[ANGLIN, J.] THE CODVILLE GEORGESON Co. v. SMART ET AL. Partnership Ostensible Partnership Infancy-Preference of Firm Creditor One of the defendants who were carrying on business ostensibly in Held, that notwithstanding the infancy, and the non-existence of the partnership as a fact, it must, so far as the plaintiffs were concerned, be deemed to be one, and that the plaintiffs were entitled to recover their indebtedness out of the assets of the ostensible firm in priority to a debt owed individually by the adult member of the reputed partnership. THIS was an action tried before ANGLIN, J., at Kenora, on the 28th June, 1907. The plaintiffs were an incorporated company carrying on business in Winnipeg as wholesale grocers. The defendants William Smart and John Smart were sued as members of an alleged partnership. They carried on business as general merchants at Keewatin. The defendant Margaret Green was a judgment creditor of the defendant William Smart; and the defendant Humble was the sheriff of the district of Rainy River. The evidence is fully set out in the judgment of the learned R. M. Dennistoun and P. E. Mackenzie, for the plaintiffs. J. F. McGillivray, for the defendant John Smart. September 12. ANGLIN, J.-Upon the evidence adduced at the trial the following facts were found: The business carried on at Keewatin under the name of W. & J. Smart was the business of the defendant William Smart. The defendant John Smart, who is an infant, was not a partner in the business, but was the "J. Smart" whose name appeared in the firm name under which the business was carried on. The defendant Margaret Green loaned to the defendant William Smart-her son-in-law-the money for which she holds a judgment, to enable him to start in business; and a considerable part of the money advanced by her was paid by William Smart to the plaintiffs 25-VOL. XV. O.L.R. 1907 Sept. 12. Anglin, J. 1907 THE CODVILLE GEORGESON Co. บ. SMART. on the account for goods supplied by them to W. & J. Smart, for the balance of which they now seek to recover judgment. In dealing with the plaintiffs and other wholesale merchants, William Smart represented that his brother John was his partner in the firm of W. & J. Smart. He obtained credit partly upon this representation. John Smart was cognizant that he was being held out by William as a partner in the business, and that his name was being put forward as that of a partner in advertisements and otherwise. He acquiesced in this course of holding out, and he conducted himself in relation to the business itself in many matters not as a mere employee, but as a partner or joint proprietor. His infancy was not known to the plaintiffs or to the other creditors of the business; but there is no evidence of any actual representation having been made that he had attained his majority. The business appears to have been badly managed, and was soon in difficulties. Apprised, no doubt, of the condition of affairs before other creditors, Mrs. Green obtained a judgment for her advances against William Smart, to whom and to whom alone she had given credit. Under her execution the sheriff seized the assets of the business of W. & J. Smart, and sold them for the sum of $581.36. Margaret Green also obtained an order attaching a debt of $335 owing by one Clifford Beaton to "W. & J. Smart." This debt remains subject to this attachment. While the proceeds of the sale under Mrs. Green's execution were still held by the sheriff, the present plaintiffs intervened as claimants. They brought an action as creditors to recover judgment for their claim, amounting to $988.63, against William and John Smart, as partners in the firm of W. & J. Smart. In some manner, which I do not understand, interpleader proceedings were also instituted, and the local Judge at Kenora directed the trial of an issue between the present plaintiffs and Margaret Green to determine whether or not the goods seized by the sheriff under Mrs. Green's execution and the Beaton debt "are partnership assets of the firm of W. & J. Smart, and as such payable to the Codville Georgeson Co. in priority to said Margaret Green as an execution creditor of William Smart." In this action the present plaintiffs were allowed by amendment to add Margaret Green and the sheriff as defendants, and to claim a declaration that the moneys realized under Margaret Green's execution and the Beaton debt are "subject to the payment in full of the plaintiffs' claim against the partnership firm of W. & J. Smart in priority to the claim of Margaret Green under her judgment, and consequential relief. An order was subsequently made for the trial of the plaintiffs' action and of the interpleader together, and both were embodied in the record before me. The interpleader proceedings were, in my opinion, wholly misconceived, and I shall deal with the record as if the interpleader issue were eliminated from it. The plaintiffs are admittedly entitled to judgment for their claim against William Smart, and, if John Smart were not an infant, would have been entitled to judgment against him on the case of holding out which they made. But his infancy is a bar to a personal judgment against him: Lindley on Partnership, 7th ed., p. 87; Lovell v. Beauchamp, [1894] A.C. 607. Upon my findings that there was no partnership in fact between William and John Smart, and that the business of “W. & J. Smart" was the property of William Smart alone, but that there was such a holding out of John Smart as a partner as would, had he been sui juris, have rendered him personally liable to the plaintiffs, it is contended for them that, in regard to assets of the business of "W. & J. Smart," they are, as against individual creditors of William Smart, entitled to the same priority which they would have had had there been in fact a partnership of William Smart and John Smart, carrying on business as "W. & J. Smart." In Ex p. Hayman (1878), 8 Ch.D. 11, the English Court of Appeal had to consider, under a bankruptcy adjudication, the rights of persons similarly situated, and held that the assets must be treated as joint estate of the actual owner and his reputed partner; and a personal creditor of the former was postponed to a claimant who had given credit to the supposed partnership firm. In re Rowland and Crankshaw (1866), L.R. 1 Ch. 421, also a decision of the English Court of Appeal, is the authority upon which the Court rests its judgment in Ex p. Hayman. The doctrine is broadly and unmistakably enunciated that in regard to the allocation of joint and separate assets to the payment of joint and separate claims, the rights of creditors are the same in the case of Anglin, J. 1907 THE CODVILLE GEORGESON Co. v. SMART. Anglin, J. 1907 THE CODVILLE GEORGESON Co v. SMART. an ostensible partnership as they are where there has been a partnership in fact. In Baker v. Dawbarn (1872), 19 Gr. 113, Mowat, V.C., held that the rule in equity as well as in bankruptcy is that his separate creditors rank first upon the separate estate of each partner, while partnership creditors rank first upon joint estate of the partnership. In Ex p. Hayman, Thesiger, L.J., at p. 25, said that but for the authority of In re Rowland and Crankshaw, L.R. 1 Ch. 421, and Ex p. Sheen (1877), 6 Ch.D. 235, he "should have wished to hear further argument as to the consequences arising from an ostensible partnership in the event of bankruptcy, where there are both joint and separate creditors." The Lord Justice proceeds to point out the inapplicability of any principle of estoppel to the position of the separate creditor, who is excluded from ranking upon assets of his debtor employed in the business of an ostensible partnership. He regards the consequence that such assets are to be deemed joint property as an offshoot of the doctrine of reputed ownership. Lord Justice James is of opinion that the doctrine of reputed ownership was really the foundation of Lord Cranworth's judgment in In re Rowland and Crankshaw. In Kelly v. Scott (1872), 49 N.Y. 595, the Court of Appeals of the State of New York laid down the same doctrine. In Van Kleeck v. McCabe (1891), 87 Mich. 599, and in Thayer v. Humphrey (1895), 91 Wisconsin 276, the like rule was applied. While there is an obvious difference between the present case and those to which I have referred, in that the ostensible partners of the real proprietors in those cases became personally liable to creditors, whereas in the present instance his infancy protects John Smart from personal liability, the preferential rights of the creditors of the ostensible firm are made to depend not upon the joint liability of the ostensible partners A and B, but upon the fact that the property with which the business of the ostensible partnership is carried on, though in law that of A. alone, will in equity be treated as the joint property of A. and B., with precisely the same incidents as if the partnership had been real and not merely ostensible. Had there been in the present case a real partnership between William Smart and John Smart, while the infancy of the latter would have precluded the plaintiffs from recovering a personal judgment against him, nevertheless all the partnership property, including the interest therein of the infant partner, would have been exigible to satisfy partnership debts: Lovell v. Beauchamp, [1894] A.C. 607. The fact that John Smart because of his minority, escapes personal liability does not affect the rights of persons who gave credit to the ostensible partnership to resort for payment to what were the apparent assets of such ostensible partnership in the same manner and to the same extent as if there had been a partnership in fact. The hardship to which Mrs. Green is subjected by the application of this rule is manifest. But Lord Justice James said in Ex p. Hayman: "The hardship would have been exactly the same if there had been a real partnership. The same conse quences would then have happened as happen where there is only an ostensible partnership." The plaintiffs will, therefore, have judgment against William Smart, trading under the name of "W. & J. Smart," for the sum of $988.63, with interest from 9th April, 1907, and costs of this action other than costs incurred upon or by reason of the interpleader proceedings. They will also have judgment as against Margaret Green, declaring that they are entitled to payment in full of their claim (both debt and costs) out of the proceeds of the sale of the assets of the business of "W. & J. Smart" in the hands of the sheriff, and out of any moneys which the sheriff may realize under the attaching order against Clifford Beaton, in priority to the claim of Margaret Green as an execution creditor of William Smart. The costs of the sheriff of this action, exclusive of costs of or • occasioned by or by reason of the interpleader proceedings, will, after taxation, be paid to him by the plaintiffs, who may add to their claim against the defendant William Smart the amount so paid to the sheriff. The plaintiffs will have judgment against the defendant Margaret Green for payment of their costs of this action, exclusive of costs of or occasioned by or by reason of the interpleader proceedings, and subject to a set-off of the costs of said Margaret Green incurred in or by reason of such interpleader proceedings. As against the defendant John Smart the action will be dismissed without costs. G. F. H. Anglin, J. 1907 THE CODVILLE GEORGESON Co. v. SMART. |