Dob & Dob v. Halsey

| N.Y. Sup. Ct. | Jan 15, 1819

Spencer, J. delivered the opinion of the Court.

Two questions arise; 1st. Whether the payment for the timber by the defendant to G. Moore, by giving up a note, which the defendant held against him, under the circumstances of the case, exonerates the defendant from any further liability to the plaintiff? 2d. Whether this suit can be sustained by the plaintiffs alone ?

1. This Court has decided, in several cases, that where a note is given in the name of a firm, by one of the partners, for the private debt of such partner, and known to be so, by the person taking the note, the other partners are not bound by such note, unless they have been previously consulted, and consent to the transaction. (Livingston v. Hastie & Patrick, 2 Caines, 246. Lansing v. Gaine Ten Eyck, 2 Johns. Rep. 300. Livingston v. Roosevelt, 4 Johns. Rep. 251.) In Ridley and another v. Taylor, (13 East, 175.) the Court of King’s Bench held, that if one partner draw or endorse a bill in the name of the partnership, it will, prima facie, bind the firm, although.; passed by one partner to a separate creditor, in discharge of his private debt, unless there be covin between such separate debtor and creditor, or, at least, the want of authority, either express or implied, in the debtor partner, to give the security of the firm for his separate debt.

The only difference between the decision of this Court and that of the King’s Bench, consists in this : We require the separate creditor who has obtained the partnership paper for the private debt of one of the partners, to show the assent ■of the whole firm to be bound. The rule of the King’s Bench throws the burthen of avoiding such security on the firm, by requiring them to prove, that the act was covinous -on the part of the partner, for whose private debt the pa-i per of the firm was given, by showing that it was done without the knowledge, and against the consent, of the other partners, and that the fact was known to the separate creditor when he took the paper of the firm.

I can perceive no substantial difference whether the note of a firm be taken for a private debt of one of the partners, by a separate creditor of the partner pledging the security of the firm, and taking the property of the firm upon a purchase of one of the partners, to satisfy his private debt. In both cases, the act is equally injurious to the other partners ; it is taking their common property to pay a private debt of one of the partners.

The facts in this case show, that the defendant not only •knew that this was partnership property, but that he had every reason to believe that the other partners, had they been informed of the sale of the timber to pay Moore’s private debt, would have objected to it; for it is evident, that Moore vvas a man of very little property, and the defendant took the timber for fear of wholly losing his debt. It is equally clear, that the plaintiffs furnished Moore the means of buying the timber, and by advancing their money and notes to pay for it.

When, therefore, the defendant purchased the timber, he became the debtor of the plaintiffs, and that debt cannot be cancelled by setting off a debt due from Moore to the defendant.

Had Moore paid the defendant the debt due to him, in money which he had taken out of the partnership fund, it would have presented a different question. Such a payment would have been valid, in the absence of all proof, th&t the defendant knew that the money of the firm had been thus misapplied. In such a case, there would be ground for presuming, that the transaction was fair, and that the debt had been paid out of the private funds of the partner indebted. In this case, there can be no such presumption, ‘for there can he no doubt, that the defendant imew that Moore was paying his private debt with the partnership property.

2. As to the second point; it does not admit of a doubt, that G. Moore was a partner with the plaintiffs. The articles do not provide for the advancing money by the plaintiffs to make the purchases of timber. Admitting, however, that the agreement authorizes that inference, Moore was to furnish an equivalent for that, by his personal services in superintending the sawpit, and lumber yard ; and he was, in consideration of his services, to receive one third of-the net profit. Now, it is a very clear proposition, that he who is to take a part of the profits indefinitely, shall, by operation of law, be made liable to losses; upon the principle, that by taking part of the profits, he takes from the creditors a part of that fund which is the security for the payment of their debts. (Green v. Smith, 2 Bl. Rep. 998. Waugh v. Carver, 2 H. Bl. 245. 4 East, 144.)

There may be, and some of the cases cited admit the position, a partnership, as respects third persons, when the transaction would not be such as between the partners themselves. This is not such a case ; here is a full, clear, and decided partnership, as regards the partners themselves, as well as third persons. It is essentially different from the case of Muzzy v. Whitney, (10 Johns. Rep. 226.)

If G. Moore is to be regarded as a partner with the plaintiffs, and would be liable for all the debts contracted during the existence of the co-partnership, which I consider perfectly clear, then he ought to have been joined in the suit; for in actions arising ex contractu, where the legal interest is joint, those in whom such interest is vested, must, if living, join in an action for the breach of such contract; and the objection may be made upon the trial, as a ground of non-suit, upon the general issue, if it appears that there is another person living, not made a party, who has a joint interest in the contract. (1 Chitty Pl. 6, 7.) If the fact "appears on the face of the declaration, it is good cause for arresting, or reversing the judgment. ' ' ■

Judgment of nonsuit.