Doremus v. McCormick

| Md. | Dec 15, 1848

Martin, J.,

delivered the opinion of this court.

In this case, an action of debt was instituted upon a judgment, rendered in favor of the appellants against the appellee, and James N. Lighiner, in one of the courts in the State of Alabama. The suit was brought against the appellee, as the surviving partner of the firm of Lightner and J. McCormick, •and the judgment on which it was based, bears date on the 27th of July 1840, and was for the sum of four thousand and twelve dollars, and one-fourth cento.

The defendant pleaded in bar a release. This release was dated on the 2nd of April 1841, and recites: “That in consideration of one thousand dollars, paid to the appellants by James M. McCormick, they acquit, release, and discharge the said James M. McCormick and James N. Lightner, of and from all debts and demands whatsoever, due or owing to the plaintiffs, jointly or severally, from said McCormick and Lightner, jointly and severally, arising from notes, bonds, bills, judgments, or in any way whatsoever, at any time prior to the date of the said release; and they further, jointly and severally, covenanted and agreed, “to release all claim and lien on any land of the said Me Cormick, in the State of Alabama, in consequence of any judgment, execution, or other process thereon;” and they bound themselves “to execute any deed or writing, that might be necessary to release such land from such claim, lien or process, and in case it should have been sold under any such judgment, execution or process, to refund and pay the said McCormick, whatever sum the same might have been sold for.”

The plaintiffs craved oyer of this release, and by their replication alleged, that it was obtained from them by the defendant, by fraud, covin, and misrepresentation, that is to say, by the said defendant, falsely and fraudulently representing to the plaintiffs, that the said defendant and the said Lightner were not able to pay, and could not pay, more than one thousand dollars of the said debt, when the said defendant and the said Lightner were possessed of property sufficient to pay, and were able to pay, and could well have paid, the whole of the said debt, which the defendant well knew; “in consequence of which said false and fraudulent representation, the plaintiffs did execute the said writing. ’ ’

The defendant, by his rejoinder, traversed the fraud, and tendered an issue thereon to the country, in which the plaintiffs joined.

At the trial of the cause, the judgment and release were offered in evidence; the plaintiffs also introduced several letters signed by McCormick, in the name of the firm, anterior to the settlement and release; also certain statements made by the defendant to the counsel of the plaintiffs; and then proved substantially by Mrs. Asprill, (the sister of James N. Lightner,) that Tmghtner died at her house, in Baltimore, on the 29th of Juno 1841, and that the partnership of Lightner and McCormick continued up to the period of his death. They further proved by this witness, that the defendant had several interviews with Lightner, during bis sickness at her house. That on one occasion, McCormick produced a number of papers, and that McCormick and Lightner talked over their business, in the presence of the witness, who was intimate with both of them, and familiar with their affairs. And that in this conversation, McCormick said, “that he had funds to the amount of $8000 in hand, and if they could settle with their Baltimore and New Jersey creditors, as he expected, and could arrange with Doremus, Suydam and Nixon, at sixty cents in the dollar, they would have $4090 left for a plank in Texas.” The same witness Anther stated, that McCormick afterwards told her brother, in her presence, that he had settled with the Baltimore and New Jersey creditors satisfactorily, and that, tlie appellants were the only remaining creditors. And in the spring of 1841, McCormick -wrote to Lightner, and like., wise informed the witness, that he had settled with the appellants at thirty-t.hree and one-third cents in the dollar.

The appellants then offered to prove by the witness, “that her brother, on being informed of the said settlement by the defendant with the plaintiffs, at thirty-thr.es and one-third cents in the dollar, which information he received in the spring of 1841, and during the continuance of the partnership, said to the witness, that the said firm .of Lightner and McCormick, had, at the time of said alleged settlement, funds sufficient to have paid the debt due to the plaintiffs in full; and further stated, that said funds were, at the time of said settlement, in the hands of McCormick, as liquidating partner.”

The appellee was not present when these declarations were made by Lightner.

The appellee objected to the admissibility of the declarations thus offered: the declarations rvere rejected by a divided court, and the sole question presented for our consideration by this exception, is, whether the declarations of Lightner were admissible and competent, evidence for the plaintiffs, upon the issue joined between the parties in this cause?

It is conceded in this case, that the declarations in question were made by Lightner, during the continuance of the partnership between McCormick and himself; and it is apparent from the whole testimony in the cause, that the appellee, in procuring this release, acted for and represented the firm. The proof furnished by the letters of the appellee, is conclusive upon this subject. They prove, that the debt originally contracted was a partnership debt, for which Lightner and Me Cor-mick were responsible insólido, and that the Alabama judgment was rendered against them as partners. It will be seen, by an examination of the evidence exhibited in the exception, that the appellee, in his correspondence with the appellants, and in his negotiations with Mr. Lee, with respect to the settlement of this claim, invariably speaks of this debt as a partnership debt, and complains of the inability of the firm to discharge it. In his interviews with Lightner, pending these negotiations, McCormick referred to this claim as a matter in which Lightner was interested, informing him, “that if he could arrange with the appellants, at sixty ceuts in the dollar, they would have §4000 for Texas; the release, by its terms, professes expressly to discharge, not McCormick alone, but McCormick end Lightner, from all judgments, <fcc., existing at any period prior to its date; and it is perfectly clear, that if the predicament of these parties had been altered, and the suit had been instituted upon this judgment, against Lightner, as the surviving partner, he could have interposed this release, assuming it to be valid as an absolute bar to the action. The release is to be regarded, as a contract between the appellants and the firm of Lightner and Me Cormick, obtained through the instrumentality of McCormick, as the active and liquidating partner. The action was properly brought against Me Cormick, as the surviving partner of the firm of Lightner and McCormick, and, as a general principle, the admissions of Lightner touching this release, would be considered as the admissions of the defendant, and therefore admissible evidence against him.

An approved writer upon this subject, says:

“As soon as evidence of the partnership is established, the acts, admissions, and declarations of one partner, in matters relating to the affairs of the partnership, will be evidence against the firm. In this respect, the partners are to be considered as one person, and therefore the rule will hold good, although the partner making the admission is not a party to the record.” Coll’r on Part., sec. 779.

In the case of Boyce against Watson, 3 J. J. Mar., 500, the declarations of a partner, upon whom the capias had not been served, were admitted as evidence against his co-partners, and the court correctly held :

“That the confessions of a partner, are not admissible as evidence against his co-partners, on account of having been served with process, but of their unity as partners.” And in Reimsdyk vs. Kane, 1 Gal., 635, Mr. Justice Story said:

“I admit, the answer of one defendant cannot in general be read against another defendant; otherwise such co-defendant would be deprived of the opportunity of cross-examination. But this rule is liable to exceptions, and, therefore, where the-confessions of any party would be good evidence against another, his answer, a fortiori, may be read against the latter. In cases of partnership, the confession of one partner in relation1 to a partnership concern, is in general admissible on an action against the other, it is not evidence to prove the partnership-itself, but that being once admitted, or proved aliunde, the-confession is let in for all collateral purposes.”

By turning to the pleadings in this case, it will be perceived, that the replication charges, that this release was obtained from the plaintiffs, by the fraud and misrepresentation of the appellee. The specification of the fraud is, that the defendant falsely and fraudulently represented to the plaintiffs, that the defendant and Lightncr were not able to pay more than one thousand dollars of the debt, when they possessed property sufficient to pay the whole of the debt, and that this fact was known to the defendant.

This fraud was traversed by the defendant’s rejoinder, and the plaintiffs, as one of the items in their proof, conducing to show that the imputed fraud was perpetrated by the defendant, offered in' evidence'the declarations of Lightner, for the purpose of establishing before the jury, not only that the firm of Lightner and McCormick was, at the time of the settlement, abundantly able to pay the entire debt, but that this fact was known to the defendant, as he had ample funds in his hands, as the liquidating partner of the house.

There is no evidence in the case, indicating that Lightner was privy to the fraudulent misrepresentations imputed to the defendant; and the counsel for the appellee has contended, that this fraud, if perpetrated, is to be considered as the individual act of the defendant, not within the scope and limits of his authority as one of the partners, and for rvhich, therefore, the firm was not responsible. It was insisted, that fraud is, from its nature, necessarily a personal act, and that the partnership contract is not to be interpreted, as communicating to one of the members of the firm the power of implicating his associates, by his fraudulent misrepresentations; That the fraud complained of, is to be treated as the fraud of the defendant in his individual capacity, and not as the fraud of the firm of which he was a member.

This point was pressed upon the court with great force and power by the counsel, and assuming his proposition to be correct, it would follow as a corollary, that the declarations of Lightner, with respect to this alleged fraudulent transaction, would be considered as the declarations of amere stranger, and as such clearly inadmissible.

But an insuperable answer to the proposition of the counsel for the appellee, is, that according to the established and acknowledged doctrine of the common law, an innocent partner is constructively responsible for the fraudulent acts of his co-partner, when those acts are committed within the range and scope of the partnership transactions. The representation of any fact, or a misrepresentation of any fact, made in any partnership transaction, by one partner, is considered, Judge Story says, as the representation, or misrepresentation of all the partners, and will bind the firm. Story on Part., sec. 107.

Again the learned commentator says:

“The principle, (alluding to the doctrine, that the representations and admissions of one partner, within the limits of the partnership, are considered as the representations and admissions of all the partners,) extends further, so as to bind the firm for the frauds committed by one partner, in the course of the transactions and business of the partnership, even when the other partners have not the slightest connection with, or knowledge of, or participation in the fraud;” for he remarks, it has been justly observed, “that partners, by forming this association, declare themselves to the world, as satisfied with the good faith and integrity of each other, and impliedly undertake to be responsible, for what they shall respectively do within the scope of the partnership concerns.” Story on Part., sec. 108.

This principle, thus announced by Mr. Justice Story, was directly affirmed by Abbott, as the chief justice of the King’s Bench, in the case of Rapp against Latham and Parry, 2 Barn. & Ald., 795; and a similar doctrine was enunciated by the court, in the cases of Stone vs. Marsh, 6 B. & Cres., 551, and in Boardman against Gore, 15 Mass., 335.

What then was the character of the fraud alleged to have been practiced by the appellee, as the means of procuring this release? Was it not connected with a partnership transaction, and employed by him, as a false pretence, to obtain a paper, in the execution of which the firm was interested?

It is impossible, that any other than an affirmative answer can be returned to these questions.

The composition of a debt, either as a creditor, or as a debtor, is one of the acknowledged and frequently exercised powers of a partner. It is strictly within the scope of his authority. In the composition of this debt, the appellee presented himself to the appellants, as the representative of the firm of Lightner and McCormick, seeking to adjust and settle a partnership debt. By compounding this large claim for the sum of one thousand dollars, the partnership was greatly bone-fitted. The appellants dealt with the appellee, not as an individual, but in his capacity of partner, and were entitled to consider his representations, with respect t,o the insolvency of the firm, as the representations of both of the partners.

Upon this ground, we think, the declarations of Lightner.; as offered by the appellants, were admissible in evidence, and that the court below erred in rejecting them.

JUDGMENT REVERSED AND PROCEDENDO AWARDED1.