Eldridge v. Troost — 3 Abb. Pr. 20

Majority

p. 20

ELDRIDGE against TROOST.

N. Y. Superior Court; Special Term,

November, 1866.

Headnote

Partnership.—General and Special.—^Application op Assets.

A general partnership may exist in respect to a single adventure; or may he made to extend over any number of adventures agreed upon by the parties.

To constitute a general partnership, nothing more is necessary than that the parties should agree to conduct a specified business, and to share its profit and loss. The business may be of a general nature, or may be confined to particular transactions; but in either case the partnership is general.

Where parties agreed to carry on upon joint account the shipment of goods from Calcutta for sale in New York, providing in their agreement for the mode of payment, manner of sale, division of profits and sharing of losses, but prescribing no limit to the duration of the business or to the amount or number of shipments.

Held, 1. That the parties were general partners.

2. That the agreement did not create a new and distinct partnership as to each shipment, so that a liability incurred for one. shipment could not attach to another—although it provided .that “profit and loss should be settled in New York upon the winding up of each shipment.” The terms of the agreement, and the course of business'under it, constituted a general partnership between the parties, covering all the shipments made.

3. That in the settlement of the partnership affairs, goods or assets of the firm, appertaining to the joint enterprise, whenever shipped, and whether in the hands of the partners themselves, or of their assignees in trust for creditors, must be applied to the payment of the joint debts.

Trial by the Court.

In January, 1864, Troost, Schmidt & Company, of New York, 'and Atkinson, Tilton & Company, of Calcutta, entered into an agreement to carry on a business between those cities upon joint account. The parties in New York were to furnish the parties in Calcutta with letters of credit for the shipment of ■goods at Calcutta to- New York, and for advances or assignments. No commissions were to be allowed for the purchase in Calcutta or for the sale in New York. The parties in Calcutta were to purchase and ship such goods and at such times

p. 21

as they should deem most for the interest of all the parties, under general advices from the parties in New York, who were to sell the same for such prices as they should deem most for the interest of all the parties, and remit to meet the bills drawn against the shipments, at the time of sale, whether before or after such bills became due, and charge the account with the rate of exchange actually paid. The profit and loss was to be equally divided between the parties, “ and settled in New York upon the winding up of each shipmentThe proceeds of consignments, over the advances and charges were to. be remitted to the parties in Calcutta, to be paid to the owners of the goods consigned. If the proceeds were not sufficient to cover the advances and charges, the parties in Calcutta, were to collect the deficiency from the owners; and if any loss should accrue, in not collecting such deficiency, or in remitting to meet the bills, such loss should be borne equally by the parties.

In pursuance of such agreement, Troost, Schmidt &' Company furnished the parties in Calcutta with a letter of credit on the firm of Abraham Troost & Company, of Manchester, England.

The general course of business under the agreement was as follows:

The firm in Calcutta on purchasing or advancing on goods at that place, drew bills on the firm in Manchester, and delivered them in payment, or for the advances. They then shipped the goods to the firm in New York, where they were Sold and remittances made to the firm in Manchester to meet the bills. Separate bills were drawn for each shipment and advices of such bills forwarded to New York with each consignment. The firm in New York opened and kept a separate account of each shipment, crediting or charging therein all profit or loss upon such shipment, and as far as was practicable, or perhaps possible, closing the same upon their books.

The transactions under the agreement, embracing a large number of shipments, continued until the 4th of December, 1866, when the firm in New York becoming insolvent, made a general assignment of all their property to the defendants Buckley & Mozle, in trust to pay their debts.

p. 22

The firm in Manchester also went into bankruptcy about the same time (Dec. 3,1866).

In May, 1866, the Calcutta house shipped to New York, by the “ Medura” and “ Audubon,” 4,750 bags of linseed, and drew upon such shipment two bills, amounting to £3,786 3s., which were accepted by the house in Manchester. One of said bills had been protested for non payment; the other at the time of these proceedings had not matured.

The plaintiffs alleged that they were ignorant of the holders of said bills, but that the plaintiffs were liable thereon, as drawers, for the full amounts thereof.

The goods shipped by the “Medura” and “Audubon,” were sold by the house in New York, and the proceeds credited on their books; the two drafts drawn against the shipment and the expenses were charged, and the balance, being the profit, was carried down, and placed to the credit of the shipment.

At the time of the failure of the New York house, they held unsettled various shipments of goods from the house in Calcutta, the value of which, over any charges thereon, was. more than sufficient to pay- the full amount of said two bills.

All bills drawn upon such unsettled various shipments had been paid, and the only outstanding obligations arising under said agreement, were the two bills above mentioned.

The relief demanded was, that the goods held by the New York house at the time of their failure, or the proceeds thereof, being the unsettled various shipments above mentioned, be applied to the payment of the said two bills, and that the defendants Buckley & Mozle, as assignees, account and pay over to the plaintiffs one-half of any balance there may be.

W. Z. Larned, for plaintiffs.

T. C. T. Buckley & J. W. Gerard, for defendants.

The question in this case arises between the plaintiffs and the general creditors of Troost, Schmidt & Company, represented by then assignees, Messrs. Buckley & Mozle. The property in question, or its proceeds, passed to the assignees under the general assignment, and is held by them upon the trusts therein declared.

p. 23

If a general partnership, or what was in the nature of a general partnership, existed between the plaintiffs and Troost, Schmidt & Company, under the-agreement of Jamlary, 1864, in respect to the transactions conducted under such agreement, then the property of such partnership must be applied to the payment of the partnership debts. If, however, each shipment was intended and understood to be a single and independent transaction, having no connection with’any others preceding or following it, then, as claimed by the defendants, the plaintiffs have no equity to be protected against their liability upon the bills in question.

The relation of the parties is to be ascertained—-first, from the agreement; and, second, from the course of business transacted under it.

That a general partnership may exist in respect to a single adventure, cannot be doubted (Collyer on Part., §§17, 55); and it may also be made to extend over any" number of adventures agreed upon by the parties. Under such an agreement, the partnership becomes general, only for the purposes of such adventure or adventures, and for no other purpose, and it subjects the partners to all the liabilities and gives them all the rights of general partners in the particular adventure (Hughes v. Burge, 9 Com. B., 431; Salomons v. Nisson, 2 T. R., 675).

To constitute a general partnership nothing more is necessary than that the parties agree to carry on or conduct a specified business, and to share in its profits and losses. The business may be of a general nature, or it may relate and be confined to certain designated transactions. In either case the partner- ■ ship becomes general.

In this case the parties agreed to carry on a business between Calcutta and New York, upon joint account., The particular kind of business was the' shipment of goods (the description not designated), from Calcutta, for sale in New York. They provided for the mode of payment; the manner * of sale; the division of profits and the sharing of losses. No period of duration was prescribed, and there was no limit to the amount or number of shipments.

Under such an agreement it cannot • be doubted that the parties became general partners.

p. 24

But it is claimed that such partnership was limited and confined to each shipment, and that any liability incurred for one shipment-could not attach-to another; and in support of this-the clause in the agreement, “ that the profit and loss shall be equally divided between the-parties, and settled in New York upon the winding up of each shipment,” is relied upon.

It was doubtless the intention of the parties that there should be frequent and speedy settlements, and that their transactions should not run for • any great length of time without being closed. It was for the interest, and probably for the convenience, of both, that returns should be made upon the termination of each adventure. The house in Calcutta was interested in receiving its share of the profits, and the house in Hew York in being reimbursed for any loss. Hence, they provided that any deficiency in the sale of goods, upon which advances had been made, should be collected from the owners in Calcutta, and any losses1 arising' from remittances to England should be borne equally. So far, therefore, as it was practicable, or possible, each shipment was to be wound up, and its results ascertained. Other parts of the agreement, however, seem to indicate quite clearly, that the provision I have quoted was not designed to control the manner of doing business, or to absolutely require the complete. isolation of each shipment, .so as to render it a separate transaction not to be affected by any other. The goods were to be purchased and shipped in the discretion of the parties in Calcutta, and sold in the discretion of the parties in Hew York. The latter were to remit to meet the bills drawn against the shipments, at the time of sale, whether before or after the bills became due. It might happen that bills would mature before favorable sales could be made, and the bills go to protest with the goods on hand; and it could not, therefore, have been the intention to deprive the parties -of the right, as it seems to me it would have been .their ‘duty, to take any other of their joint property to meet their engagements. Besides, the winding up of each shipment is, in express terms, confined and restricted to the settlement of the profits and losses of such shipment, and not to the payment of bills drawn against the same.

The agreement, therefore, did not, in my opinion, make each

p. 25

shipment a separate transaction, so as to take from it any of the characteristics of a general partnership as to all.

The course of business also gave a construction to the agreement. The answer admits that at the time of the assignment there were on hand unsettled “ various shipments made under the arrangement,” and that the goods and assets mentioned in the schedule annexed to-the complaint, were portions of such shipments remaining undisposed of. Such portions were the remnants of distinct shipments by seven different vessels, arriving at different periods, none of which had been closed or settled. Besides, goods sent by the “ Medura” and “ Audubon,” against which the drafts in question had beemdrawn, were long since sold and the avails used in paying other bills.

■ Thus the parties in New York did not, practically, admit any obligation to separate each transaction, or to close each distinct shipment.

.It is clear, therefore, I think, both from the argreement and the course of business under it, that the parties intended their relations to the business should be that of general partners, subjecting themselves to all the liabilities of partners, with them corresponding rights.

From this conclusion it necessarily follows, that any goods or assets in the hands of the New York parties, being the property of the joint enterprise, whenever shipped, must be applied to the payment of the joint debts. Smith v. Wright, l Abb. Pr. R., 243.

The defendants, Buckley and Mozle, are mere trustees and not purchasers. They acquired no other right or title to the property in question than their assignees, Troost, Schmidt & Co., had. In the hands of the latter, equity would give the creditors of the Calcutta and New York firms, a preference over the individual debts of either, and the goods or assets must be subjected to the same equity in the hands of their assigns.

The plaintiffs, therefore, are entitled to an account from the defendants, Buckley and Mozle, of all property and assets, which came into their possession under the assignment, and which was derived from the joint adventures of the plaintiffs and Troost, Schmidt & Co., for which purpose there must be a reference.

p. 26

The plaintiffs must also have judgment, that out of said assets and property, if sufficient, the said assignees pay to the plaintiffs the amount of said outstanding drafts, or so much thereof as said assets and property will pay; and if any balance remains, that said assignees pay to the plaintiffs their costs of this action, to be taxed, together with the one equal half of the residue, if any.