Ross v. West — 15 N.Y. Super. Ct. 360

Majority

p. 360

James Ross and William Newell, Plaintiffs and Respondents, v. George E. West, Defendant and Appellant.

Headnote

1. If one partner, upon a dissolution of his firm, assigns, to liis co-par.tners, all his interest in all the property and assets of the firm, and covenants not to interfere ■with the collection of the debts owing to the firm, and subsequently, for a valuable consideration received by himself, settles and receipts, as paid to him, one of the debts so assigned, an action will lie against him, at the suit of his co-partners, to recover the amount of such debt.

2. It is no answer to such action, that the original debtors might, notwithstanding such settlement, be sued by his co-partners to recover such debt, on the ground, tiiat no money was paid or property delivered on such settlement, but that the defendant receipted the debt, as paid to him, on receiving from such debtors a receipt that he had paid to them, in full, a debt of an equal amount which he, individually, owed to them.

8. The Court, at General Term, on an appeal from a judgment rendered at Special Term, or entered on the report of a referee, cannot look into -the question, whether a previous order, requiring 1he defendant to be arrested and held to bail in the action, was properly granted.

(Before Duer, Ch. J. and Hoffman and Pierrepont, J. J.)

Heard, Jan. 6;

decided, Jan, 30, 1858.

The complaint alleges, that on or before the 20th of October, 1854, the plaintiff Newell and the defendant were partners in business, and as such, had divers assets; and that on that day, the defendant, for value received, sold and assigned to the plaintiffs, jointly, “ all his interest in each and every of said assets, and in all the partnership property; and among said assets, so sold and conveyed, was an account and demand against the firm of Blood-good & Bouse, for the sum of $237.97, due and owing said co-partnership ; and after said conveyance, and on or about the 5th of December, 1854, the defendant received and collected, from said Bloodgood & Bouse, the said sum of $237.97 in full of said account, and receipted for and discharged the same without the authority of the plaintiffs; and though often requested, has not paid the said moneys so collected, nor any part thereof, hut is still indebted therefor,” and prays judgment for $237.97, with interest from December 5, 1854.

The answer admits the transfer by West, to the plaintiffs, of his interest in the partnership, and alleges it was a limited partner

p. 361

ship; that Ross was the special partner, and that it continued until the 1st of January, 1855. It puts at issue the allegations as to Bloodgood & Bouse being debtors of the firm, and as to the settlement of their alleged debt. It sets up matters by way of counter-claim, and prays judgment against the plaintiffs for $12,300, with interest from the 20th of October, 1854.

The action, being at issue, was referred to a referee, to be tried and decided by him. On the trial, among other evidence, there was produced a written and sealed agreement, dated October 20th, 1854, signed by all the parties to this action, which recited, that the three were partners, that the plaintiffs had purchased West’s interest, and by which said agreement, he sold and assigned to them all his interest in the property and assets of the firm, and covenanted that he would “not use the partnership name or credit in liquidation, or for any other purpose whatever.” The referee’s report, exclusive of* its recitals, reads thus, viz:—■

“I find, that all the facts stated in the complaint in this action are true, as therein stated; that the manner in which the defendant received and collected from the firm of Bloodgood & Bouse, the sum mentioned in said complaint, was by receiving from the firm of Clement & Bloodgood, who were in the habit of paying the bills of Bloodgood & Bouse, a receipt and discharge of a similar amount of indebtedness, due from the defendant to said Clement & Bloodgood, and thereupon giving a receipt for said sum due, from Bloodgood & Bouse, to the firm of West & Newell, and signing the name of West & Newell to such receipt.

“I further report, that the counsel for the defendant, with the assent of the counsel for the plaintiffs, voluntarily withdraws the counter-claim set up in the answer, without prejudice to his right to avail himself of the same in another action.

“I find, as matter of law, from the foregoing facts, that the plaintiffs are entitled to recover, from the defendant in this action, the amount claimed in the said complaint, with interest from the 5th day of December, 1854, amounting to $36.78, and making, in the aggregate, for principal and interest, the sum of $274.75.

“I do, therefore, decide, adjudge and report, that the plaintiffs in this action, are entitled to recover, from the defendant, the said sura of $274.75, together with the costs of this action.

p. 362

“All of which is respectfully submitted.

“ Dated Kew York, February 20th, 1857.”

When the plaintiffs rested their case, the defendant’s counsel moved that the complaint be dismissed, and a report made in favor of the defendant, on the grounds—

1st. That there was no conversion of money or property of the plaintiffs proved.

2d. That the complaint sets forth that the defendant received and collected from Bloodgood & Bouse the money: whereas the evidence of the plaintiffs is, that the amount of the receipt given by West was credited by the witness, Clement, upon the claim which Clement & Bloodgood held against West; and that there is a failure of proof on the part of the plaintiffs.

3d. That the defendant received no money or other valuable consideration of Bloodgood & Bouse, or of Clement & Bloodgood; the original indebtedness remains intact, and the giving and crediting of the receipt, made by West, upon an individual debt, is not a new consideration.

4th. Such act cannot be construed into a tortious, or fiduciary transaction.

The referee denied the motion, and the defendant’s counsel excepted.

Judgment having been entered on the report, the defendant appealed from the judgment, to the General Term.

Geo. Shea, for defendant, the appellant, made and argued the following points:—

I. The complaint states that the defendant “received and collected,” of Bloodgood & Bouse, money. The evidence is, that the amount named in the receipt given by the defendant was, in form, passed by the witness to the credit of West, upon the claim which Clement & Bloodgood held against the defendant individually. There is a failure here of proof. (Code, § 171.)

II. The evidence does not prove the conversion of any tangible property of the plaintiffs, or any injury done to the plaintiffs’s interests. 1. West, as partner, or assumed agent, was possessed of no power to create or discharge a partnership liability or claim, when it was for the manifest purpose of being credited

p. 363

therefor upon, a past individual indebtedness. 2. Clement & Bloodgood parted with nothing for the receipt. (Stewart v. Small, 2 Barbour’s S. C. R. 566.)

III. This action cannot be said to be brought upon the theory that the plaintiffs have waived the alleged tort and fraud, and rest their claim on the assumption that West was authorized to do the act stated, as their agent. They expressly disclaim any such waiver, the complaint stating that the defendant acted “ without the authority of the plaintiffs.” There is no ratification or adoption of his act.

IV. This action can only be maintained by, predicating it upon the idea that the agent has, by such act, discharged the plaintiffs’ claim against Bloodgood & Bouse. The plaintiffs properly place their right of action on such idea. (Beardsley v. Boot, 11 John. R. 465.) 1. The plaintiffs’ right to recover of Bloodgood & Bouse remains intact. They have not lost or gained any thing by the nugatory act of West. (Underwood v. Nicholls, 33 Law and Equity R. 321; Dob, et al., v. Halsey, 16 Johns. R. 34; Gram v. Cadwell, 5 Cowen R. 489.) It is a good defence, that the misconduct of the agent has been followed by no loss or damage to the principal; for the rule then applies, that although it is a wrong, yet it is without damage, and to maintain an action, both must concur. (Story on Agency, § 236.)

Y. The defendant is not estopped from availing himself of the real nature of the alleged act, as proved by the plaintiffs. 1. The. plaintiffs have not been induced, on the faith thereof, to alter their condition in relation to Bloodgood & Bouse; they have not acted upon it. (1 Greenleaf’s Ev. § 209.)

VI. If there has been any interference with the rights of the plaintiffs herein, such act, as proved, cannot be construed into a tortious or fiduciary transaction. The action should have been brought upon the covenants in the bill of sale. (Masters v. Stratton, 7 Hill, 101 .)

C. A. Nichols, for respondents.

The defendant having'sold, (for its full value as we must assume,) his whole interest in the assets of the firm of which he was a member, and having cove

p. 364

nanted not to use the partnership name, in liquidation or otherwise, gives a receipt to debtors to the firm for the amount of the demand; and gives it in the partnership name.

That receipt is so expressed as to justify the plaintiffs in supposing that the money was actually paid by the debtors, so as fully to exonerate them, and as the firm had not then expired according to its original limitation, and no proof was given of the debtors’ knowledge of its actual dissolution, the plaintiffs could not but conclude that the debtors were fully discharged. They, therefore, brought their action against the defendant to compel payment of the amount thus received by him.

It turns out, upon the trial, that the defendant owed these debtors, on his own individual account, a sum of money exceeding their indebtedness to the firm, and he was credited by them with the amount of the latter debt on that individual account. It may be noticed, that although the personal debt was to Clement & Bloodgood, it is treated by both parties..as the same as if it had been to Bloodgood & Bouse.

Ko money passed at the settlement; nothing but receipts. The claim was for groceries furnished to West’s family.

It may be that Bloodgood & Bouse, being parties to the transaction of thus attempting to liquidate their debt to the firm, were not effectually discharged. But this was a matter for the action of the plaintiffs, who were clearly at liberty to repudiate the receipt, or to ratify it. They do ratify it, when, with knowledge of the facts, they proceed with this action against the defendant, and demand a judgment for the amount, as an amount in his hands received from their debtors. To permit the defendant to set up as a defence, that although he obtained full value from the debtors for the receipt he gave, they remain liable, and he is not, would be to enable him to commit a franc', against one or the other party, and to sanction it.

We cannot hesitate in affirming the decision of the referee.

It has been suggested, that the defendant is now under an Order of arrest obtained at the commencement of the action. It is insisted, that if the ground on which the action is sustained, is merely his violation of his covenant, and reception of money, or its equivalent, to the plaintiffs’ use, an arrest could not be supported. And also that an execution against the person could

p. 365

issue, as of course, upon the basis of the order of arrest remaining in. force after the return of one against the property. (Corwin v. Freeland, 2 Selden, 560. Code; § 288.)

We apprehend that the General Term cannot make an order in the matter. If any redress can be had, either before or upon the execution which may be issued, it must be sought elsewhere.^[1] Judgment affirmed with costs.

* The papers on which the appeal was heard, do not disclose the grounds on which the order of arrest was made, nor that any such order had been granted, An order of arrest may be granted for causes having no connection with the nature of the plaintiffs’ cause of action, or the grounds on which his right to recover is placed, (Code, § 179, sub. 6.) An order of arrest can be vacated, by a motion under § 204, and by an appeal, from the order denying such motion, taken under § 349 of the Code, and, probably, by no other mode of proceeding.—Rep.