3 Denio 410 | Court for the Trial of Impeachments and Correction of Errors | 1846
The material question presented in this case is, whether a partnership debt can, after notice of the dissolution of the copartnership, be paid and discharged by the negotiable note of one of the partners given to and received by the creditor, as payment and in satisfaction.
To a plain and practical man there would seem to be no possibility of a doubt in relation to it. He would naturally say that parties are at liberty to make such settlements as their convenience or interest may dictate, and that such an arrangement affords great facilities, and is peculiarly advantageous in settling a partnership concern. Such too appears to have been the opinion of Lord Kenyon, when it was sought to make all the partners liable for an original indebtedness under such circumstances. The proceeding, indeed, called forth an expression of indignation. He speaks in the following strong terms: “ Is it to be endured that when partners have given their acceptance, and when perhaps one of two partners has made provision for the bill, that the holder shall take the sole bill of the other partner and yet hold both liable 1 I am of opinion that when he chooses to do so Iu» discharges the other partner.” After referring to the
The question was distinctly and clearly brought under the consideration of the supreme court of this state, as early as 1815, in Arnold v. Camp, (12 John. 409;) and Thompson, Ch. J. there uses this emphatic language : “ If the facts in the case before us will warrant the conclusion that when the individual note of Downing (a former partner) was taken and the partnership note delivered up, it was intended and agreed to be considered as payment of the note in question, there can be no doubt but that, in judgment of law, it will operate as a satisfaction of the partnership note.” And the court gave judgment for the defendant. The same principle was fully recognized in Muldon v. Whitlock, (1 Cowen, 290,.) and also in Frisbie v. Larned, (21 Wend. 450;) and in the latter case Arnold v. Cam.p is cited by the same learned judge who in the present case repudiates it. Indeed that case was universally acquiesced in, in this state, until as late as 1841, when it was for the first time questioned in Cole v. Sackett, (1 Hill, 516.) The case of Smith v. Rogers, (17 John. 340,) which was supposed by the counsel of the defendant in error to be an exception, is not so in fact. The note which was set up in that case as extinguishing the joint debt, was received to be applied to the credit of the partnership account “ when paid,” and the opinion of the court shows that their decision was placed on the ground that it was not intended as- a discharge of the original liability. It is therefore in perfect harmony with the prior decisions, and they were not. questioned by it. (See also Tobey v. Barber, 5 ,John. 72 : Witherley v. Mann, 11 id. 518; Sheehy v. Mandeville, 6 Cranch, 253; opinion of Ch. J. Marshall, p. 264; Harris v. Lindsay, 4 Wash. C. C. 272; Story on Partn. § 155.) I do not deem it necessary to refer to the opinions of judges in England on the point, further than to say that, after careful deliberation, it was finally held as late as the year 1834, in Thompson v. Percival,
It then remains to be considered whether such a principle exists. The whole argument of the court below appears to be placed on the ground that a debt cannot be discharged by the mere promise of the debtor to pay it. “ The logic of these pleas, (says the learned judge in Cole v. Sackett,) is no more than saying, Your precedent debt is discharged, because I promised o pay it in another form, and you accepted the latter promise as a satisfaction.” Now I concede that the note of a debtor himself will not discharge a precedent debt, though it may suspend the remedy; yet I consider it to be equally well settled that the acceptance, by a creditor, of the note of a third person for an existing indebtedness, operates as an -extinguishment of the original consideration, when agreed to he accepted in full satisfaction of it. See Booth v. Smith, (3 Wend. 68,) and Frisbie v. Larned, (21 id. 450,) where the whole doctrine is well considered by Mr. Justice Cowen. And here it may be useful to examine on what, principle this latter rule is placed. In Booth v. Smith, the defendant was sued for the balance of a due bill, made by him to the plaintiff, in satisfaction whereof he subsequently gave a note for the amount due, of three other persons, endorsed by himself. These facts being set up in a plea, were held to be a good defence. Justice Sutherland, in giving the judgment of the court, says : “ The plea is unquestionably good. It would have been good, by way of accord and satisfaction, if no part of the original debt had been paid prior to the acceptance by the plaintiff of the last note.” He concludes by saying, “ Although the defendant still remains liable, the character of his responsibility is changed. He has entered into a new con
Entertaining these views, I am of opinion that the judgments should be both reversed, and a venire de novo awarded.
Porter, Senator. That the debt sought to be recovered was atone time the debt of the defendants in this suit, is not disputed; but the retiring members insist, that as the plaintiff below knew of the dissolution of the copartnership, and that the business of settling the debts of the firm had been left with Cort, together with their property; he knowing this and consenting to extend the credit, and to take the individual promise of Cort, and give up the note of the firm, has virtually released the firm from the original liability.
The contract of indebtedness having been established, the court should have evidence of its performance; or that it has
Newmark v. Clay, (14 East, 239,) is also relied upon. But I can extract no principle from this case which supports the decision of Arnold v. Camp. The question turned upon the appropriation of a payment that had been made by two remaining members of a firm, to the discharge of a debt contracted while a third person had belonged to the firm, and who was sought to be-charged in that suit with the payment of the same debt. While they thus continued partners, the creditor received in payment bills of exchange, which were dishonored after the partnership was dissolved; but the remaining partners took up the dishorn
The other cases cited by the court (Tobey v. Barber, 5 John. 72, and Wetherby v. Mann, 11 id. 518,) only decide that accepting a note of a third person, upon an express agreement that it shall be received in payment of a pre-existing debt, is a discharge of that debt. The creditor in such a case runs the risk of its being paid. Before these last authorities can be made applicable to the case of Arnold v. Caimp, the case should have shown, that Arnold has expressly agreed to take Downey’s note in satisfaction of his debt. Besides, the liability of a third party forms a new and distinct consideration. Of this there was no pretence. I am therefore constrained to think that the case of Arnold v. Camp was not well considered, and is not sustained by the authorities cited and relied upon.
But let us inquire how it agrees in principle with the decisions of the supreme court, in other cases which have never been questioned. The position taken in this case is, that the acceptance of the note of Oort worked a complete satisfaction of the original debt, and was a legal fulfilment of the contract of the joint debtors. The principle is well settled, that when a debtor gives his own negotiable note for a prior debt, it is no -absolute satisfaction and discharge of the debt. It may be deemed prima facie evidence of such discharge; but as the production and destruction of the note, on the trial, rebuts this evidence, it is plain that -the original indebtedness has never been cancelled. Pintard v. Tackington, (10 John. 105,) Angel v. Fulton, (8 id. 149,) Holmes v. De Camp, (1 id. 34,) and many other more re-cent cases establish this position. The court has sometimes said
The unsoundness, as it appears to me, not to say absurdity of the rule now contended for, is strongly exemplified in the case of Cole v. Sackett, (1 Hill, 516.) To a declaration containing the common counts, and an account stated,-the defendants pleaded in bar of the action, that they had accounted with
I will advert to one consequence of the principle for which the plaintiff contends, and which will show the injustice that might often follow its adoption. Soon after the dissolution of this firm, the former partners made an assignment of their effects for the benefit of their creditors; and we may reasonably suppose that the firm was insolvent. The notes of Cort were received, and that of the firm given up about that time. If from that time this ceased to be the debt of the firm, and became the debt of Cort alone, then it lost all claim upon the assets of the firm. The plaintiff below must be content to wait until all the other debts of the firm were satisfied, and then limit his claim to a share in one-third of the surplus, upon an equal footing with all the other creditors of Cort.
The plaintiff’s counsel relied much upon certain English authorities which he adduced, as bearing upon this question. The earliest case referred to, and the earliest in existence, I suspect, on that side of the question, is Evans v. Drummond, (4 Esp. R. 91.) This was a nisi prius decision in which Lord Kenyon held that when a creditor held the bill of a firm, for the debt of the firm, and after a dissolution allowed one of the firm to renew it, by giving his own bill, he discharged the other partner. It is only the opinion of a very learned judge, given in the course of a trial, unsupported by the citation of any authority, or by a course of reasoning amounting to a legal argument. The same principle was adopted in Reed v. White, (5 Esp. R.
The principle of these two cases from Espinasse, was sanctioned in a decision at bar in 1834, in Thompson v. Percival, (5 Barn, & Ald. 925.) In this case there was a partners Mp debt due from A. & B. They dissolved, and B. continued 'he business on his own account, and retained the funds to pay partnership debts. B. gave his individual acceptance to -a creditor of the firm for a debt of the firm. The bill was dishonored, and the creditor sued the firm. The court held that it was a question for the jury, whether the creditor had agreed to accept B. as his sole debtor. Prior, however, to this decision, a different principle had prevailed in the court of king’s bench. In Lodge v. Dicas, (3 Barn, & Ald. 611,) that court decided, that where on the dissolution of a partnership it was agreed between the partners, that tine of them should pay the debt of the plaintiff, due from the firm, and When he= was informed of it, he agreed to exonerate the other partner from all responsibility; that this did not furnish a defence -to an action against both partners. In 1826 the -same doctrine was repeated in the same court, in David v. Ellice, (5 Barn & Cress. 196.)' In that case there were three partners, and one of them retired from the firm and gave notice to the creditors. The others continued in the business, retained the funds and agreed to pay the debts. The plaintiff, a creditor, assented to'the transfer of his credit to the new firm; and they paid a part of it by a bill drawn on them
I can see no ground upon which to question the decision of the'supreme court, and shall therefore vote for its affirmance.
Talcott, Senator. The proposition which the defendants’ counsel desired the court to affirm in its charge, assumed that there was evidence tending to show that the note of a third person was transferred by Cort to the plaintiff, on account of the copartnership debt, on the occasion of the adjustment when Cort gave his individual notes to the plaintiff. There was some evidence to that effect. But the court refused to charge in the manner requested, and on the contrary instructed the jury to disregard the settlement between Cort and the plaintiff, and that the latter was entitled to go back to the original loan, and recover of all the copartners, the balance still remaining unpaid. In this decision, I think an error was committed which requires the cause to be sent back for a new trial. No doctrine is better settled in our courts than that an agreement between a debtor and creditor for compromising a debt will be valid, and cut off the creditor from a right of action upon the original indebtedness, provided new security is given for the payment of the whole or any portion of the debt, and the creditor agrees to accept the substituted securities in satisfaction of the prior indebtedness. (Boyd v. Hitchcock, 2 John. 76; Le Page v. McCrea, 1 Wend. 164; Frisbie v. Larned, 21 Wend. 452.) In such a case, the old claim is cancelled, as between the debtor and creditor, and a new one created in its stead, upon which alone the creditor must rely in the assertion of his legal rights. This legal consequence will follow, however, the original debt, or the securities by which its payment was guarantied may have been changed under the new arrangement. A part of the former debt may have been extinguished, or one or more of the original debtors discharged from liability, and if so, it having been done
Upon the important question discussed in the opinion given by the supreme court in this case, to wit, whether the agreement between-Cort and the plaintiff would have discharged the firm indebtedness, provided the note of a third person had not formed a part of the consideration for that agreement, I concur in the conclusion to which that court came, that the original liability of the whole firm would, in that case, have remained unchanged by the agreement. Had the demand been against Cort alone, instead of being against the firm of which he was a member, it is well settled that the payment of a part of the debt in cash and the giving of his own note for the balance would not have discharged the former indebtedness, or barred a suit on the original consideration, after the expiration of the credit given by the new note, for the reason that there would have been no consideration, in that case, to support such agreement. I can see no better consideration to support an agreement to discharge a debt against a firm upon receiving therefor the note of one of the members of such firm. The security of the creditor can, in no court, be increased by such substitution; nor can I see that the partner who thus assumes the payment of the debt, can be injured thereby. In either case, he is liable for the whole amount of the debt, and it can make no difference with him, whether his liability be joint or several. His entire property is, in both cases, equally holden for its payment. If such an agreement were valid, the partner "who should discharge a firm debt by
On the ground first stated, however, I think the judgment of the supreme court should be reversed and a venire de novo awarded.
Johnson, Senator, also delivered a written opinion, in which he took the same views of the case and arrived at the same conclusion which Senator Talcott had done.
Hand, Senator, delivered an oral opinion concurring substantially with the opinion of Senator Talcott.
Van Schoonhoven, Senator, delivered a verbal opinion in favor of affirmance, agreeing in substance with the positions taken in the opinion delivered in the supreme court.
Gardiner, President, delivered an oral opinion in favor of reversal, upon the grounds taken in the opinion of Senator Lott.
For reversal: The President, and Senators Backus, Denniston, Emmons, Hand, Johnson, Jones, Lott., Sanford, J. B. Smith, Talcott and Wheeler—12.
For affirmance: Senators Deyo, Hard, Porter, S. Smith and Yan Schoonhoven—5.
Judgment reversed.
3 Denio, 577