Statement of case.

way, mother of John P. Shumway, for what he owed for property got of Phelps as her agent. The mortgage was made for $3,500, Phelps to advance the balance to Shumway.

The referee found that Phelps had no knowledge, at the time of taking this mortgage, that money had been borrowed of Cook by said firm, or that a mortgage was to be given him. That at that time they owed Cook only $1,070.

On the 8th day of August, 1867, the said firm commenced to borrow money of Cook; the talk was as to a loan of $8,000 or $9,000. Moneys were got of him from time to time, until, in November, it amounted to the sum of $8,087.18.

On the 29th of February, 1868, all of the partners gave to Cook a mortgage for $16,772.30, upon the whole premises. On the 30th of November, 1868, Jacob M. Cook, the mortgagee, commenced this action for the foreclosure of his two mortgages upon the whole premises. The plaintiff died, and Mr. Hiscock was substituted as his executor.

As to the first mortgage the complaint was confessed. The defendant Phelps answered as to the second mortgage, second count of plaintiff's complaint, and asked that his mortgage be protected as a bona fide one.

He, however, held that plaintiff's second mortgage was a lien upon the premises prior to defendant's mortgage, and judgment being entered in conformity thereto, defendant Phelps appealed therefrom.

Other facts appear in the opinion.

J. C. Hunt for the appellant. The mortgagors held the land as tenants in common, and plaintiff's second mortgage is not entitled to preference. (Buchan v. Sumner, 2 Barb. Ch., 169; Corning v. Horner, 2 Selden, 82; Collyer on Partnership, p. 134, § 150; Cookson v. Cookson, 8 Sim., 529; Buchan v. Sumner, 2 Barb. Ch., 165; Kirby v. Schoonmaker, 3 id., 46; Ketchum v. Durkee, 1 id., 480; Buckley v. Buckley, 11 Barb., 43; Ballmain v. Shore, 9 Vesey, Jr., 500; Coles v. Coles, 15 Johns., 159; Smith v. Jackson, 2 Edw. Ch., 28.) The referee erred in allowing the Charles

Opinion of the Court, per FOLGER, J.

G. Kenyon mortgage the priority for its full amount. (The Mechanics' Bank v. Edwards, 1 Barb., 271; Averill v. Loucks, 6 id., 470; Sage v. Chollar, 21 id., 596; Stevens v. The Bank of Central New York, 31 id., 290; Greenwood v. Skeel, 8 id., 593; approved, 3 Kernan, 167.)

Frank Hiscock, respondent, in person. Real estate bought with copartnership money and for copartnership purpose is to be treated as copartnership property and part of the firm assets. (Smith v. Glass, 5 Sand., 669; Averill v. Loucks, 6 Barb., 19; Buchan v. Sumner, 2 Barb. Ch., 167; Smith v. Tarlton, 2 id., 336; Buckley v. Buckley, 11 Barb., 74; Downing v Colt, 3 Sand., 284, note a; Van Brunt v. Applegate, 44 N. Y., 544; see Collumb v. Read, 24 id., 505; see Sage v. Sherman, 2 Com., 417.) The appropriation of firm property to pay an individual debt, copartnership insolvent, is void. (See Wilson v. Robertson, 21 N. Y., 587.) The partnership property must first pay partnership debts. (See Wilder v. Keeler, 3 Paige, 164, 167.) The interest of a partner is his ratable proportion of the assets after payment of debts. (Hayes v. Reese, 34 Barb., 151.) Phelps took his mortgage subject to all the interests of the members of the firm, and to all the rights of the creditors of the firm. (Sage v. Sherman, 2 Com., 432; see Governeur v. Lynch, 2 Paige, 300; Troup v. Hurlbut, 10 Barb., 354; Tuttle v. Jackson, 6 Wend., 213; Grimstone v. Harter, 3 Paige, 421; see, also, other cases cited at § 106, p. 694, vol. 4, Abbott's Digest; Bank of Orleans v. Flagg, 3 Barb. Ch., 316.)

FOLGER, J. 1st. The first point made here by the appellant is that there was a finding of fact made in the case, which is wholly unsupported by the evidence, and the contrary whereof was established by evidence.

The printed case shows but one exception taken to a finding of fact. It is the finding, "that when Shumway applied to Phelps for the first two loans, he told him who were the members of the firm of Charles G. Kenyon & Co."

Opinion of the Court, per FOLGER, J.

It is not apparent how it would aid the appellant if this exception should be sustained. It is not very important whether he was informed who were the individual members of the firm. The material matter is, did he have notice that there was a firm which owned the real estate as partnership property.

But there is some evidence to sustain the finding excepted to. Phelps himself testifies that Shumway told him who the parties were who owned the mill; and this was in such connection as to warrant the referee in the inference that the information was given at the time of the application for the first two loans. Phelps was thus made aware of who were the persons owning the mill; and other testimony and other unqestioned findings show that he knew of the existence of the copartnership.

We think that the finding excepted to is sustained by the evidence, and by the inferences which the referee was warranted in making from it.

2d. The second point made by the appellant is, that the referee refused to make findings of fact as requested by the appellant.

It appears that these requests were made after the making and delivery by the referee of his report, and on the subsequent settlement of the case by him.

It is not needed that we decide now whether the appellant has or has not adopted the proper method of remedying the error, if any had been committed by the learned referee in refusing the requests of the appellant.

In looking over the requests refused, we find none which we could say were for the finding of material facts, and which we could at the same time say were refused where the testimony demanded the finding, save one. The appellant asked that it be found that the mortgage to the defendant Kenyon, does not cover the one-twelfth of the premises conveyed by Cook to Shumway; that is, so much of the one equal undivided third which was bought by the four partners from Cook. It is clear that it did not. Kenyon conveyed to the

Opinion of the Court, per FOLGER, J.

other three but an equal undivided half, and he took back from them a mortgage, which the case shows was on the same premises which he had conveyed, and on none other. The referee's finding is, that Kenyon conveyed this half to them, and that a portion of the consideration money was secured by bond and by a mortgage from them, which is a lien on the premises. This evidently means, and should be construed thus, that the mortgage was a lien upon the premises conveyed by Kenyon. So that this fact is found as the appellant desired.

But the learned referee in giving judgment has practically held this mortgage to be a second lien on the whole premises. For he has directed the sale of the whole premises, and after payment of costs and expenses of sale, the payment first from the whole avails of the sale, of the first mortgage of the plaintiff's testator, and the payment second from the whole. avails of the sale of this mortgage to Kenyon. Now as this mortgage was not a lien on the whole premises, nor was it a debt due from the partnership to Kenyon, it has no right to a preference in payment over the mortgage of the appellant from the avails of any lands not described in it. And the mortgage of appellant upon the share of Shumway in the equal one-third purchased from Cook, is to be postponed in the payment of the mortgages, only to the two of the plaintiff's testator. The judgment was so far erroneous.

3d. The deeds of conveyance of the real estate were to all or some of the persons who composed the copartnership, and to them as individuals. The legal effect of the conveyances was to create them tenants in common of the premises therein described; each could deal with his interest as such tenant in common by deed or by mortgage, so as to transfer all the title which he held, or make it all subject to a valid lien. This was so at law, and had there been no more in the case than the deeds of conveyance, would be so here.

The referee has found however, that prior to the execution of the conveyances the grantees named in them had formed a copartnership, had agreed upon the amount of the capital

Opinion of the Court, per FOLGER, J.

thereof, the sum which each copartner should pay in, the amount thereof which should be applied to the purchase of this real estate for the use of the copartnership, and the amount thereof which should be used to improve the same and supply it with the machinery necessary for the contemplated business. He has further found, that in pursuance of this agreement they did purchase this real estate, and did execute to secure a portion of the purchase-money thereof, one of the mortgages to the plaintiff's testator and the mortgage to the defendant the elder Kenyon. He has further found, that they entered into the occupation of the premises as copartners, and expended large sums of money in the improvement of the same, for such purpose borrowing money therefor in the name of the copartnership, and the different partners contributing to the purchase and improvement of the premises moneys in different proportions. He has also found that the consideration of the second mortgage to the plaintiff's testator, was money borrowed for the copartnership and applied in part to the improvement of the premises. Under such a state of facts, equity treats real property, though held under such deeds of conveyance, as partnership property. Where tenants in common prima facie, are also copartners in business, and partnership funds have been expended in the purchase of the real property for the use of the copartnership, and the same has been used for partnership purposes by agreement to that end, it is to be treated in equity as partnership assets. It is made liable for debts due to the creditors of the copartnership. (Buchan v. Sumner, 2 Barb. Ch. R., 165.)

And where moneys of the firm have been expended upon such real estate in the improvement of it, the same effect follows as to its enhanced value. And other rules as to the disposition of partnership assets, also come in in such case. The creditors of the copartnership are entitled to priority of payment thereout. The creditors of an individual member of the copartnership are to be preferred to those of another member and one member to creditors of another and to