Gram v. Cadwell — 5 Cow. 489

Majority

p. 489

Gram and Stewart against Cadwell.

Headnote

. An agreement between partners, on dissolution, that one shall have the settlement of their affairs, he continuing the business, and assuming all debts and accounts outstanding and due, with which the firm had connexion, until they should bo settled and that all the moneys contributed by the outgoing partner, except what had been drawn out by him, should be paid back by the other within a limited time, creates a separate interest in the remaining partner; and the subsequent release of a debt by the outgoing partner. to a creditor having notice of the agreement, is void.

One partner cannot release a debt due to the firm even during the partnership, in consideration of a debt due from him individually ; and if such appear to be the fact, on the face of the release, it is void.

On demurrer to the replication. The declaration was m A indebitatus assumpsit, for goods sold, &c. Plea, a release:

p. 490

which was set forth, on oyer, as follows: “ Jamesville, 20t.Ii September, 1824. In consideration of two hundred ana eighty dollars and thirty-one cents, cash received from sales of ashes in June last, belonging to Matthew Cadwell, (the defendant;) and sf the consignment to me by him of a lot of cherry hoards, supposed to be about thirty-five thousand feet, I do hereby release and discharge the said Matthew Cadwell from all debts and demands due by him to the late firm of N. B. Gram & Stewart, supposed to be about six hundred and fifty dollars; as witness my hand and seal. F. A. Stewart (seal,) one of the late firm of N. B. Gram & Stewart.” The plaintiff replied, that at the time of the dissolution of Gram & Stewart, by certain articles under their hands and seals, dated and executed May 1st, 1824, it was agreed that Gram should have the settlement of the affairs of the firm; that their connexion should be dissolved; that the business of the firm should be settled as soon as practicable to write up the books ; that as N. B. Gram was in business previous to the connexion, he should continue the business and the settlement thereof, assuming all debts and accounts outstanding and due, with which the firm had connexion, until they should be settled ; that all monies put in and applied by F. A. Stewart, should be paid back to him by N. B. Gram, within ten days from that time, excepting what might have been drawn out by him, as should appear from his individual account; of which the defendant, before the execution of the release, had notice.

General demurrer and joinder.

D. Lord, jun. in support of the demurrer.

The instrument set forth in the replication is not an assignment of the debt to Gram. The replication do(es not call it so. The whole was a mere temporary arrangement; and if Gram had just cause of complaint against the defendant for taking the release, his remedy was in equity, as in Legh v. Legh, (1 B. & P. 447.) If Stewart had any interest, his release bars the action. ( 4 Bin. 375 .) The defendant is a'debtor paying his debt in full. The authority conferred by the agreement was revocable; and countermanded, quoad hoc by the release.

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(Bristow v, Taylor, 2 Stark. 50. 3 Chit. Com. Law, 224, S. C. Salmon v. Davis, 4 Bin. 375 .)

C. Walker, contra.

The agreement at the time of the dissolution, was an assignment of the demand in question to Gram ; or what is equivalent, a power to collect the debt, coupled with an interest. (1 Cain. Cas. Err. 15. Raymond v. Squire, 11 John. 47 .) For this there is a valuable consideration. The plaintiff agreed to dissolve on certain terms; the continuation of the business, and settlement of the concern was left to Gram; who agreed to repay to Stewart his capital, and pay all debts, These features of the case distinguish it from the authorities cited in support of the demurrer. This court will protect the assignee of a chose in action. ( 1 Mass. Rep. 117 . 1 John. Cas. 411. 3 John. 425 . 16 id. 51. 19 id. 95.)

That there may be a resulting interest to Stewart, does not affect the question. It is like an assignment to trustees, to pay creditors. The assignor’s residuary interest there, would not warrant his interference. ( 5 John. 336 . 20 id. 142, 442. 12 id. 343.)

This case is precisely similar to Henderson v. Wild, (2 Campb. Rep. 561.)

But the release was for the consideration of Stewart’s individual debt; and is inoperative for this reason. (Dob v. Halsey, 16 John. 34 .)

In June following the dissolution, Stewart received $280 31, from sales of Cadwell’s ashes ; and subsequently a consignment of 35,000 feet of cherry boards ; in consideration of which he, on the 20th of September, executed the release. This can be of no avail, unless Stewart had a right to execute it; and that right depends on the question, whether he had assigned his interest in the partnership concerns. It has been often decided that this court will protect the rights of assignees ; and if the article of dissolution amounts to an assignment of Stewart’s interest, there is an end of the question.

The cases referred to do not seem to settle this definitive*

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ly. Bristow v. Taylor, (2 Sark. 50,) proves that when two partners appoint an agent to collect their debts, he has no interest in the debts to be collected; and either partner may revoke his authority, and receive payment himself. Without expressing any opinion, as to the soundness of this decision, it is only necessary to say, that it does not control this case, if the instrument in question conveyed an interest in the debts of the firm.

The case of Salmon Brown v. Davis, ( 4 Bin. 375 ,) was this: The plaintiffs had been partners ; and on a dissolution gave notice, that all persons indebted, should pay to Salmon, who was authorized to receive. Salmon released the debt due from the defendant; and on a suit by Brown, for his own benefit, the plaintiffs were nonsuited ; and the court refused to set aside the nonsuit; saying, that Salmon had a right to release half the demand at any rate; and that was sufficient to defeat the action. To make that case analogous the release in this case Avould have been executed by Gram.

In Henderson & Smith v. Wild, (2 Campb. 561,) after dissolution of the plaintiff’s partnership, and notice in the gazette intimating that all debts due the firm should be paid to Henderson only; the defendant produced receipts by Smith, of payment by his OAvn private account; and it Avas held no defence. Lord Kenyon seemed to think that such a payment, during the partnership, rvould have been valid ; but it certainly Avould not here. (Dobb v. Halsey, 16 John. 34 .)

Raymond v. Squire, ( 11 John. 47 ,) shoAvs that a chose in action may be assigned and transferred, without using those Avords. In that case the right of action consisted in a breach of the covenant of seisin in a deed. The plaintiff conveyed to St. John, and gave him a letter of attorney to collect of the defendant all such sums of money, <fcc. for the use of St. John. Of this the defendant had notice; and a release afterwards, by the plaintiff, Avas held inoperative and void, as the poxver of attorney, conveying an interest tolSt. John, Avas irrevocable.

In the present case, the plaintiff, Gram, wanted no authorization from Stewart to receive debts, by Avay of conferring poAver upon him.

p. 493

During the existence of the partneship, each partner may receive the debts due, and give discharges. So after the partnership is dissolved, without some contract, or conveyance by one to the other'. Had there been no special stipulations between the plaintiffs, each would have had the same rights and authority over the partnership debts. The article of dissolution was intended, then, to have some effect, varying the rights of the parties as they existed before the execution of the instrument. They agree, that Stewart shall retire from the concern, and Gram shall continue the business; further, that Stewart shall receive his whole capital in, ten days; and that Gram shall assume all debts and accounts outstanding, until they are settled. This language, in an instrument signed by both, amounts, in my judgment, to an assignment. And that is all the security which Gram has, for the advance he makes to Stewart; for, supposing the business not to have produced any thing, how else could Gram be made Avhole, but by receiving all the debts ? Hoav shall he assume, but by consent of Stewart 1 And having signed and sealed the instrument, in which Gram covenants to assume the debts, it is a virtual conveyance to Gram of his interest. That SteAvart may have an interest in those debts after settlement, I think does not vary the question.

But if this Averé otherwise, another question arises; Avhether the release on its face does not show that this partnership debt was not paid by a set off of SteAvart’s own individual liability. He does not appear to have received the ashes, or the boards, in payment of the partnership demand ; but he was liable in September to the defendant for money received in June, to the defendant’s use, for ashes sold by him, probably on commission ; and other property Avas also committed to him for sale on the defendant’s account. If this Avas not a receipt of the debt from the defendant, but a payment of Stewart’s sole debt, by releasing the partnership demand, then it Avas void, even if no assignment had ever been made.

But on the ground that the article of dissolution conveyed all SteAvart’s interest in the debts and accounts, until

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settlement, I think it clear, that the release wa I void. I therefore, the plaintiff is entitled to judgment.

Judgment for the plaintiff.