Wayne County MI Archives Court.....Kirby, V. Ingersoll 1837
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Source: Cases In Chancery
Written: 1837

CASES IN CHANCERY
FIRST CIRCUIT.

Zebulon Kirby v. Justus Ingersoll and Nehemiah Ingersoll.

Partners, implied power of. One partner may bind his co-partner in all matters 
within the scope of the co-partnership; the implied authority of one partner 
to bind his co-partner is generally limited to such acts as are in their 
nature essential to the general objects of the co-partnership.

Partners, general assignment by one. One partner cannot make a general 
assignment of the partnership effects to a trustee for the benefit of the 
creditors of the firm, without the knowledge or consent of his co-partner, 
when he is on the spot, and might have been consulted.

There is no implied authority resulting from the nature of the contract of co-
partnership, that will authorize one partner to make a general assignment of 
the partnership effects, without the knowledge or consent of his co-partner.

Partners, implied power of. The authority impliedly vested by each partner in 
the other is for the purpose of carrying on the concern, and not for the 
purpose of breaking it up and destroying it.

One partner does not, by any implication, confer a power upon his co-partner 
of divesting him of all interest in, or authority over, the concern.

One partner may transfer a portion of the assets for the purpose of paying or 
securing debts, or to raise means to carry on the concern; but the power of 
divesting entirely one partner of his interest, appointing a trustee for both, 
and breaking up the concern, is not one of the powers either contemplated or 
implied by the contract of copartnership.

Covenants, several. Where the covenants and conditions of bonds and other 
deeds are several, they may be good in part, and void as to the residue.

Deed fraudulent in part is void. The better opinion seems to be, that even at 
common law a deed fraudulent in part is altogether void.

Fraud, meaning of. By the term fraud, the legal intent and effect of the acts 
complained of is meant.

The law has a standard for measuring the intent of parties, and declares an 
illegal act, prejudicial to the rights of others, a fraud upon such rights, 
although the party denies all intention of committing a fraud.

Partners, general assignment by one. The principle upon which general 
assignments by one partner have been declared void is, that one partner has no 
authority to make a general assignment of the partnership effects in fraud of 
the rights of his co-partner to participate in the distribution of the 
partnership effects among the creditors.

Illegal conveyance void. The construction to be put upon a deed conveying 
property illegally is, that the clause which so conveys it is void equally, 
whether the illegality be by statute or at common law. This is the rule, 
except in cases where the statute declares the whole instrument void.

Deeds void in part. One good trust inserted in an illegal instrument of 
assignment cannot make that instrument a valid one.

A grantee, who voluntarily becomes a party to a deed which is fraudulent in 
part, forfeits his right to claim benefit from another part which would have 
been good.

The bill in this case was filed September 5, 1839, and states that November 9, 
1833, complainant and Justus Ingersoll, one of the defendants, entered into a 
co-partnership in the trade and business of tanners, curriers, and dealers in 
leather; that they were to be equally interested, and devote their time and 
skill to the management of the business, under the firm and style 
of "Ingersoll & Kirby," and were to share the profits equally. That the co-
partnership agreement was not reduced to writing; was to continue so long as 
they should be satisfied with each other.

That immediately on entering into the co-partnership, the firm of Ingersoll & 
Kirby purchased stock in trade to a large amount; that they purchased out the 
business of a firm then trading in the city of Detroit, under the name 
of "Justus Ingersoll & Co.," and undertook to pay the liabilities of said 
firm, to the amount of the stock received from said firm, one of which was a 
debt to complainant of about $900. That at the time of forming the co-
partnership, said Justus resided at Medina, in the State of New York, and 
continued to reside there until September, 1838, when he removed to Detroit; 
that during his residence in the State of New York, said Justus did not devote 
his time to the business of said firm, but was exclusively engaged in 
conducting and carrying on his own private business, for his own exclusive 
benefit. That complainant resided at Detroit, where the business of said firm 
was carried on, and devoted his whole time to the business of said firm; that 
the business of said firm became prosperous and lucrative, and was carried on 
without any material disagreement until about the month of November, 1838, 
when some difference of opinion arose as to the mode of conducting the 
business, and the said Justus expressed a desire to close the said co-
partnership business; that complainant expressed his willingness to dissolve 
the co-partnership as soon as the business of the firm could be placed in a 
situation to secure to the creditors of the firm the immediate payment of 
their debts. That immediately complainant directed the whole of his attention 
to the payment of the liabilities of the firm, and to the collection of the 
outstanding debts due to the firm; that the liabilities of the firm had been 
reduced, during ten months last past, about $11,000.

That complainant and said Justus had from time to time, as fast as they could 
without prejudicing the rights or interests of the creditors of the firm, 
since that time divided between them certain of the property of the firm, so 
as to hold the same in severalty, and not as partners; that among the property 
so set apart to complainant there were about 728 sides of upper leather, of 
about the value of $2,000. That there was assigned to said Justus as an offset 
for the property so assigned to complainant, about 540 hides, of about the 
same value as those assigned to complainant; that said Justus took possession 
of the property so assigned to him, and shipped the same to Medina, in the 
State of New York; that complainant took possession of the property so 
assigned to him, and packed the same away apart from the partnership property, 
but leaving the same in the same building where the co-partnership business 
was carried on, and in a building contiguous thereto. That at various other 
times there were other divisions of the property of said firm between 
complainant and said Justus, with the view and intent to close the said co-
partnership business as fast as the same could be done without hazarding the 
interests of the creditors or materially injuring the business of the firm. 
That the property so set aside to complainant and said Justus, by amicable 
division, was not charged or entered against either on the books of the firm. 
That August 28, 1839, while the business of the firm was so in progress of 
final settlement, the said Justus Ingersoll, without any previous consultation 
with complainant, and without complainant's knowledge or consent, made or 
pretended to make an instrument of assignment or indemnity to one Nehemiah 
Ingersoll, and in which assignment it was, among other things, set forth that 
complainant and said Justus were jointly indebted to James Abbott, of the city 
of Detroit, for rent, accruing on a certain lease, bearing date April 11, 
1836, and that said Nehemiah was liable to pay the said rent by reason of a 
bond signed by him for the said firm. And that it was further set forth in 
said assignment that said Nehemiah was liable upon a certain bond bearing date 
November 19, 1835, executed by him to the Farmers and Mechanics' Bank of 
Michigan, for the benefit of said firm of Ingersoll & Kirby, in the penal sum 
of $20,000, conditioned to pay the sum of $10,000, or the amount of the 
indebtedness of the said firm to said bank, not to exceed that sum, and that 
the present indebtedness of the firm of Ingersoll & Kirby to the said bank, 
for which said Nehemiah was liable, was about $10,000. That said Nehemiah was 
also liable as indorser of a promissory note of said firm for the sum of 
$2,000, and that said firm were willing not only to secure and indemnify the 
said Nehemiah, etc., on account of his liability on the bond, but also to pay 
him the $2,000 and to secure to all other creditors of said firm the payment 
of their just debts, out of the moneys and effects of said firm after such 
indemnification and payment to said Nehemiah, and for the purpose of such 
indemnification, the said Justus, using the name of the said firm of Ingersoll 
& Kirby, assigned to said Nehemiah the stock in trade, or the greater 
proportion of it, amounting in value to about the sum of $9,000, and notes and 
accounts belonging to said firm to the amount of about $6,000, and in and by 
said deed of assignment gave said Nehemiah full authority to sell and dispose 
of all the said property, and collect all the said debts, and apply the 
proceeds of the same to the payment:

1st. Of the $2,000 due to him as indorser of said note. 

2d. To pay off and satisfy any debts due from said firm which the said 
Nehemiah was in any manner bound to pay; and

3d. To pay and satisfy any other debt or debts justly due or owing by said 
firm; to retain out of the moneys collected a reasonable sum for his services, 
and to pay over to said Justus and complainant the residue, etc.

The bill states that said Nehemiah is a brother of said Justus, and charges 
that said Justus was largely indebted, individually, to said Nehemiah, for 
money loaned of him, and that said assignment was made by said Justus not for 
the purpose of securing any debt owing by said firm of Ingersoll & Kirby to 
said Nehemiah, or for securing or indemnifying him against any debt or demand 
owing by the firm for which said Nehemiah is security; that said firm was in 
good credit at the time of making the assignment, and was then able to pay all 
its liabilities and obligations; that said Nehemiah had been the indorser of 
said firm during the whole time of its continuance, and that there was not at 
the time of filing the bill any paper on which said Nehemiah was liable, 
except that which is held as collateral to the debts of said firm; that said 
Nehemiah never became liable to pay any sum for the firm, by reason of the 
protest for non-payment of the liabilities of said firm; that said firm are 
not indebted to the Farmers' and Mechanics' Bank in the sum of $10,000, but 
that their whole indebtedness to said bank is $6,700, no part of which was yet 
due; that since said assignment complainant has been prevented from attending 
to the business of said firm, and when complainant applied to examine the 
books and papers of the firm, he was abruptly refused, and told by said Justus 
that the papers, books, notes and accounts of the firm were left in his, the 
said Justus' charge and care by said Nehemiah, and that complainant could have 
no access to them.

The bill further states that there is a large amount of property, consisting 
of leather, hides and other stock, belonging to said firm, which is not 
mentioned in the said assignment, which is now in the possession of said 
Nehemiah and said Justus, which complainant fears will be wholly lost to said 
firm unless some person duly authorized should take possession of the same; 
that there is also a large amount of notes and accounts due to the firm, which 
are not assigned, but are in the possession of said Nehemiah and said Justus, 
and said Nehemiah has demanded payment of the same; that said Justus, in said 
assignment, has recognized a claim in favor of said Nehemiah to the amount of 
$2,000; that instead of the same being a true and just account, said Nehemiah 
justly owes the said firm of Ingersell & Kirby the sum of $1,200; that 
immediately after the said assignment, said Justus caused a notice of the 
dissolution of the co-partnership to be published; that some of the stock on 
hand consists of hides, now in the progress of tanning, which requires the 
constant attention of a large number of hands to fit them for market, etc.; 
and that there is danger of the property of said firm being squandered and the 
creditors defrauded, etc.; charges said Nehemiah to be irresponsible, etc, and 
that he is disposing of the property, etc.

The bill prays for an account, for an injunction, and the appointment of a 
receiver. Injunction granted.

The answer admits the co-partnership, the purchase of the stock, etc, of the 
firm of J. Ingersoll & Co., to the amount of $15,000; admits the indebtedness 
of the firm of J. Ingersoll & Co. to the complainant in about the sum of $900, 
and that that amount was credited to complainant as so much capital paid in at 
the time of entering into the co-partnership; states that complainant had been 
employed as clerk and agent for the firm of J. Ingersoll & Co., and in 
consequence of inaccuracies in the statement of the affairs and inventory of 
the property of the firm of J. Ingersoll & Co., made by complainant, said 
Justus (in order to compromise the matter and enable the firm of Ingersoll & 
Kirby to proceed with the business) was obliged to pay Rufus Ingersoll and 
John Bagley (two of the members of the firm of J. Ingersoll & Co.) in the 
years 1833-4, the sum of about $3,600 out of his individual funds. Admits that 
complainant conducted the business of the firm at Detroit; states that 
complainant made all the sales, received all payments, and that it appeared 
from the books of the firm up to May 14, 1835, that payments had been made to 
Rufus Ingersoll and John Bagley, to the amount of about $7,790; admits that 
said Justus resided at Medina, in the State of New York, up to 1838, as stated 
in the bill, at which place he was engaged in attending to his own business ; 
but states that by the partnership agreement, said Justus was relieved from 
devoting any part of his time to the business of the firm; states that the 
firm of Ingersoll & Kirby purchased large quantities of hides at Detroit, and 
sent them to said Justus to be tanned at his establishment at Medina; that the 
costs and charges of said Justus, which he had charged against the said firm, 
for tanning said hides, amounted to about the sum of $10,000; states that 
during the continuance of the said partnership, said Justus had sent from his 
establishment at Medina, to the store of the firm at Detroit, large quantities 
of leather, oil and other materials, to be sold at and used in and about the 
business of the firm of Ingersoll & Kirby, at Detroit, to the amount or value 
of about $8,000. The answer further states and charges that the purchases made 
by complainant on account of said firm amounts to about the sum of $122,000; 
states that no cash book was kept by complainant, and that complainant was 
extremely negligent in keeping the books of the firm ; that complainant had 
appropriated a large amount of funds of the firm to his own use, without 
giving any account therefor; that he had committed gross frauds upon the 
rights of said Justus, in managing the affairs of said firm; that some time in 
the month of August, 1839, said Justus declared to complainant in positive 
terms that he should make an assignment of the partnership effects, for the 
purpose of paying and securing the debts of the firm, and that he should 
proceed immediately to dissolve the partnership, to which complainant did not 
object; that August 27, 1839, said Justus, in the name of the firm of 
Ingersoll & Kirby, made, executed and delivered the assignment referred to in 
the bill to said Nehemiah Ingersoll, who is brother to said Justus; that 
complainant had frequently, before making said assignment, expressed his 
willingness that said Justus should sell and transfer all his interest to said 
Nehemiah, and that he would be fully satisfied with any arrangement which said 
Nehemiah should recommend for the final settlement and adjustment of all the 
affairs of said firm; admits there was some conversation about making a 
division of a part of the property of the firm, but denies that any such 
division ever was made as is set up in the bill; that it was agreed by 
complainant and said Justus that said Justus should tan all the raw hides 
which should be sent to him at his establishment at Medina, for which said 
Justus was to be allowed a reasonable compensation by the firm of Ingersoll & 
Kirby; that it was known and approved of by said complainant that said 
Nehemiah was, from time to time, during several years, advancing money to said 
Justus for the benefit and on the credit of the firm of Ingersoll & Kirby, 
which was used by said Justus in the business of said firm, and for the 
payment of which the faith of said firm was pledged; avers that the balance 
due from the firm to. said Nehemiah, at the date of the assignment, was at 
least $1,600, which said firm was legally and equitably bound to pay; denies 
that said Nehemiah is a debtor to the said firm; states that said Nehemiah has 
indorsed for said firm, since its commencement, to the amount of $60,000; that 
he was at the time of the assignment directly liable to the said Farmers' and 
Mechanics' Bank for said firm to the amount of $6,700; that he is further 
liable for the payment of rent to James Abbott for said Justus and. 
complainant; avers that the assignment was made for the purposes therein 
expressed, and no other, and that it was made after full notice by said Justus 
to said complainant of his intention to make an assignment of the partnership 
property; denies that all the property of the firm is not mentioned in the 
assignment; denies that the firm was in good credit at the time of making the 
assignment. The answer further states and charges that complainant has, since 
the commencement of said partnership, received as net profits arising from the 
business of said firm the sum of $73,000; that the whole amount received by 
said Justus from said firm, individually, does not exceed the sum of $20,000; 
denies that said Nehemiah is insolvent; also denies all fraud in making the 
assignment.

The complainant now moves for the appointment of a receiver, and the 
defendants move for a dissolution of the injunction.

Walker, Porter and Goodwin, for complainant.

As to the power of one partner to assign partnership property, see Gow on 
Partnership, 74, and note; Collyer on Partnership, 217, and note; 1 Dessaus. 
Rep., 537; 4 McCord Rep., 519; 5 Cranch, 300; 4 Day's Rep., 428; 4 Wash. Cir. 
C. Rep., 232; 3 Paige Rep., 523; 5 Paige Rep., 30.

J. M. Howard, for defendants. 

It is admitted by the pleadings that complainant and J. Ingersoll were at the 
time of the assignment partners in trade, and that the assignment was made by 
J. Ingersoll in the name of the firm.

The first question, therefore, which arises, is as to the power of Justus 
Ingersoll to make the assignment, irrespective of the fraud charged in the 
bill, which is fully denied by the answer.

The very relation of partners implies a confidence in each other; such a 
confidence as makes each partner the general agent of the others, and renders 
his contracts in their name and in reference to the partnership effects the 
contracts of all the others. In all simple contracts they are regarded as one 
contracting party; and they are all bound, provided the contract has reference 
to the co-partnership (Gow on Part., 53, 54, 55); and such has been the law 
since the time of James I. (Ib., 73-75.)

And Lord Mansfield declared that each partner has the power, singly, to 
dispose of the whole of the partnership effects; and this results from the 
principle that partners are joint tenants; one joint tenant may lawfully 
dispose of the whole, which is not the case with tenants in common. (Fox v. 
Hamburg, 3 Cowp., 445; Barton v. Williams, 5 B. and Ald., 395; 12 Mass., 54; 
and see 10 Peters, 360.)

With regard to all effects contributed, manufactured or purchased to be sold 
for the benefit of the partners, each partner in the course of trade has an 
absolute right to dispose of the whole, and may assign it by way of pledge or 
security. (Watson on Part., 67; Purson v. Hooker, 3 Johns., 70, 71; Mills v. 
Barber, 4 Day, 425; Harrison v. Sterry, 5 Cranch, 289.) The sale of one 
partner is the sale of both; and such is the unity of right and interest, that 
one partner may enter the appearance of the other in an action against all. 
(Gow on Part., 79, 195, and appendix, page 494; 7 T. R., 108.)

The case of Dickinson v. Legare, 1 Dessaus., 537, is the first case in England 
or the United States in which the principle has been denied; but it should be 
remembered that it was the case of one partner making an assignment while a 
prisoner of war in the enemy's country and to an alien enemy; and this has not 
been sanctioned by any other decision, but overruled in Robinson v. Crowder, 4 
McCord, 518, and in Egberts v. Woods, 8 Paige, 523.

The only point decided in Havens v. Hussey, 5 Paige, 30, is "that one partner 
cannot, without the consent and against the known wishes of his co-partner, 
execute an assignment of all the partnership effects to a mere trustee for the 
benefit of the favorite creditors of the assignor." The case at bar differs 
greatly from that. Here the assignment is made directly to a creditor of the 
firm. The answer shows that the firm owe him about $1,600, and denies that the 
assignment was made against the known wishes of the complainant, and shows 
that he had every reason to suppose—indeed, that he was directly notified—that 
it would be made, and that he did not dissent. Here the assignee is authorized 
to retain the amount of his debt; and being responsible as indorser for the 
firm to the amount of the $2,000 note, and bound by his obligation to the 
Farmers' and Mechanics' Bank to the amount of $7,000 for their benefit, and 
also to James Abbott for the payment of the rent of the premises leased by him 
to Ingersoll & Kirby, he is authorized, in order to secure and indemnify 
himself, to sell the property assigned, to pay the debts for which he is 
liable, and to indemnify himself out of the proceeds; after which payment and 
indemnification, he is required to account to the partners for the residue of 
the fund.

The authorities make no distinction between the power to sell and the power to 
indemnify by pledging the property; and they all agree that it is the right of 
one to appropriate the joint property for the payment or security of the debts 
of the firm, in such manner and by giving such preferences as he may think 
proper; and that preferences may be created, even if the firm is insolvent. (8 
Paige, 525, 526; Wakeman v. Grover, 4 Paige, 36; 1 Dallas, 248; 7 Mass., 257.)

So far as N. Ingersoll has an interest in the assignment, he holds the 
property as a personal security, with full authority to sell, and out of the 
proceeds to cancel his liabilities for the firm, having first retained the 
amount due himself, and the residue of the fund is to be applied in payment of 
any debts which the firm may owe, without preference of one creditor to 
another. There is no inequality, no authority to compound with the creditors, 
and no terms whatever requiring them to discharge their debts for less than 
the amount legally due; were there such terms the assignment would be void. (2 
Binney's R., 174; 4 Dallas' R., 76; 4 Paige, 38-9.)

The decision in Havens v. Hussey conflicts with that in Harrison v. Sterry; 
and without any precedent to justify it, Chancellor Walworth declares an 
assignment by one partner to a trustee, void in law and equity, for the reason 
that it is no part of the partnership business "to appoint a trustee of all 
the partnership effects for the purpose of selling and distributing the 
proceeds among the creditors in unequal proportions." But as if not satisfied 
with this decision, the same learned judge brings this question again into 
doubt in the case of Mills v. Argal, 6 Paige, 582, in which he says, "there 
may be some doubt as to the right of the general partner (it was a special 
partnership under the New York statute) to make an assignment of all the 
partnership effects to a trustee, for any purpose, without the express or 
implied assent of the special partner." The case was, however, decided on 
other grounds.

But the law presumes the assent of the creditors to the trustee, until they 
express their dissent, and their rights cannot, therefore, be disturbed. 
(DeForest v. Bacon, 2 Conn. R., 633.)

The question then arises, can the security which was placed in the hands of N. 
Ingersoll by the assignment be wrested from him ? or, in other words, does the 
clause constituting him a trustee (an event which, by the way, may never 
happen) for the remaining creditors vitiate and annul the whole contract of 
assignment?

That security was so given in pursuance of the authority possessed and 
exercised by Justus Ingersoll as a partner. (See 5 Paige, 31.)

A. D. Fraser, on same side.

It is competent for one of several partners to make an assignment of the co-
partnership property. (Fox v. Hanbury, Cowper, 445; Barton v. Williams, 5 
Barn. & Ald., 395; Pier son v. Hooker, 3 Johns. R., 70; Lyles v. Styles, 2 
Wash. C. C., 224; Lamb v. Durant, 12 Mass., 54; Pierpont v. Graham, 4 Wash. C. 
C., 232; Mills v. Barbor, 4 Day's Rep., 428; Harrison v. Sterry, 5 Cranch, 
289; Robinson v. Crowder, 4 Mc Cord's R., 519; Egberts v. Wood, 3 Paige, 517; 
Gow on Part, 51, 53, 54, 73, 74, 75, 79; Appendix, Taylor's case, Coll. on 
Part., 216, 217; Watson on Part., 67.)

That a deed may be good in part, and void for the residue, is the common law 
doctrine. (United States v. Bradley, 10 Peters, 243, 360; Pigot's case, 6 Coke 
Rep., part 11, 27.)

The Chancellor.—This case presents the broad question of the right of one 
partner to make an assignment of all the partnership effects, without the 
consent or concurrence of his co-partner, who is on the spot, and acting in 
the business of the co-partnership. Perhaps no question has been presented to 
this court of greater practical importance than the present; and it has been 
considered with a full and deep conviction of the responsibility imposed upon 
the court in its decision.

The authority of one partner to make such an assignment, if sustained in the 
present case, must be sustained in its broadest form. The two partners were 
both, at the time of the assignment, in town, and attending to the business of 
the firm. The complainant, on proceeding to the usual place of business, finds 
the brother of the other partner in possession, and is informed that an 
assignment of all the partnership effects has been made, and is denied all 
access to the books, and all interference with the property or business of the 
firm.

The allegation in the answer, that the subject of an assignment had been 
mentioned to the complainant, to which he made no objection, cannot aid the 
assignment. It is not pretended that at the time of actually making the 
assignment he was advised of it, or was in any manner consulted as to either 
the assignee, the terms and conditions of the assignment, or anything else; 
but that the first notice to him was the information that he no longer had 
anything to do with the partnership property or business.
Very different views seem to have been entertained upon this subject, and it 
has become necessary to examine it with care and attention.

It will be found that the dicta relied on to sustain the powers of one partner 
to make such an assignment, have been thrown out under special circumstances, 
and that the reports, upon a careful examination, do not sustain the exercise 
of the power in cases like the present.  The elementary writers, Gow and 
Collyer, state the rule to be that one partner may bind the others in all 
matters within the scope of the co-partnership, and the implied authority of 
one partner to bind another is generally limited to such acts as are, in their 
nature, essential to the general objects of the co-partnership. Does this rule 
contemplate the authority here contended for?

Is it intended that when both partners are on the spot, and where no 
difficulty exists in consulting each other as to the assignee, and the terms 
and conditions of the assignment, that by the law of partnership they are 
placed in such a position that one partner, on repairing to the place of 
business, may find all he possesses, together with the books and accounts of 
the firm, transferred to a third person, placed entirely beyond his reach, 
himself utterly excluded, and the business of the firm ended without his 
knowledge or assent? This cannot be contemplated.

Do the authorities cited sustain the position ? The case which has gone as far 
as any other, and much relied on in the argument, is the case of Harrison v. 
Sterry, 5 Cranch, 289. In that case the question did not turn upon this point. 
But a question was raised upon the validity of an assignment made by one 
partner.

The court say in delivering the opinion: "The whole commercial business of the 
company in the United States was necessarily committed to Robert Bird, the 
only partner residing in the country. He had the command of their funds in 
America, and could collect or transfer the debts due to them." And it is 
manifest from the case that the assignment was made of a portion only of the 
assets to obtain aid in carrying on the concern. This case from the entire 
showing manifests clearly that this is an exception rather than the rule, and 
that it was made under special circumstances; and such will be found to be the 
case in 2 Cowper, 445, also much relied upon. Indeed, I have been unable to 
find any case where the broad power here asserted has been sustained. 
Chancellor Walworth, it is said, has countenanced this principle in the case 
of Egbert v. Woods, 3 Paige, 517; and it is unjustly, I think, said, that he 
virtually decreed both ways, and that there is a discrepancy between the above 
case and that of Havens v. Httssey, 5 Paige, 31.

In the first case he says: "I do not intend to express an opinion in favor of 
the validity of such an assignment of the partnership effects to a trustee by 
one partner against the known wishes of his co-partner, and in fraud of his 
right, to participate in the distribution of the partnership funds among the 
creditors, or in the decision of the question which of those creditors should 
have a preference in payment out of the effects of an insolvent concern." 
Showing clearly that after an examination of the whole subject he did not 
believe in the validity of such an assignment. In the case of Havens v. 
Hussey, he says: "Upon the most deliberate examination, he was satisfied that 
the decision of the vice-chancellor was correct, that such an assignment is 
both illegal and inequitable, and cannot be sustained." And further he 
says: "It is no part of the ordinary business of a co-partnership to appoint a 
trustee of all the partnership effects, for the purpose of selling and 
distributing the proceeds among the creditors, in unequal proportions. And no 
such authority can be implied. On the contrary, such an exercise of power by 
one of the firm without the consent of the other, is, in most cases, a virtual 
dissolution of the co-partnership, as it renders it impossible for the firm to 
continue its business.

From a review of all the cases, it is clear that this power, if sustained at 
all, must be sustained upon the implied authority for that purpose from his co-
partner, resulting from the nature of the contract of co-partnership. There is 
no such implied power. The authority impliedly vested by each partner in the 
other is for the purpose of carrying on the concern, and not for the purpose 
of breaking it up and destroying it. One partner does not, by any implication, 
confer a power upon his co-partner of divesting him of all interest in or 
authority over the concern. The elementary writers upon the subject do not 
sustain this position. The adjudged cases, when carefully examined, do not 
sustain it; and assuredly it is not sustained by the reason of the thing or 
the dictates of justice. Every consideration of public policy or commercial 
convenience is against it. The result to which I have arrived is, that a 
partner may transfer a portion of the assets or obligations for the purpose of 
paying or securing debts, or to raise means to carry on the concern; but that 
the power here asserted of divesting entirely one partner of his interest, 
appointing a trustee for both, and breaking up the concern, is not one of the 
powers either contemplated or implied by the contract of co-partnership; and 
it is best that it should be so. Else, who could with safety enter into such a 
connection?

On the other hand, if partners cannot agree, and one partner is violating his 
duty or endangering the rights of the other, the remedy is plain and adequate.

This assignment is partly for the purpose of securing the debts and 
liabilities of the firm to the assignee, as well as for the purpose of making 
him a general trustee for the firm. It was urged at the hearing that if the 
assignment was void in other respects, it must be carried into effect thus 
far. I am inclined to the opinion that effect may be given to the assignment 
to that extent, but it is not now necessary to decide this question.

From the views I have taken of this case, it must result in the appointment of 
a receiver, and the application of the assets must be under the direction of 
the court.

There are other considerations which render the appointment of a receiver 
appropriate in this case. It is contemplated by the assignment to secure the 
assignee from his liability for the payment of money due upon a lease having 
some twenty-five years to run, and clearly not within the scope of the 
partnership.

The amount of the indebtedness of the firm to the assignee is a disputed one. 
It will follow, then, that a receiver must be appointed, and the assignee 
directed to deliver over to such receiver the partnership property and 
effects, and account with the receiver for whatever shall have come to his 
hands by virtue of such assignment.

The counsel for the defendants requested to be further heard upon the question 
of the appointment of a receiver, which request was granted.

A. D. Frazer for defendants.

The court having decided that the assignment ought to be set aside, the 
complainant now insists that the property embraced in the assignment must go 
into the hands of a receiver. This position is denied by the assignee, who 
insists that it necessarily follows from the decision which has already been 
made that the trust shall remain with him on whom the assignment conferred it. 
He submits that he cannot be deprived of it, unless the case falls within some 
of the exceptions to be found in adjudged cases upon this subject. The 
assignee contends that the only legal operation and effect of the decision 
which has been made must be to render inoperative that part of the assignment 
which purports to create a trust for the benefit of those mentioned in the 
assignment, other than the assignee. If the assignment is good for any 
beneficial purpose, the assignee cannot be divested of the power and rights 
conferred on him by it, unless the fund be in danger, or some other strong 
ground urged which would justify the appointment of a receiver; and while he 
acts as assignee he is as much under the control and direction of this court 
as a receiver would be, and bound to execute the trust, modified, limited and 
qualified, as the court have already decided it must be.

Under these circumstances, it is contended that a receiver will not be 
appointed unless the property is shown to be in danger; that the trustee is 
irresponsible, or where the plaintiff's right is not shown to be clear; must 
show some evil actually existing, or danger to the property, or a strong 
special case of fraud. (Edw. on Receivers, 2 Ch.; Willis v. Corlis, 2 Edw., 
286, 287, 288; Orphan Asylum v. McCartee, 1 Hopk., 429; Verplanck v. Caines, 1 
Johns. Ch., 58; Hugonin v. Baseley, 13 Ves., 105; Middleton v. Dodswell, Id., 
266; Lloyd v. Passingham, 16 Ves., 59.)

This assignee is subject to the control and direction of this court as much as 
a receiver would be. (Shaftsberry v. Arrowsmith, 7 Ves., 486, 487; Beaufort v. 
Berty, 1 P. Wms., 702.)

H. N. Walker, in reply.

The complainant insists in this cause that the deed of assignment is void, ab 
initio, for the following reasons.

1. That one partner cannot assign the partnership goods without the assent of 
his co-partner. This position having, as a general rule, already been settled 
by this court, it is unnecessary to say anything upon it. The case of Havens 
v. Hussey, 5 Paige, 30, lays down the true doctrine.

2. But this case is sought to be taken out of the rule on the ground that the 
deed of assignment constituted Nehemiah Ingersoll, the brother, a trustee as 
respects all the creditors of the firm of Ingersoll & Kirby but himself, and 
that he acquired an individual right to the goods assigned, they having been 
assigned to him to secure the amount due him from the firm, and his liability 
for them as an indorser.

The decision that one partner cannot assign the partnership effects, seems to 
settle this question. The doctrine contended for by the counsel opposed is 
that the deed may be good in part and bad in part. This doctrine does not 
apply in this case. It is only applicable where there are different clauses or 
covenants in a deed which do not depend on each other. But where the deed is 
entire, and the several clauses depend upon each other, then the distinction 
ceases, and it must either be good for the whole or bad for the whole. (1 
Shep. Touchstone, 70, 71.)

It is a necessary requisite that the person making the deed be able to 
contract. This is not the case here. (Havens v. Hussey, 5 Paige, 30; 1 Shep. 
Touchstone, 54.)

It is a well established rule in courts of equity, that interests of third 
persons gained by fraud, imposition, or even undue influence over others, 
cannot be held by them. The interest of the assignee here, if he has any, has 
been gained by the fraud of Justus Ingersoll. (Hugonin v. Baseley, 14 Ves., 
273, 289; Bridgeman v. Green, Wilmot, 64; Hildreth v. Sands, 2 Johns. Ch., 35, 
42; Shep. Touchstone, 66, 67.)

In cases of alleged fraud, the answer of the party is not to be relied upon as 
to any advances, but positive proof is required. (3 P. Wms. E., 228; 2 Ves., 
516.)

In the case of Sands et al. v. Codwise et al., 4 Johns., 536, the court said 
that no right can be deduced from an act founded in actual fraud. The cases in 
which a deed is set aside on terms are not at all analogous to this.

The Chancellor. Upon a former occasion, it was held that the assignment in 
question could not be sustained, so far as it purported to be a general one, 
to a trustee for the payment of his own debt, in the first instance, and also 
as a general trustee for all the creditors. It was then said that it would 
follow that a receiver must be appointed.

The reasons that induced the court to come to that conclusion were then 
stated. A further reason is urged, that it appeared by the answer that a 
considerable portion of the property of the concern had been sold before 
filing the answer, notwithstanding the injunction.

On that occasion the court remarked that it was not contemplated to decide the 
question whether the assignment could be sustained, so far as it purported to 
constitute a security to the assignee, he being a creditor; but it was said 
that the court was inclined to the opinion that it could be so far sustained, 
on the authority of the case in 10 Peters, 363. The counsel for defendants 
requested to be further heard on the question of the appointment of a 
receiver, and it has also been urged that a decision upon the validity of the 
assignment should be now entered; so that, if the defendants desire to enter 
an appeal, it may be done, and a decision had in the appellate court. This is 
certainly proper and desirable. In a question of this importance, both in 
regard to principle and amount, every proper facility for an appeal should be 
afforded. This has compelled the court to examine this question, which, as it 
was not contemplated then to dispose of it, had not before been done. In the 
case of United States v. Bradley, 10 Peters, 363, which was a case arising on 
a paymaster's bond, it was held, when the covenants and conditions are 
severable, that bonds and other deeds may be good in part, and void as to the 
residue. In Hyslop v. Clarke, 14 Johns. Rep., 464, Van Ness, in giving the 
opinion of the court, says: "The better opinion seems to be that, even at 
common law, a deed, fraudulent in part, is altogether void." This view seems 
to have been sustained and carried out in the subsequent decisions in New York.

By the term fraud, it should be remembered that the legal intent and effect of 
the acts complained of is meant. The law has a standard for measuring the 
intent of parties, and declares an illegal act, predjucial to the rights of 
others, a fraud upon such rights, although the parties deny all intention of 
committing a fraud. (11 Wend., 224.)

The principle upon which assignments of this kind have been declared void is, 
that one partner has no authority to make a general assignment of the 
partnership effects, in fraud of the rights of his co-partner to participate 
in the distribution of the partnership effects among the creditors. (Havens v. 
Hussey, 5 Paige, 31.)

The implied authority of one co-partner is that he may perform any act within 
the scope of the co-partnership which may be necessary to carry on the 
concern. Under this implied power it has been held that one partner may assign 
such portion of the partnership effects as may be necessary in payment of a 
debt, or to secure a creditor. But this is a general assignment, and, if 
sustained at all, breaks up and puts an end to the co-partnership. If 
sustained, and the assignee is authorized to go on and close up the affairs of 
the concern, does it not necessarily lead to all the consequences intended to 
be guarded against in the decision in the case of Havens v. Hussey t One 
partner, by selecting a creditor, large or small, as the assignee, may 
effectually put the other partner out of the possession of his property, and 
end the business without the knowledge or assent of his co-partner. He is 
deprived of the right to which the decision in 5 Paige, 81, declares he is 
entitled.

The preferred creditor has been selected without his knowledge or consent; and 
a party, who has been illegally placed in possession of the entire partnership 
effects, if the views urged by the counsel of the defendants are sustained, is 
entitled to the custody, and has the right to settle and wind up the concern. 
One good trust could always be inserted, and thus the partner would do 
indirectly what could not directly be done. Whatever view may be taken of the 
question, as to whether this assignment may be void in part only, or in toto, 
it seems to me inevitable that, as the case now stands, a receiver should be 
appointed. But, as it is urged that a decision be now entered upon the 
validity of the assignment, and it seems but just and proper that it should be 
done, I shall do so according to the best reflection I have been able to give 
it.

A distinction seems to have been taken, in some of the cases, between 
instruments void by statute and at common law.

In the case in Peters, cited in support of this assignment, it is said, 
quoting the opinion of Chief Justice Gibbs, that if an act be prohibited, the 
construction to be put upon a deed conveying property illegally is that the 
clause which so conveys it is void, equally whether it be by statute or at 
common law. This is, undoubtedly, the true rule, and there is no reason for 
any distinction, except where the statute goes further, and declares the whole 
instrument void. The cases where instruments have been declared good in part, 
and bad as to the residue, seem to have been bonds which were variant from the 
statute, or deeds which purport to convey lands, some portion of which the 
party could not lawfully convey. In the one case the bond may be valid in part 
only. The rights of no one are interfered with. Effect is given to the bond so 
far as it is in conformity with the statute. If it contains other conditions 
or requirements they are declared void.
So with deeds. The grantor may have title to nine hundred out of a thousand 
acres of land, and may have no right to convey the residue. Still, it would be 
unjust to deprive the grantee of that to which the grantor had a title, and by 
giving it effect pro tanto, the rights of no one are violated.

Is it so here? The partner has been deprived of all control over or voice in 
the disposition of the effects of the co-partnership, without his consent.

Shall effect be given to this proceeding? Can the court say, where the whole 
effects are mingled together, that it shall take effect as to certain portions 
of the property, and be void as to the residue? One good trust is inserted, 
but that cannot make an illegal instrument a valid one. The legal and illegal 
are so mixed and commingled that, if assignments of this character are 
sustained to the extent asked, they may as well be sustained in toto.

A grantee who voluntarily becomes a party to a deed which is fraudulent in 
part forfeits his right to claim a benefit from another part that would 
otherwise have been good. (14 Johnson's Reports, 465.) Here the assignee takes 
a general assignment from a party not authorized to make such an instrument, 
and I think it cannot be sustained.

The order is that the assignment be set aside and declared void, and that it 
be referred to a master to appoint a receiver; and that said Nehemiah 
Ingersoll deliver over to, and account with said receiver, for whatever shall 
have come to his hands by virtue of said assignment. (a.)

(a.) This case was appealed to the supreme court, and the decree of the 
chancellor approved in an elaborate opinion by Mr. Justice Felch. See 1 Doug. 
Mich., 477.

Additional Comments:
CASES DETERMINED IN THE COURT OF CHANCERY FOR THE STATE OF MICHIGAN
BY ELON FARNSWORTH, Chancellor 

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