Hanford v. Prouty

Citations

• 133 Ill. 339
• 24 N.E. 565

Syllabus

<p>1. Trustee and cestui que trust—debtor and creditor—when the different relations exist. A widow continued the business in which her husband had been engaged in his lifetime, using the property, in conducting the business, which was left by will to her and her children. It was held, that long as the property of the children was employed in the business it was a trust fund in the hands of the mother. But upon a settlement between her and her children, in respect to their shares in the estate, she gave them her obligation for their respective portions, and they gave in return a release to her from any further liability to them. This was regarded as an extinguishment of the trust, at least so far as concerned any subsequent indebtedness, and thereafter the legal relation between the mother and the children was that of debtor and creditor.</p> <p>2. Partnership—marshaling assets—os to debts of the firm, and debts of individual partners. The equitable rule which requires the assets of a partnership to be first applied to the payment of firm debts, and vice versa, is founded, not upon the equities of the creditors, but upon the equities as between the partners. Each-partner has the equitable right to have partnership assets applied, in the first instance, to the satisfaction of partnership debts, so that his individual property may be relieved; and so the members of the firm have each an equitable right to have the individual property of each partner first exhausted in satisfying his individual debts, in order to the exemption of the joint estate, as far as possible, from seizure for individual debts.</p> <p>3. But firm creditors whose debts have not been reduced to judgment have no specific lien, either legal or equitable, upon the property of either the firm or of the individual partners, and their right to have the firm assets so marshaled as to satisfy their debts first, can only be worked out through the equities of the partners.</p> <p>4. So a sale made in good fa