In Re Taub, 4 F.2d 993 (2d Cir. 1924)

*994 David Haar, of New York City, for trustee in bankruptcy.

Beekman, Bogue, Clark & Griscom, of New York City (William Campbell Armstrong, of New York City, of counsel), for Yakima Trust Co.

Before HOUGH and MANTON, Circuit Judges, and LEARNED HAND, District Judge.

HOUGH, Circuit Judge (after stating the facts as above).

It is proven, and was we think admitted, that Small and Taub were joint adventurers in the enterprise of procuring fruit in the vicinity of Yakima and marketing it in New York. The relation is now legally well known; it implies an agreement, but that agreement may not only be shown by parol (Burkardt v. Walsh, 49 App. Div. 634, 64 N. Y. S. 779); it may be implied in whole or in part from the conduct of the parties (33 C. J. 847, citing cases). The form of agreement is immaterial. It is the nature of the enterprise undertaken by a plurality of persons that controls. Reid v. Shaffer, 249 F. 553, 161 C. C. A. 479.

The relationship once established, the legal rights and obligations of the several adventurers in respect of their enterprise are substantially those of partners. In re Kessler (D. C.) 174 F. 906; Nestor v. Joseph (C. C. A.) 265 F. 246; Irvine v. Campbell, 121 Minn. 192, 141 N.W. 108, Ann. Cas. 1914C, 689.

This particular adventure grew out of a visit paid by Taub to the neighborhood of Yakima some considerable time before the occurrences which gave rise to this suit. The inference is necessary that what was done as above set forth was the result of an agreement to do it made between Small and Taub. That agreement was that Small was to use the property acquired for joint account i. e., the fruit as a means of borrowing money; that is, negotiating drafts on Taub upon the faith of the bills of lading. As Small drew the drafts, he remained personally liable to the trust company or any subsequent draft holder. Therefore Small was authorized or empowered to borrow for the joint enterprise; such power is one coupled with an interest, and subject to no revocation. The Seattle, 170 F. 284, 95 C. C. A. 480. That he borrowed in his individual name by *995 drawing his individual draft does not show that the borrowing was for his individual benefit. Gutman v. Schreiber, 173 App. Div. 670, 160 N.Y.S. 243, aff'd Gutman v. Livingston, 226 N.Y. 582, 123 N.E. 868.

We thus conclude that, when Small discounted his drafts with the trust company, he did so substantially as one partner might have done for the benefit of a partnership; he did it by authority of Taub, and for the benefit of Taub, as well as himself i. e., for the joint business. His individual liability to pay for the fruit, or to pay the trust company, which had in effect paid for the fruit, was in the nature of an advance made, as it was certainly a liability incurred for the benefit of the joint business. And one joint adventurer, having made advances and having in his possession property of the joint enterprise, may retain it until his lien for advances is discharged. Burhans v. Jefferson, 76 F. 25, 22 C. C. A. 25.

When Small shipped the fruit to Taub under a straight bill, he unquestionably put the legal title in Taub, but equitably the fruit was joint property, and Small still had the interest of a partner in it. The transfer of the straight bills from Small to the bank gave the bank the same right in the goods evidenced by the bills that Small himself had possessed. Hinrichs v. Standard, etc., Bank (C. C. A.) 279 F. 382, at page 385.

Thus Taub was, at date of bankruptcy, conducting a business in New York in his own single name; but he had as a side interest this joint adventure or quasi partnership with Small. The latter had an interest in the joint assets, which authorized him to use them for the joint benefit; e. g., as collateral. For his own advances, or otherwise to protect his rights, he, like a partner, had a lien, enforceable in equity on the partnership assets. In re Kessler (D. C.) 174 F. 906. If the amount due to any adventurer is unliquidated, a bill in equity will lie, as for a liquidation of partnership affairs. O'Hara v. Harman, 14 App. Div. 167, 43 N.Y.S. 556; Reid v. Shaffer, supra.

Small, by his discount of drafts and delivery of bills of lading, transferred his rights to the trust company, and, bankruptcy being equity, the questions are: (1) Whether the bare legal title outstanding in Taub changes the rights of any party; and (2) whether the trustee in bankruptcy stands in any better position than Taub himself. No reason is or can be suggested why the vesting of legal title in Taub, per se, changed the equitable rights of those who had cooperated with him, in conducting a lawful business.

A bankruptcy trustee, ever since the amendment of June 25, 1910, to section 47 (Comp. St. § 9631), in cases unaffected (as here) by any fraud of the bankrupt toward creditors, takes the property in the same plight and condition in which the bankrupt held it, and subject to all equities and rights imposed upon it when in the bankrupt's hands. Rem. § 1402, citing cases.

We will assume that, notwithstanding the diversion orders; Taub held legal title to these 42 carloads of fruit; no holding is necessary on the point. But, even with such assumption, his equitable title, his right as a joint adventurer, was no more than what would be coming to or due by him on settlement of joint account. Therefore, since no creditor or creditors acting through the trustee have shown any superior equity or lien, the lien of the trust company in succession to Small must prevail. The interest of the estate in bankruptcy extends only to a surplus after reimbursing Small i. e., the trust company and there is no surplus. In re McConnell (D. C.) 197 F. 438; In re Kessler, supra.

On October 16th last we passed an order herein, on the motion of the Yakima Trust Company, requiring petitioner to print certain additional documents and testimony as a portion of the record. The order provided that, in the event of our considering said documents, etc., unnecessary, the cost of printing the same should be imposed upon respondent trust company. We do think such printing unnecessary, and accordingly impose the costs of printing upon the respondent trust company.

After due allowance is made for the foregoing expense, order affirmed, with costs.