Vernam v. Harris — 8 N.Y. Sup. Ct. 451

Majority

p. 451

JOHN R. VERNAM, Appellant, v. SAMUEL HARRIS and CHARLES CROCKER, Respondents.

Headnote

Pa/rtmrshyp—dissolution of—Acceptance by m'editor of note of one member of— effect of.

The defendants, while engaged, as copartners, in the business of saloon-keeping, became indebted to the plaintiff for beer purchased from him. Subsequently, the partnership was dissolved, Harris selling out his interest to Crocker, who agreed to pay the firm debts. The plaintiff, with knowledge of the dissolution, accepted Crocker’s note for the debt, upon the agreement that, if paid, it would cancel the debt, but, if not, that he should hold the firm for it. Crocker having failed to pay the debt, this suit was brought. Meld, that the plaintiff, by accepting Crocker’s note, did not discharge Harris from his liability for the firm debts ; that Harris was liable to .the plaintiff, as principal debtor, and not merely as surety of Crocker.^[1]

Colgrove v. Tollman ( 2 Lans., 97 ) distinguished; Smith v. Rogers ( 17 John., 340 ) followed.

Appeal from a judgment in favor of the defendant Harris, entered upon the report of a referee.

In 1871, while the defendants were partners, engaged in the saloon business, under the name of Harris & Crocker, they purchased of the firm of H. B. Ogden & Co. (which firm was composed of H. B. Ogden and the plaintiff), beer, to the amount of ninety-three dollars.

Before the commencement of this action, Ogden assigned his interest in this account to the plaintiff. On or about June 10, 1871, the defendants dissolved partnership, Harris assigning all his interest in the partnership property to Crocker, who agreed to pay all the firm debts.

On or about July 6, 1871, Crocker informed the plaintiff of this arrangement, and asked him if he would take his own (Crocker’s) note for the firm debt, payable thirty days after date. The plaintiff agreed to take the note, and stated that, if it was paid, it would cancel the debt, but, if not .paid, that he should hold the firm of Harris & Crocker for the said debt.

p. 452

The note not being paid at maturity, the plaintiff brought this action.

Cassidy ds Brown, for the appellant.

H. H. IIusfÁs, for the respondents.

The plaintiff brought this action to recover $137, for a bill of ale sold to defendants. The answer avers the dissolution of the defendants’ firm of Harris & Crocker, on the 10th of June, 1871; that Crocker paid the debt sued for, by cash and a note, which plaintiff accepted in settlement. .At the trial, it appeared that the note in question was the note of Crocker only, made after the dissolution of defendants’ firm, and accepted by plaintiff from Crocker. The plaintiff testified: “ I told him I would take it, and, if paid, it would be in full; if not paid, I would hold the firm.”

.The note was not paid. Plaintiff produced it at the trial, and offered to return it. This testimony is corroborated by other witnesses, and no other testimony was offered, which established any other version of the affair. It appeared, by the testimony, that the plaintiff was apprised of the dissolution of defendants’ firm, and that Crocker had assumed the debts. It further appeared, that both defendants, some time afterward, joined in a general assignment for the benefit of creditors.

The referee held that the agreement between the two defendants, made Harris, who defends this action, a surety as between them; that plaintiff, with knowledge of the fact of this agreement, by accepting Crocker’s note and giving time, discharged Harris; and he ordered judgment in favor of plaintiff, as to Crocker, and against the plaintiff, as to Harrig. The contrary rule was held in a similar case,^[6] and it is said, in Waydell v. Luer,^[5] that the taking of a note from one of two joint debtors, does not satisfy the debt, unless it be so agreed.^[3]

The rule, that a surety is discharged by the giving of time to the principal, may be conceded, without, however, its entering into the

‡ ‡ Van Eps v. Dillaye, 6 Barb., 252 ; Bates v. Rosekrans, 37 N. Y., 409 .

p. 453

determination of the case. The defendants, Harris & Crocker, were both principals. Harris sold out to Crocker, with an agreement that Crocker should pay the firm debts. Crocker attempted to pay the firm debts, by giving the plaintiff his note at thirty days, which note was not paid. The express condition, on which plaintiff took the note, is not disputed, and is, that the firm should be held, if the note was not paid. The original liability of Crocker & Harris for their debts, as partners, and their responsibility to creditors, continued after a dissolution of their partnership. How, then, is Harris exonerated?

Crocker said to the plaintiff: “ I have agreed to pay the firm debts; will you take my note?” The plaintiff conditionally accepted the note at thirty days; hence, the referee has found that Harris was a surety; that plaintiff acted with knowledge thereof; and that the extension of time to pay the debt, operated to discharge Harris. The defendant relies on Colgrove v. Tollman,^[6] but the only point decided by that case, is, that the note there sued on was actually paid. The distinction is taken, in Bates v. Rosekrans (above cited), between a security, taken as a present payment, and that taken as a provision for future payment. In that ease, the defendant and one Bingham had jointly given their note to the plaintiff, and, upon its non-payment at maturity, the plaintiff took a new note from one of the defendants alone, retaining, however the note which had become dishonored.

While this case is not directly in point, as to the exact question involved, yet that question was the feature in Smith v. Rogers.^[5]

A creditor of a dissolved firm, with knowledge of the dissolution, and that one partner had assumed the debts, accepted that partner’s note; he became insolvent, and the creditor sued the firm for the original debt. “ Held, that neither the acceptance by the plaintiff of the note of one partner, nor the indulgence shown him, amounted to a payment, or discharged the other partner, but that plaintiff was entitled to recover of both partners the balance due for the original debt, on delivering up the note to be canceled.” “ It was the duty of one partner to see that the other partner complied with the engagement made with him as to the payment of the debt; and the plaintiff, knowing of this arrangement, is not, on

† † Above cited from 17 Johns.

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that account, to be considered in default, for omitting to call on one partner until the insolvency of the other partner, whose note plaintiff' had taken.”

A debt is not paid by a new promise, unless it be so stipulated. The note in suit was simply a further security, liquidating a book account. Harris himself had no knowledge that it was given by his former partner.

In Cole v. Sackett,^[6] a firm dissolved; one partner assumed the debts, and the creditor took the note of the one partner and gave up the note of the firm. The note so taken being unpaid, the creditor sued the firm for the original debt, and the court, Cowen, J., held, that these facts constituted no defense; and various authorities are there cited to sustain these views.

The weight of authority, and the “ reason for the law,” appear to be in favor of plaintiff, and that defendant Harris, as an original debtor, is not exonerated from his liability, there being no agreement to that effect.

The judgment, as to Harris, should be reversed, and a new trial ordered, as to him, costs to abide the event.

Present — Barnard, P. J., Taloott and Tappen, JJ.

Judgment reversed, and new trial ordered as to defendant Harris, costs to abide the event.

* 1 Hill, 516 .

Footnotes

* Smith v. Rogers, 17 John. R., 340.
† † 3 Denio, 410 .
* 2 Lansing, 97.