Supreme Court, December, 1919. [Vol. 109. He directs that the legacies given in the 3d, 4th, 5th, 6th and 7th paragraphs shall not be required to be paid until the expiration of the eight years specified, but authorizes payment in whole or in part sooner, if they are able to do so without hampering the business. I am of the opinion that these provisions authorized the continuation of the copartnership business. The testator not only authorized this course, but undertook to direct how it should be managed and the part each son should have in its conduct. It is impossible to put any other construction on the will. If this view be correct, then all the testator's estate invested in the business was put at the hazard of the enterprise. If the business failed or the firm became insolvent the interest of the estate so invested would be lost to the estate. The executors as such were not to continue the business, but his sons as surviving partners. The general estate was not at the risk of the business, but under well-settled principles of law only so much of the estate as was invested in the business can be reached by creditors of the insolvent firm. Thorn v. De Breteuil, 179 N. Y. 64–78; O'Brien v. Jackson, 167 id. 31; Willis v. Sharp, 113 id. 586; Manhattan Oil Co. v. Gill, 118 App. Div. 17; Matter of Hickey, 34 Misc. Rep. 360. This is particularly true in the case now under consideration because if the business to be continued turned out prosperous and profits were made, the estate at large got no benefit of its success save as it enabled the business to pay more easily the legacies directed to be paid from the enterprise. To the extent, however, that the testator had money and property invested in the business to be continued, it must be held that he contemplated that it was at the risk of the venture, and those who saw fit to extend credit to it had the right to look to the assets invested Misc.] Supreme Court, December, 1919. for the payment of their debts. While doubtless the directions of the will as to the continuation of the business did not make the estate a continuing copartner with the sons, nevertheless, where a partner by will directs that his share of the capital and assets be not withdrawn from the firm for a specified period, or until a specified contingency and remain meanwhile under the control of the surviving partners as survivors, the capital and assets thus continued in the business are liable for the debts and losses of the business. Ex parte Garland, 10 Ves. Jr. 110; Owen v. Delamare, L. R. 15 Eq. 134; cited in footnote to Hooley v. Gieve, 9 Abb. N. C. 8. In Costello v. Costello, 209 N. Y. 252, Judge Collin said in discussing the provisions of the will then under consideration: "The testamentary provision for the continuance of the trust estate in the partnership business after testator's death did not create new firms or constrict the title or rights of the surviving partners. It permitted the surviving partners as such to continue the business for the benefit of the estate and themselves, using the capital and share of the deceased partner therein until the trustees thought fit to extract it and made it liable for the debts meanwhile contracted as well as those existing at testator's death." In the case of Adams & Co. v. Albert, 155 N. Y. 356, a retiring partner allowed his unliquidated interest to be continued in the business of the new firm. Judge O'Brien in his opinion said: "The principle to be deduced from the elementary books and the adjudged cases, which applies to such a situation as the facts in this case disclose, is substantially this: When a retiring partner allows his unliquidated interest to be continued in the business of a new firm, the interest thus left becomes liable for the partnership debts subse Supreme Court, December, 1919. [Vol. 109. quently incurred, as well as the prior debts." Citing Willis v. Sharp, 113 N. Y. 586; Burwell v. Mandeville's Exrs., 2 How. (U. S.) 560; Hoyt v. Sprague, 103 U. S. 613; Nerot v. Burnand, 4 Russ. 247; Payne v. Hornby, 25 Beav. 280; Lindley on Partnership, 700–702. Parsons in his work on Partnership, Vol. 2 (3d ed.), 537, says: "If therefore, the person, instead of permitting himself to be held out as a partner, permits his property to be held out as the property of the firm, and as forming a part of the foundation upon which its credit rests, the very same reason which held him personally in the first case with all his property, would now hold that part of his property permitted to appear as the property of the firm." See also La Montagne v. Bank of New York, 94 App. Div. 219, 232. The law as laid down in the cases above referred to when applied to the facts of this case compel the court to reach these conclusions. First. That the testator's interest in the copartnership business of M. Zeis & Sons was alone at the risk of the business, and the creditors of that concern cannot look to the general estate. Second. That such interest of the testator is liable to creditors of the concern for the payment of the copartnership debts whether such debts were contracted prior or subsequent to the death of the testator. Third. That until such debts are paid the legatees under the will have no right to demand the payment of their legacies, and inasmuch as the fund in court will be insufficient to pay the business creditors in full, they cannot participate in the distribution of the fund. Counsel for the legatees contend that the legacies given by the will are made payable out of the business and therefore are made an equitable charge thereon, and that such legatees become creditors of Misc.] Supreme Court, December, 1919. the business and entitled to share with other creditors in the distribution of the firm assets. In a sense the legacies mentioned are a charge against the business, but are not a charge superior to or equal to that of general creditors, but subordinate to their claims, and to be paid only after the claims of creditors have been satisfied. The testator's interest in the business was only seven-ninths thereof after all debts of the business had been paid, and the provisions for the benefit of his daughters made by his will are simply an equitable charge against the testator's net interest after the payment of all proper indebtedness of the business. The situation is not changed because the testator, instead of directing the immediate payment of these legacies after his death, saw fit to direct the continuance of the business enterprise, and the payment of the legacies at any time within eight years, when the financial condition of its affairs would permit. All the equities of the case favor creditors whose loans and advances, whether of money or material, added to the assets of the concern, and enabled the business to proceed in accordance with the testator's directions. The Manufacturers and Traders' National Bank contends that its claim or debt is entitled to priority of payment over debts contracted by the business subsequent to the death of the testator. The evidence shows that at the time of the death of Michael Zeis, the firm of M. Zeis & Sons was indebted to the bank, upon notes for some $82,000. This indebtedness has been reduced somewhat until the present indebtedness is about $55,500. Of this indebtedness of $55,500, $6,302.75 is represented by notes accepted by the bank on transactions entirely independent of the original indebtedness and taken subsequent to the death Supreme Court, December, 1919. [Vol. 109. of Michael Zeis. The balance, however, is represented by notes taken to renew in whole or in part notes held by the bank at the time of the testator's death. The bank takes the position that the acceptance of these renewal notes did not effect a novation of the original claim, but the renewal notes simply represent the old and original debt, which was never paid, and therefore the bank is entitled to payment in preference to any claim of the legatees, devisees or subsequent creditors. Whether there was or was not an actual or legal novation of the original debt by the taking of renewal notes made by the survivors is not to the mind of the court controlling as to the question here involved. The precise question was decided at the General Term of the old Superior Court of Buffalo in the case of Smith v. Howard, 20 How. Pr. 121, where it was held that where one of three copartners sold his interest to the other two, who continued the business and then failed, making a general assignment providing for the pro rata payment of the debts of the old and new firm, that the creditors of the old firm had no superior equity in the partnership property of the old firm in the hands of the new firm or their assignee. The rule of law governing cases of this kind and the principles on which it is based are stated in the case of Case v. Beauregard, 99 U. S. 119-124, where Mr. Justice Strong, commenting upon the rights of copartners in a suit involving the marshalling of assets, said: "The right of each partner extends only to a share of what may remain after payment of the debts of the firm and the settlement of its accounts. Growing out of this right, or rather included in it, is the right to have the partnership property applied to the payment of the partnership debts in preference to those of any individual partner. This is an equity the |