Lansing v. Gaine

Headnote

ered softer the time they are valkfon-b f:'om the ryfan/areto on that of the dissolution of a co-timGazeue " is sufficient to who have had ¿galffigs'whh the copart-on^partnerj after the dis-'(]le COpart-neri3bip, ’ss!je notes signed with the name nershiMh'e other partner is not liable, The power t0 bind the copartnership ceases With it. When a copartnership is entered into for a particular business, and is limited, and one partner gives the notes of the firm, for a debt arising out of his own private c oncerns, the other partner is not liable, when the notes are issued without his knowledge or consent, and the person receiving them, knows that they are not for a copartnership debt. Where a note is negotiated'after it has been dishonoured, the holder takes it subject to all the equity existing against it in the hands of the original payee.

Whether a writing delivered as an escrow, and not consummated by the perfor. -manee of the conditions, can be received as evidence to show the confessions and de* cl aratio s of the party, relative to the subject matter of the pdper, quero ?

This was an action brought to recover the amount of' two promissory notes, signed Gaine and Ten Eyck. One note was dated August 1, 1804, for the sum of 5,000 dollars payable on demand to Daniel Hale, or order, for value received on account of the Literature Lottery ; and the other dated October 9, 1804, for 1,000 dollars, payable to Thomas Storm, or order, sixty days after date, value received of the Lottery.

Ten Eyck suffered judgment to pass against him by default, and’ Gaine, the other defendant, pleaded non assumpsit. The cause was tried at the June Sittings, 1806, before Mr. Justice Thompson, when a verdict was found for the plaintiff.

The defendants were copartners, as Booksellers, and the copartnership name had been signed by Ten Eyck, to the notes in question. The business of the copartnership was principally transacted by Ten Eyck, who used to subscribe the notes issued by the firm. The defendants had been concerned together in the purchase and sale of tickets, in two former lotteries granted by the state, viz. JLiterature Lottery, No. 1, and the Navigation Lottery: . . J 0 3 and tickets in those lotteries, as well as in the one to which the notes referred, were publicly sold in the bookstore of the defendants ; and on the door of their store, . j, . ... . . , a sign was fixed up, on which was written, “tickets to be sold here in Literature Lottery, No. 3.” The defen

dant Ten JEyclc, and the clerks who attended at the store of the defendants generally sold the tickets, and the money received by them for the tickets was mixed with the money received in the course of the copartnership business . an(j jn one or two instances in the two former lotteries. the money received for tickets, was deposited in the banks, and drawn out as copartnership money.— Gaine occasionally sold tickets, and mentioned it to Ten Eyck, putting the money received into a drawer. It did not appear that Gaine knew that the money arising from the sale of tickets was mixed with the money received'in the copartnershij) business. A separate account was kept by Ten Eyck, with the contractors for the two former lotteries ; and h separate'account was also kept by him of tickets sold in Literature Lottery, No. 3, (to which the notes referred) which accounts were not entered in the books of the copartnership; but the money arising from the sale of the tickets was put into the common stock, in the same manner as in the two former lotteries. Ten Eyck was a manager of the Lottery, No. 3, but Gaine had no interest or concern whatever with him in relation to that lottery. Hale and Storm were joint managers of the lottery with Ten Eyck, and the notes in question were given to them in part for money so received by Ten Eyck for the tickets sold.

The copartnership of Gaine and Ten Eyck was dissolved by public advertisement, on the 22d October, 1804, and the note made payable to Storm, was delivered to him on the third day of November, 1804, after the failure of Ten Eyck, which became publicly known on the first day of November, at which time the note to Hale was delivered. The notes being dishonoured, were indorsed to the plaintiff for the use of the state. Storm, who was admitted as a witness, declared that he received the notes as agent for the state, and on the credit of Gaine and Ten

EycJc, supposing them equally concerned and equally liable.

The plaintiff’s counsel offered in evidence on the trial, a paper dated the 22d October, 1804, purporting to be a release from Gaine to Ten EycJc, of all demands against him on account of the copartnership, in consideration of an assignment to him, of the same date, from Ten EycJc, of all his interest in the copartnership property, and of all his personal property; and engaging to pay “ all the notes and bonds mentioned in a schedule annexed, and all other debts due from the copartnership, of whatsoever kind or nature, or not secured by notes, and to save harmless,” &c. In the schedule referred to, under the head of “notes given on our account,” were mentioned “5,000 dollars, notes for lottery.” This release was delivered as an escrow, to be delivered to Ten EycJc, on the performance of certain conditions, one of which was never performed. The reading of the paper was objected to on the part of Gainey but the judge decided, that though it could not be read in evidence, as a deed consummated and conclusive on the parties, since the conditions on which it was to be delivered had not been complied with, it might yet be read in evidence, as to the confessions and declarations of the party, in relation to the subject matter; but liable to be explained or avoided by other evidence on the part of the defendant. The paper was accordingly read.

On a motion for a new trial, made on behalf of the defendants, the following points were raised for the consideration of the court.

1. That as the notes in question were not made on the partnership account, and were received as a security for the separate debt of Ten EycJc, asa manager of the lottery, by persons who knew that Gaine had no concern with him in that lottery, the notes were void in their hands..

2. That as the notes were not issued by Ten Eyck, until after the dissolution of the copartnership, they were void ; and the plaintiff cannonly stand in the situation of Storm and Hale.

3. That the papter-writing mentioned as having been delivered as an escroto, ought not to have been admitted in evidence.

This cause was argued at the last term by Woodworth, attorney-general, for the plaintiff; and Hoffman and Haris on, for the defendants ; but not having heard the whole argument, and as the points and authorities are so fully considered in the opinion delivered by the court, the arguments of the'counsel are here omitted.

Kent. Ch. J. The notes upon which this suit is brought, were delivered by Ten Eyck to the payees, some time after notice had been given in the newspapers of the dissolution of the partnership of Gaine and Ten Eyck. The date of the notes then becomes immaterial, as they were valid only from the time of their delivery; and unless the contrary' be shown, the presumption will bé, that they were then actually drawn, and were antedated by mistake or design. If they had been previously drawn, theyjhad no force while in the possession and under the c.ontrol of the maker. To all legal purposes the notes are to be considered as made or drawn when they were delivered. This was so ruled by Lord Kenyon, in the case of Abel v. Sutton, (3 Esp. Cases, 108.) in which he held, that if a fair bill existed at the time of the partnership, and was not put into circulation until after the dissolution of the partnership, is sufficient notice to all persons who have had no previous dealings with the firm; and there is no evidence in the present case, that the payees ever had any such previous dealings. This rule has received repeated sanction in the English courts, (Peake’s N. P. 42. 154. 1 Esp. Cases, 371. 3 Esp. 108. 248 and it is reasonable and just. Without the protec*

tión of such a rule, one partner never could retire with safety from the concerns of the partnership. Instead of being the means df enferpris e and profit* a merCantile connexion of this nature would prove a source of never-ceasing anxiety* and becomfe oppressive and ruin-feus. The fact then* that the notes Were issued by Ten-Eyck, after the partnership was dissolved* is sufficient to exempt Gaine from bein’g bound by the nejes, even if they had been given for a partnership concern; The power of one partner to bind the othei;, ceases'with the existence of the partnership; This is a proposition clear and undeniable, and it places the defence set up by. Guiñé upon sure ground.

It would be as unjust as it is illegal* to charge the defendant, Gahle; for the notes were not only given subsequent to the.dissolution of the partnership, but the evidence in the case shows, that they were given for the private debt of Ten Eyck. The partnership of the defendant was a limited one. It was confined to the book-selling business/ Ten Eyck was a manager in the lottery alluded to in the notes; This was a personal trust, and Could not be carried into the partnership.- Gairie had no interest or concern with him in the lottery; The payees were managers of the lottery with Ten Eyck, and of coure* Were well acquainted with the relation in which he acted, and with the consideration for Which the notes wefegiVen, which was for the lottery money received by Ten Éyck, upon the sale of tickets. Though the tickets were’ sold in the bookstore of the defendants* and the money arising upon the sale of them, was mingled with the co-partnership moneys, yet a separate account was kept by Ten Eyck, of the sale of the tickets, which was not in the' partnership books. There was* then, no ground for art inference that a partnership existed.in the' sale of the' tickets. The sale Was made in pursuance of' a trust, open and notorious, not of a copartnership nature, and i#

which the payees were personally connected. The proceeds of the sales formed a separate account, detached from the partnership books; and, notwithstanding that one of the payees said that he received his note on the credit of the firm, yet he had noaathority to consider the firm as holden, and he drew that inference at his peril. The payees either knew, or were bound to know, from the facts in the case, that the notes were given by Ten Eyck on his own account, for a debt contracted by him in his character as manager. There was no room for mistake or imposition. The notes, upon the face of them, specified for what consideration they were given, and the payees were joint managers with Ten Eyck, in the lottery in question. Most clearly then,- the notes were not given for a partnership debt, and it is equally cleát, that, this was known to the payees. Here were then copartnership notes given by one partner for Ms private debt, after the partnership wasdissolved, and when the payees knew that the notes- were for his private debt, and knew also, or what amounts to the same thing, were chargeable with notice of the dissolution of the partnership, it would be difficult to make out a stronger case for the defendant Gaine, even upon principles of justice; and, I feel disposed to- adopt and apply the rule laid down in Livingston v. Hastie and Patrick, (2 Caines,- 249'.} that when one takes a partnership note from one of the company, for what he knows to be :bis particular debt, and he takes it without the knowledge or consent ofthe other partner, it would be wrong to hold the other partner bound, and unreasonable to allow a payee thus to extend his security.

If the notes while in the hands of the payees, did not bind Gaine, they are equally inoperative in the hands of the plaintiff. They were negotiated to him after they had been dishonoured, and he took them, subject to all

the equity that existed against them in the hands of the original payees.

But a certain covenant of the defendant Gaine, with the schedule annexed, is supposed to give a different complexion to the case.

This deed and schedule were delivered as an escrow, i. e. conditionally, and as the condition was never complied with, the same became void. Whether those papers were still competent evidence against Gaine, of the fact stated or admitted therein, is a point we need not stay to examine, because, supposing them admissible, the declaration as to the notes in question, was too loose and equivocal, to charge Gaine with a contract, by which he was not before holden; and when we perceive that the admission contended for was against the real truth of the ease. The admission ought, at least, to have been explicit, that the notes were given on a partnership account, and that Ten Eyck had authority to draw and deliver them in behalf of the firm. But the admission contains no such thing, It merely says, at the head of a long list of-notes, of which those before us form a part, u notes given on our accountand this is said too, not in the covenant executed by Gaine, hut in a schedule referred to in that covenant, and signed by Ten Eyck alone. This is a very dangerous and unfit foundation on which to rest a demand against Gaine, for the debts of Ten Eyck. The nature and manner of the admission cannot but strike us with peculiar force. The paper was given upon the ground of compromise with apartner who had abused his confidence; and upon certain terms, Gaine might not have had any objection to have the notes in question added to the list ofnotes given on the partnership account. If he were to assume the payment of them, he would of course be very careless as to the particular list to which they were added. A paper which was drawn originally