ABRAHAM VAN DOLSEN, et al., Plaintiffs and Respondents, v. WILLIAM P. ABENDROTH, Impleaded, &c., Defendant and Appellant.
U. S. DISTRICT COURT, PROCEEDINGS THEREIN IN BANKRUPTCY, JURISDICTION, &c.—RES AD JUDIO ATA.
In this case the plaintiffs sought to recover judgment against the defendant upon a promissory note made by .the firm of Griffith & -Wundram, upon the ground that defendant was a general partner of that firm. Defendant claims by his answer to have been only a special partner in that firm, and to have been adjudged as such, in proceedings in bankruptcy against said firm in the U. S. district court, to which proceedings the plaintiffs were parties, and that they were hound by the said adjudication.
Held by the court, that the adjudication in the U. S. district court appears to embrace all the elements to sustain the defense of res adjtdieata. The court was of competent jurisdiction, and the parties were before it to have their respective rights determined ; they were actors and participants in the proceedings, and also in the administration and disposition of the property and assets affected by the decision of that court, and the same question sought to be raised and decided in this action was then and there determined, and under such circumstances it would be inconsistent with well-established rules, that the parties or their privies should be allowed to again litigate a *471subject matter which was or which could have been determined in the proceedings in the U. S. district court. The facts pleaded in defense are sufficient.
Decided March 4, 1877.
The case of Durant «. Abendroth (reported in 41 N. T. Super. Gt. [9 J. & /S'.] 53), wherein this court held that this defendant was a general partner in the firm of Griffith <& Wundram, noticed and reviewed by the court.
Before Curtis, Oh. J., and Freedman, J.
Appeal by the defendant Abendroth from so much of the interlocutory judgment rendered herein, at a special term of this court, as determines that the new matter alleged in his answer as a third defense upon its face does not constitute a defense, and is upon its face insufficient in law as a defense, and that the demurrer to such new matter, alleged as a third defense, is sustained and allowed.
And also from so much of the interlocutory judgment as determines that the new matter alleged in his answer as a fourth defense, upon its face does not constitute a defense, and is upon its face insufficient in law as a defense, and that the demurrer to such new matter alleged as a fourth defense is sustained and allowed.
And also from so much of the interlocutory judgment, as amended by the order of October 18, 1877, as provides that defendant shall pay plaintiff $10 costs of the motion to resettle the interlocutory judgment when it appeared that such judgment had been entered without notice to defendant.
This action was commenced in April, 1877, upon a promissory note made by the firm of “Griffith & Wundram,” and signed by that firm’s name, and the defendant Abendroth is sought to be charged as a general partner in that firm, he claiming by his answer to be *472only a special partner, and to have been adjudged to be such in proceedings in the U. S. district court, to which the plaintiffs were parties and by which they were bound.
The third and fourth defenses pleaded in the defendant’s answer were as follows :
And for a further and third defense :
First. On or about November 23, 1872, voluntary and involuntary proceedings were duly instituted in district court of the United States for the southern district of New York, in bankruptcy, wherein the said firm of Griffith & Wundram was duly adjudged and declared to be bankrupts, as by said proceedings, a reference being had thereto, will more fully and at large appear.
Second. The claim of the plaintiffs arose upon a money demand on contract, and was provable in said proceedings in bankruptcy, under and by virtue of the provisions of the act of congress of the United States, entitled “ An Act to establish a uniform system of bankruptcy throughout the United States,” approved March 2, 1867, and of the acts supplementary thereto, or amendatory thereof. Plaintiffs were then the lawful owners and holders of said claim, and were duly made parties to said proceedings in bankruptcy ; they made due proof of their debt against said firm in bankruptcy, and the same was duly allowed and filed.
Third. Both before and after the plaintiffs had duly presented and filed their said claim, and while they were owners thereof, such proceedings were had, to which the plaintiffs were parties, that it was duly adjudged and determined, that John Griffith and George W. Wundram, the bankrupts in this bankruptcy, were the general partners in the limited partnership of Griffith & Wundram, of which William P. Abendroth, this defendant, was the special partner.
*473Fourth. In the course of said proceedings in bankruptcy, a meeting of the creditors of the said special partnership of Griffith & Wundram was duly held, and in it the plaintiffs participated ; at said meeting, this defendant was duly chosen the assignee in bankruptcy of said firm, and thereafter, he duly qualified as such, and entered upon and discharged the duties of his said office ; all of which was done by and with the assent of the plaintiffs, who were then and there the lawful owners and holders of said claim.
Fifth. “After said adjudication that said firm of Griffith & Wundram was a limited partnership, of which this defendant was the special partner, and the appointment of this defendant as assignee in bankruptcy, this defendant, in the course of the discharge of his duties as such assignee, duly paid to the plaintiffs, they then being the owners and holders of said claim, a dividend of six per centum upon the claim in suit, out of the proceeds of the assigned estate of Griffith & Wundram, being the sum hereinbefore alleged to have been paid on said claim, and the plaintiffs accepted the said payment.
Sixth. The said adjudication that Griffith and Wundram were general partners, and this defendant was special partner, was made more than one year before the commencement of this action, and the same now remains in full force and effect.
Seventh. This defendant pleads the said proceedings in bankruptcy, and each and every part thereof, and the adjudication and determinations therein, and the acts of the plaintiffs in bar and in abatement of this action.
For a fourth and last defense :
Before the commencement of this action, another action was brought in the court of common pleas in and for the city and county of New York, in the State *474of New York, for the same cause of action as set forth in the complaint herein, in which said action the plaintiffs herein were plaintiffs, and John Griffith and George W. Wundram, two of the defendants herein, were defendants, and were sued as forming the partnership of Griffith & Wundram.
The said action is now pending and undetermined, having been stayed by order of the United States district court in bankruptcy in the matter hereinbefore forth.
Wherefore this defendant demands judgment, that the complaint be dismissed as against him, with costs.
The plaintiffs demurred to the new matter contained in the answer of the defendant Abendroth, and alleged as a third defense, upon the ground that, upon its face, such new matter did not constitute a defense.
The plaintiffs also demurred to the new matter contained in the answer of the defendant Abendroth, and alleged as a fourth defense, upon the ground that, upon its - face, such new matter did not constitute a defense.
The demurrer of the plaintiff to these defenses was sustained and allowed, and an interlocutory judgment upon such decision entered, which was subsequently amended, by granting leave to the defendant Abendroth, to serve an amended answer upon payment of of costs, and ten dollars costs of the motion made for a resettlement of the interlocutory judgment, and for such leave.
Wm. Henry Arnoux, for appellant. .
Carlisle Norwood, Jr., for respondents.
By the Court.—Curtis, Ch. J.
—It may be true *475that in a similar action, entitled Durant v. Abendroth (reported in 41 N. Y. Super. Ct. [9 J. & S.] 53), this court held that the defendant Abendroth was a general partner in the firm of Griffith & Wundram, he having claimed to be only a special partner, and that such decision was affirmed by the court of appeals in March, 1877. But if we look beyond the record before us, to determine to what extent the action in which the decision was so made and affirmed was similar to this, or governs this, it will appear that the question was not considered, as to how far the adjudication of the United States district court that the firm of Griffith & Wundram was a limited partnership, and Abendroth, the defendant, was the "special partner, was binding upon these plaintiffs and the other creditors of such firm, who were parties to such proceedings and adjudication.
The chief question raised by the demurrers is whether the proceedings and adjudication in the United States district court, considered as truly stated in the answer, constitute a matter judicially acted upon and decided, by which the plaintiffs are precluded from raising the question as to the status of the defendant Abendroth, in the firm of Griffith & Wundram.
The answer alleges the due institution of proceedings in the United States district court in bankruptcy, under the act of congress of March 2, 1867, and the acts supplementary and amendatory thereto, to which proceedings the plaintiffs were parties, and in which they proved and established this claim now sued upon, and that in these proceedings it was duly adjudged and determined, that George Griffith and George W. Wundram, the bankrupts, were the general partners in the limited partnership of Griffith & Wundram, of which William P; Abendroth, this defendant, was the special partner.
The answer further states that the plaintiffs partici*476pated in a meeting of the creditors of such special partnership, at which the defendant Abendroth was chosen assignee by and with the plaintiffs’ assent, and that after such adjudication they received a dividend out of the proceeds of the assigned estate of Griffith & Wundram.
It would thus appear that the plaintiffs were parties to these proceedings, in which it was competent for them to have had the defendant Abendroth adjudged a general partner, if they had interposed such a claim, and established it by proof. But it appears that they did not do so, for reasons, if any, not apparent in the pleadings. They did, however, participate in the fruits of the adjudication in bankruptcy.
By this adjudication the defendant Abendroth was held to be a special partner, and hence in the position which the State law declares, of not being liable for the debts of the partnership beyond the sum contributed by him as capital. The adjudication that the firm of Griffith & Wundram was a limited partnership, limited the plaintiffs, and other creditors, who were parties to the proceedings, to a remedy against the sum contributed as capital to the firm, as far as the defendant Abendroth is concerned. If they deem themselves entitled to anything more, or that such adjudication was not in accordance with the proofs, they should have availed themselves of the relief and of the means of review afforded them by the acts of Congress affecting proceedings in bankruptcy, and not wait and participate as far as possible in benefits afforded them by the-determination of the federal court, and then.resort to a State court, upon the theory that the former erred in passing upon the character of the partnership.
This adjudication appears to embrace all the elements, to sustain the defense of res adjudícala. The court was of competent jurisdiction. The parties were before it to have their respective rights determined. *477They were actors in the proceedings, and actors and participants in the administration and disposition of the property and assets, affected by its judicial decision. The same question sought to be raised anew in this action, was there determined. Under such circumstances, it would be inconsistent with well-settled rules, that the parties or their privies should again be allowed to litigate a subject matter which was, or even which could have been determined, in the proceedings in the United States district court.
It is enough that the facts pleaded in the third defense are sufficient to confer jurisdiction upon the United States district court, and it is not for us to consider, on this appeal, whether in point of fact the plaintiffs can, as they claim, show that this defendant was a third general partner, neither petitioner nor petitioned against, and that consequently there was no sufficient jurisdiction conferred upon the court. We cannot look beyond the sufficiency of the allegations of the defense as stated in the answer.
In reference to the fourth defense, setting forth that John Griffith and George W. Wundram, were sued for the same cause of action as in the present suit, and that the same is now stayed by order of the United States district court, the same principle must govern. The act of congress authorizes this stay. It is a part of the proceedings in bankruptcy. Under it the assets of the firm, including the capital contributed by the defendant Abendroth, were held and protected for the benefit of the creditors of the firm. The plaintiffs, having been parties to the adjudication confirming such stay, and participants in the subject matter of the proceedings, are precluded from maintaining an action for the same cause, and against parties who are held to be the same parties under the adjudication which binds the plaintiffs.
The application for relief or for a remedy on the *478part of the plaintiffs, should be directed to the federal court, and on the basis of "the proceedings there already had. To nullify this stay would be, in effect, to hold that the matters pleaded in the defendant’s third defense were insufficient, and would tend to open the State courts to the review of questions collaterally, that by proceedings under the bankrupt laws have been determined and put at rest in the federal courts.
The suit in the court of common pleas originally" operated as to the defendant, Abendroth, to the extent of his capital in the firm of Griffith & Wundram. The present suit can extend no further, if it is governed by the existing adjudication. The maintenance of the former suit being prohibited by law, to hold that by bringing a new suit for the same cause of action, the effect of the existing adjudication can be avoided, would be to sustain an evasion of the bankruptcy laws and of the just and competent adjudication in this respect rendered thereunder.
The question as to the costs of the motion was properly determined in the discretion of the court at special term. So much of the interlocutory judgment appealed from other than that directing the payment to the plaintiff of $10 costs of motion is reversed with costs.
Freedman, J., concurred.