I am satisfied, by the evidence in this case, that the transaction of the 30th of April, 1845, should be regarded as an adjustment and settlement, pro tanto, of the co-partnership business of the firm of Newberry & Burch. The copartnership existing between the parties expired on that day; and the transaction in question embraced a purchase by, and a transfer to, I. H. Burch, one of the copartners, of all the effects of the firm then remaining in the hands of John T. Smith &
I am led to take this view of the case, by the intrinsic probabilities arising out of the relative situation of the parties; as well as from the responsive allegations of the answer, and the documentary proofs in the cause.
1st. Nothing is more probable than this hypothesis, when we look at the facts disclosed by the evidence. Walter L. New-berry and Isaac H. Burch, constituting the firm of Newberry & Burch, were exchange brokers, residing and doing business at Chicago. To procure funds to enable them to carry on this business, they had borrowed the sum of $5000 of the Albany City Bank, upon a note dated on the 1st day of July, 1845, bearing two and a half per cent interest, upon certain conditions as to the circulation of the notes of the bank; and other $5000 of the Herkimer County Bank, upon a similar note, bearing interest at three per cent. The notes were signed in the firm name, “ Newberry Burch” and by “ T. Burch Sf Co.” surety ; and were outstanding against the firm on the' 1st of April, 1845. A large part of the business of Newberry & Burch consisted in selling drafts, payable at sight, on New-York; and to enable them to conduct this branch of their business, they made an arrangement with the house-of J. T. Smith & Co., brokers, in the city of New-York, to accept and pay such drafts. It was a part of the arrangement that this house should be kept in funds for that purpose, by available paper which they were authorized to collect, and also to sell, and thus realize the proceeds upon it to meet the drafts that were liable to be presented, at all times, from Newberry & Burch.
In the course of the winter of 1845, Newberry had signified to his partner his intention to go out of the business, and to close the concern, so far as he was connected with it, in the
Now, although I entertain no doubt of the correctness of the conclusion I have formed as to the true character of the transaction in question, yet I will not stop to inquire whether the bill should be dismissed upon the ground that the plaintiff has
Before proceeding to a consideration of that question, it may be proper to allude to several matters of fact which have been, to some extent, drawn in question upon the argument. (1.) It must be assumed as an undisputed fact in this cause, that the firm of Newberry & Burch had funds in the hands of Smith &. Co. to the full amount called for by the draft and orders of the 30th of April. This fact is distinctly averred in the bill, and admitted in the answer; and it would not be competent, therefore, to disprove it without an amendment of the pleadings. And if it were disproved, it would be evidence of a fact, not within the issue; which the court would be bound to disregard. But the fact upon which the parties, in their pleadings, have agreed, is not disproved. It is true that the witness Underhill says, that by the books of J. T. Smith & Co. it did not appear that such a balance as was claimed was in the hands of that firm. This witness, however, admits that he did not suppose the books showed the true state of the accounts between the parties. In addition to the belief of this witness, we have most decisive evidence that they did not; for the books did not exhibit any account of the collection paper, nor of its proceeds. (2.) It is one of the grounds of complaint in the bill, and the same position was taken upon the hearing, that J. T. Smith &• Co. were only authorized to sell the collection paper placed in their hands when it was necessary to meet the drafts drawn on them by Newberry & Burch, and that they had sold, without such necessity, and without authority, all but one of the drafts mentioned in the order aforesaid, and had converted the proceeds to their own use. Upon this assumption it is argued that when the order was drawn for the delivery of these collection drafts, or their avails, neither the drafts nor their avails were on hand; so that in fact the order called for property
I am of the opinion that Smith & Co. had authority to sell the drafts in question, and that it can not be successfully maintained that the “ avails” were not in the hands of Smith & Co. on the 30th of April. (1.) The course of business between the firm-of Newberry & Burch and their New-York correspondents gave a large discretion to the latter to make sales of these collection drafts. These drafts, drawn upon J. T. Smith & Co. by Newberry &. Burch, were payable at sight, and were, at times, drawn to the amount of $2000 or $3000 a day, and to provide against emergencies it would be necessary to make collections or sales some days previous to the occurring of actual and known occasions for the use of the funds. Again; it must have been expected by the parties that the firm of Smith & Co. would have the benefit of a considerable deposit, inasmuch as they received no compensation for doing the business, except the use of the deposits, and a greater per cent, on the sale of paper. Again; it is inferable that a general authority was understood by Newberry & Burch, to be extended to Smith & Co. to sell at their discretion; for the reason that in several instances they were directed, by letter, not to sell either certain specified' paper, or at a greater discount than 6 per cent.; it also appears that they had been directed to sell some of this very paper—and one of the firm of Smith & Co. is a witness, and testifies that in the spring of 1845 I. H. Burch was in New-York, and gave verbal directions to sell any paper of Newberry & Burch’s, when it could be sold at a reasonable rate, or whenever their account required it. There is therefore no ground for saying that the sales were made without regular authority. (2.) Nor do I think there is any ground for saying that the avails of the collection paper were not in the hands of J. T. Smith & Co. on the 30th of April, when the order in question was drawn upon that firm. When this firm was directed, or permitted to sell collection paper, or when they received the proceeds of such paper on collection, it is not to be supposed that they were to make a separate deposit of
Now upon this state of the facts it seems to me that the plantiff is entitled’ to no relief, for several conclusive reasons.
I. Deriving his title to relief under the order of the 30th of April, he becomes jointly interested with I. H. Burch in the fruits of his purchase of the partnership funds in question, and merely succeeds to an undivided moiety of his interest in the enterprise. I have already said that the transaction is to be regarded as an adjustment of a closing partnership concern, by which one partner agrees to pay a certain amount'of partnership debts, and to receive a certain amount of partnership funds as an equivalent. In this case, it is true that Burch had already discharged, instead of then assuming, the stipulated portion of the firm liabilities; and it is also true that the amount
II. Independently of the ground which I have just considered, it seems to me that there is another and a decisive objection to the relief sought by the plaintiff. On the 30th of April N. & B. gave I. H. B. & Co. the order on Smith & Co. to deliver over the collection paper, or its avails. ' The $3000 draft was transmitted to Smith & Co. by the morning mail of the 1st of May. At a later period of the same day I. H. B. & Co. addresed another communication to Smith & Co. in which, among other things, they request that firm to “ acknowledge the receipt of the paper called for by that order, specifying the items and time of maturity, and to hold them for collection, for our account.” On the 9th of May Smith & Co. answered the other parts of this communication of I. H. B. & Co. and added, “ we have not time to-day to examine N. Sp B.’s order for thepaper; will refer in our next? Now it is not denied that if Smith & Co. had found time to comply with this request of I. H. B. & Co. and had actually acknowledged the receipt of the paper or its avails, and that they held it for the new firm, the loss must have fallen upon the latter. I think it will also be admitted that the ground upon which this loss must have been borne by the new firm, would have been that such an acknowledgment of the receipt of this fund would have either transferred, or have been evidence of a transfer of, the right of property in
It is,- however, not material that I. H. B. & Co. should be able to maintain an action for this money, at law, in their own names. Their right to the fund was absolute and perfect. The firm of N. & B. had no control over it, and Smith & Co. could not divert it, in obedience to their direction, or otherwise, without being responsible to the holders of the order. The court of chancery affords full and ample protection to the assignee of a chose in action. I am of the opinion, therefore, that the new firm were the absolute owners of the entire beneficial interest in this fund, and of course must sustain the loss of it. (2.) Again; it is to be remembered that the sole ground
IH. Again; upon the most favorable view of this case for the plaintiff, the loss must fall upon him if he has been Wanting in due diligence in making the proper presentment and demand of the order of the 3.0th¡ of April; and if the defendant has sustained damages by such neglect.
There is no. evidence ip the case showing that the defendant Newberry in any manner directed, or assented to the manner in -which I, H. B, & Co, chose to make presentment and de
In answer to this argument it may be urged, that neither Newberry nor I. H. Burch had any reason to suspect the solvency of the house of John T. Smith & Co., and that I. H. Burch & Co. chose to allow the money to remain in their hands as a deposit against which to draw in the prosecution of their business as exchange brokers. This doubtless was the true reason why this fund was not withdrawn from the possession of J. T. Smith & Co. as it would have been under other circumstances. That, however, furnishes no reason for devolving this loss upon the defendant. If the firm of I. H. B. and Co., when they received this order, intended to hold the drawers responsible upon it for the insolvency of the drawees, then they should have pursued the usual course for removing the fund from the possession of the latter; and if there be good reasons to believe that the usual and ordinary demand, by a third person, would have resulted in a payment prior to the 16th of May, then the defendant should be discharged. There is also an additional ground for holding the new firm to this reasonable
The bill must be dismissed, with costs.