
    First Appellate Department,
    April Term, 1902.
    Reported. 71 App. Div. 244.
    Simon E. Bernheimer, Respondent, v. Josephine Schmid, Appellant. John M. Bowers, as Receiver of the Firm of Bernheimer & Schmid, Respondent.
    Receiver of a brewing copartnership authorized to advance to its customers money with which to pay for liquor tax certificates.
    In an action to dissolve a partnership engaged in operating a brewery, an interlocutory judgment was rendered dissolving the partnership and appointing a receiver. The receiver was empowered, in his discretion, to sell the partnership property, assets and effects, but was expressly prohibited, without the further order of the court, from selling any accounts or debts due the firm or claims of the firm against any one, or the good will or trade marks of the firm, or the leasehold interest to which the firm was entitled, or any part of the machinery used by the firm, or any real estate of the firm. The decree further provided, “That until all of said property is sold, or the further order of the court, and for the purposes of making such sale or sales more advantageously, said receiver shall continue the business of the late firm, and that said receiver may reimburse himselt out of the proceeds of said property for such disbursements as he may from time to time make in the carrying on of said business.”
    The partnership property was very valuable, and there was due to it from customers, who numbered over 700, $2,000,000. It was the practice of the firm to advance to its customers moneys with which to fit up their saloons and to take chattel mortgages as security for the moneys advanced. It also advanced to its customers the moneys necessary to secure certificates under Liquor Tax Law, taking as security for the sum so advanced, assignments of the certificates.
    It appeared that a great majority of the customers were unable to pay their license fees, which would become due May 1, 1902, and that if such license fees were not paid the market for the product of the brewery would be lost and the security of the chattel mortgages imperiled.
    
      Held, that the receiver should have leave to apply the moneys in his hands, or which he should have in his hands on the 1st day of May, 1902, to the payment of such license fees, but that he should not be allowed, for that purpose, to borrow money on the credit of the receivership or to give liens upon the assets.
    Appeal by the defendant, Josephine Schmid, from an order of the Supreme Court, made at the ¡New York Special Term and entered in the office of the clerk of the county of ¡New York on the 2d day of April, 1902, authorizing the receiver in the action to loan certain moneys to customers purchasing beer from him as receiver to enable them to take out licenses.
    
      Charles F. Brown, for the appellant.
    
      William A. Jenner, for the plaintiff, respondent.
    
      John M. Bowers, for the receiver, respondent.
   Patterson, J.:

The embarrassment in which the receiver is placed in this case, concerning the administration of the receivership and the necessity which compelled him to apply to the court for instructions in a very serious conjuncture, arise from the peculiar provisions of the interlocutory judgment in and by which he was appointed. The action was brought to dissolve a copartnership existing between the plaintiff and the defendant. The court adjudicated that the copartnership be dissolved. The ordinary and necessary effect of such an adjudication would be to require the cessation of the partnership business, the liquidation of its affairs, and the distribution of the assets or proceeds of the assets between the two partners. The peculiarity of the decree in this case is, that although the dissolution is adjudicated, the receiver is only empowered at his discretion to make sale of the partnership property, assets and effects, and he is expressly prohibited, without the further order of the court, from selling any accounts or debts due the firm, or claims of the firm against any one, or the good will or. trade marks of the firm, or the leasehold interests to which the firm is entitled, or any part of the machinery or buildings of the firm used in manufacturing, or any real estate of the firm, and then the decree proceeds to provide as follows: “ That until all of said property is sold, or the further order of the court, and for the purposes of making such sale or sales more advantageously, said receiver shall continue the business of the late firm, and that said receiver may reimburse himself out of the proceeds of said property for such disbursements as he may from time to time make in the carrying on of said business.”

This judgment is not now before us for review, although we are advised by the record that the plaintiff has appealed from it. But as it is a binding judgment until reversed, we may only construe it at the present time in connection with the application of the receiver involved in this appeal. Plainly by this interlocutory judgment there is cast upon the receiver the duty of continuing the business as it was carried on by the copartnership. There is nothing in the decree which requires that such business shall be carried on by the receiver for any fixed period, and evidently it was the intention of the court to impose upon him the duty of carrying on the business until a sale could be made advantageously of the assets of the partnership in his hands. The duty of carrying on the business is made mandatory. By the provision of the judgment, he must do so until the further order of the court, and in the meantime he is absolutely restrained by the terms of the judgment from selling those things which are necessary to the carrying on of the business. In the performance of the duty enjoined upon him, he now finds himself in a position in which, in order to carry on the business and to comply with the requirements of the judgment, it is necessary for him to advance large sums of money to customers and debtors of the copartnership; and he has satisfactorily shown that if that course is not pursued peril will be incurred of the loss of an immense sum of money to the receivership. His application to the court below was for permission to advance the money referred to, and from an order of the court granting such application this appeal is taken.

The requirement of the interlocutory judgment that the receiver shall carry on the business implies that it shall be carried on as it had been conducted by the copartners before the dissolution of the firm was decreed. What the attitude of the defendant, who appeals from the order, is with respect to this interlocutory judgment we do not quite gather from the record. It is asserted by the respondents that the form of the decree was prepared by the defendant’s attorney. We are not distinctly informed by the record that she has appealed from this interlocutory judgment. It is shown, however, that under the provisions requiring the receiver to carry on the business specific authority had been given by the court to buy horses and pay bills for merchandise, and that permission has passed unchallenged by the defendant.

The facts connected with the present emergency are, briefly, the •following: The plaintiff and the defendant were copartners in the business of brewing beer and were the proprietors of one of the largest establishments of that character in the city of New York. Their extensive plant, covering nearly a block of ground in that city, is built upon land which the court has decreed to belong to the plaintiff and defendant as tenants in common, and not to constitute a partnership asset. The property belonging to the copartnership is worth millions of dollars, and something over two millions of dollars of the copartnership book assets consists of indebtedness due to the copartnership from customers supplied by it with beer it manufactured. These customers are saloon-keepers and are in number something over 700. The relation existing between the copartnership and the customers (being the same relationship as exists between almost all the brewers in the city of New York and their customers) is, that the copartnership would advance to the saloon keepers moneys for the fitting up and appointment of their saloons, and take chattel mortgages upon the personal property of the saloon keepers as security for the money advanced. In addition. thereto the copartnership would advance to these saloon keepers the moneys necessary to take out licenses under the Liquor Tax Law, and as security for those moneys those licenses would be assigned to the copartnership, which would then supply beer to the saloon keepers, and thus find an outlet and market for its manufactures. It is now made to appear that the licenses to these saloon keepers through whom the beer is sold will expire on the 1st of May, 1902, and that such licenses must be renewed or new ones issued. A great majority of the customers of this copartnership and of the receivership it appears are unable to pay their license fees. The receiver asked and obtained the permission of the court to advance the moneys necessary for the payment of those license fees. If they are not paid, not only is the market for the beer manufactured in the brewery in charge of this receiver to a great extent lost, but the chattel mortgages and the immense indebtedness covered by those mortgages are imperiled.

It seems to be absolutely necessary, in the interest of both the plaintiff and the defendant, that in order to preserve the assets from ruinous loss the receiver should be authorized to make the advances of money to renew these licenses. The grave results of withholding permission for him so to do are in no sense conjectural, and we think it was the obvious duty of the court to grant the application of the receiver to advance these moneys under the situation created by the terms of the interlocutory judgment; but that permission should not be granted in such manner as to bind the parties to the action to a continuance of the business for any fixed period, nor should it be so construed as to prevent the defendant from making application to the court to have the business sold, as she may be advised. Leave should be given to the receiver merely to apply moneys in his hands to the taking out of licenses for the customers. That being done, he may be able, as is suggested, to dispose of his chattel mortgages, and interests, such as they are, in the various saloons to other brewers, who may take over the custom of the saloon keepers. The receiver should not be allowed to borrow money on the credit of the receivership, nor to create indebtedness for the parties to the action, nor to give liens upon the assets; but the authority given to him to advance moneys should be limited to such moneys as he has in hand or may have in hand on the first of May,' at which time the license fees become due. The affirmance of this order is placed upon the ground that under the terms of the decree enjoining a duty upon the receiver and the absolute necessity existing for the preservation of that business which the receiver is thus required to carry on under that decree, the advancement of these moneys must be approved.

The order appealed from, to the extent indicated, must be affirmed, with" ten dollars costs and disbursements.

Van Brunt, P. J., O’Brien, Me Laughlin and Laughlin, JJ., concurred.

Order affirmed to the extent indicated in opinion, with ten dollars costs and disbursements.  