal footing with the claims of the new firm’s creditors.</p> <p>When a partnership composed of three persons is insolvent, and a conveyance of all his interest in the firm is made by one partner to the others, who continue the business, an assignment by them for the benefit of creditors generally ten days thereafter is fraudulent in law and justifies an attachment by the creditors of the first partnership.</p>