Boyd v. Foot & Cole — 18 N.Y. Super. Ct. 110

Majority

p. 110

Boyd, Plaintiff and Respondent, v. Foot & Cole, Appellants and Defendants.

Headnote

1. In the taking and stating of an account between partners, in an action brought for that purpose, the mere fact that certain items were charged, after the dissolution of the firm, upon its books, to profit and loss, by some of the partners, is not of itself prirrta fade evidence against the other partners that they are items of loss properly chargeable to the firm.

2. Where, on such a stating of an account, it appears that all of the partners, ' except one who withdrew, continued the same business in the name of the old firm, and, subsequently to the. dissolution, took a judgment from a dealer with the old firm as security for the whole sum then owing to the firm, and after that, settled with him and gave him a receipt in full, Such facts are prima fade evidence that they were paid in full the balance owing to the old firm at the time it was dissolved.

3. Where the capital contributed by the retiring partner consisted in part of a note made by a third person, and the continuing partners subsequently recovered a judgment on such note, and issued an execution which was returned satisfied, the presumption is that the continuing partners collected such judgment.

4. In an action by an assignee of one of three co-partners against the other two for an accounting, the defendants cannot set up as a counterclaim that in a transaction between them, and the retiring partner disconnected from the partnership business, they sold him goods and took therefor the notes of a third person, which, on a compromise and settlement with the latter, after discovering his insolvency, they surrendered to him; and that they were induced by the fraudulent representations of the plaintiff’s assignor as to the solvency and credit of such third person to take the notes, whereby they were damaged. Such a cause of action is not one against the plain- ■ tiff, and for that reason is not a counterclaim as defined by the Code.

5. Where, on an accounting between partners in 'a suit brought for that purpose, two of the defendants claim that a note of a third person for $500 was contributed by the other partner, and was credited to him as so much capital, and that only $200 of it was paid, and that $300 of its amount should be charged by the Referee to such other partner, and it is so charged, the judgment will not be reversed merely because the Referee received incompetent evidence tending to prove that it had been paid in full, as it is clear that receiving such evidence was not prejudicial to the defendants.

6. On such an accounting between partners, the defendants have the right to have each partnership transaction investigated, and its results embraced in the account to be stated, though there be no specification of it, or of the facts in respect to it, contained in the pleadings.

p. 111

7. Where, on such an accounting, a referee erroneously refuses to allow to the defendants the proper credit in respect to a particular item, the judgment will not necessarily be reversed. If the plaintiff chooses to stipulate to deduct the whole amount of the defendants claim in respect to such item, the Court will order the deduction made, and affirm the judgment as to the residue. t

(Before Bosworth, Ch. J., and Woodruff and Moncrief, J. J.)

Heard, June 7th;

decided, July 9th, 1859.

This is an appeal by Joel W. Foot and Charles Cole, (the defendants,) from a judgment in favor of George. Boyd, (the plaintiff,) entered on the 14th of September, 1858, for $1,415.79, and costs, on the report of Willis Hall, Esq., as Referee.

The action was brought in August, 1856, to recover a balance alleged to be due to the plaintiff’s assignor, Henry 0. Goodwin, as a member of the firm of Foot & Cole, alleged to have consisted of the defendants and of said Goodwin, and to have continued from October 1, 1855, to April 1, 1856, and to have been then dissolved by mutual consent.

The complaint states the formation of the partnership; the nature of its business; its duration; its dissolution; the stating of an account then between the partners; the finding of a balance of $2,319.84 due to Goodwin, and a promise by the defendants to pay it; an assignment on the 26th of June, 1856, by Goodwin, of such claim to the plaintiff, and prays judgment for that sum, with interest from the 1st of April, 1856.

The answer takes issue upon all the averments in the complaint, and counterclaims for three items, viz.: First, $700 damages for Goodwin’s failure to furnish the amount of capital which he agreed to contribute. Second, $835.04 for goods, &c., delivered at Painsville Mill, of which Goodwin was lessee; and, third, $1,303.50 for inducing them, by false representations, to take notes made by John S. Dye for that amount, which were worthless. It also prays “ that an account may be had between the said Goodwin and them, of and concerning all his rights as such co-partner, if, in fact, he be adjudged to have been such partner.”

The plaintiff, by a replication, denied all the allegations of new matter, or by way of counterclaim. The Referee found that there was a partnership; that Goodwin was to have one-fourth of the profits, and bear the like part of the losses, and adjusted

p. 112

the accounts on that basis, and found the balance due to Goodwin, April 1, 1856, to be $1,204.93, which, with interest to August 15, 1858, the date of the Referee’s report, was $1,415.79.

The defendants insist, (assuming it to have been correctly-found that there was a partnership,) that they were entitled to various credits in the alleged partnership accounts which the Referee rejected; and also to two counterclaims; and for those causes they appealed. The items omitted and claimed by the defendants, are the Pittstown Mill account, and $249.94, $318.73, $139.50, $91.23, $176.06, $1,303.50, $835.04. None of these were allowed by the Referee, except $38.25 out of the $249.94.

The Referee’s finding, in respect to the matter of the second and third counterclaim, is as follows:

“ Item Secowd—$835.04 for goods,' wares and merchandise delivered at Painsville Mills.

“ Goodwin was the nominal lessee of these mills, but had no actual interest in them, or in running them, or in their management. They were paper mills, and Goodwin, before entering into the partnership of Foot & Cole, did their business in the city; that is, sent them rags, and received their paper for sale on commission. On forming that partnership, he closed his accounts, in his individual name, with the mills, up to the 1st of October, 1855, and the business of the mills, which was considered valuable, and was an inducement to forming the partnership, was conducted after that date by the concern of Foot & Cole, in the firm name. The party who was in possession, running the mills, received the goods from the concern of Foot & Cole, and was called upon by them to pay the account against the mills.

“ The Referee is of opinion that the transactions of the Pains-ville Mills were on account of the partnership, and that Goodwin is not chargeable, except for one-fourth of the loss, $208.76.

“Item Third—$1,303.50. Notes of John S. Dye.

“ Without entering into the question whether Goodwin was ever liable for these notes, it is sufficient that on the 10th of September, 1857, Foot & Cole, for valuable consideration, gave up these notes to the said Dye, and gave him a receipt in full of all demands to that date.

“ This item cannot be allowed.”

p. 113

The facts in respect to the other items, which the defendants claim were erroneously rejected, sufficiently appear in the opinion of the Court, as does also the matter in respect to two exceptions taken by the defendants during the trial.

David Dudley Field, for appellants.

I. There were two exceptions, both of which were well taken. (These are noticed in the opinion of the Court.)

II. Assuming that the defendants and Goodwin were partners for a time, and that the accounts between them are tobe adjusted on that basis, there are various credits to them, as charges to Goodwin, which should have been made, and which are specified in the following subdivisions:

1. Goodwin should have been charged with one-fourth of the loss on the Pittstown Mill. This mill was purchased while Goodwin was with Foot & Cole, and at his suggestion, for $1,500, the whole of which has been lost. The Eeferee rejected this item, because not specified in the answer as a counterclaim. Clearly, that was not necessary. The transaction entered into the accounts between the alleged partners, and the loss in it, should be charged one-fourth to plaintiff.

2. Goodwin should have been charged one-fourth of the items in the profits and loss account on page 56, amounting to $999.76, one-fourth being $249.44.

3. Goodwin should also have been charged with one-fourth of the loss on J. S. Dye’s account, accrued while Goodwin was with Foot & Cole, $394.95; in the Catskill Mill account, $558.35; in Eeuwee’s account, $1,274.93.

The account, with the foregoing corrections, would show a balance of only $81.94 in the plaintiff’s favor.

III. Against the foregoing balance there should have been charged two independent items, by way of counterclaim, as follows :

1. The plaintiff should have been charged with the notes of Dye, amounting to $1,303.50. The defendants sold to the plaintiff, on the 12th of September, 1855, goods to the amount of these notes; and the plaintiff induced the defendant to receive Dye’s notes for the goods they sold, representing them as good, when they were, in fact, worthless. The goods were charged to Good

p. 114

win in the books of Foot & Cole, and so stood on the books while Goodwin was there. ' The only questions then are, 1st, whether Dye’s notes were received as absolute payment; and 2d, if they were, whether Goodwin, by misrepresentation, induced Foot & Cole to take them. His own account of the transaction is clearly disproved. There is no evidence that the notes were received under an agreement that they should be taken as pay- . ment. There is, besides, abundant evidence of Goodwin’s misrepresentations.

2. The debt against the Painsville Mill should have been charged to Goodwin. He had a lease of that mill, and was Tuning it oh his own account, and represented to Foot & Cole that it would be a great advantage to their concern. Foot & Cole sold goods to that mill, and charged them to “ Painsville Mill, H. 0. Goodwin. D. P. Squires, Agent.” The loss was charged to Goodwin in the books while he was there. Goodwin’s statement is disproved by the other witnesses. Charging these two items, there would be a large balance in the defendants’ favor.

IV. If the testimony, in respect to the purchase of the Pitts-town Mill, should bethought imperfect, the reason is, the Referee’s ruling that it was impertinent. The defendants excepted to that ruling, and for that cause, if there was no other, the report should be set aside, and a new trial ordered. The item insisted on was not a counterclaim, but an item in the partnership account as much as any other.

Chauncey Shaffer, for respondent.

This is an action to recover a balance of $2,319.84, found due to the plaintiff’s assignor, Henry C. Goodwin, on the occasion of his selling out his interest in and retiring from the firm of “ Foot & Cole.” From the agreement proved, it appears that Foot & Cole were to receive three-fourths of the profits, (if any,) and Goodwin one-fourth part thereof; that in the same proportion the losses (if any) were to be borne.

The answer sets up several matters of defense, by way of counterclaim; but as the issues are all noticed in the Referee’s report, no further notice of them is required here. The whole case seems to resolve itself into questions of fact, upon which the Referee has already passed.

p. 115

The defendants have taken .only two exceptions.

I. The first exception appears to have been taken unnecessarily, as

1. The evidence sought for by the defendants was-not admissible, but

2. It was received by the Referee as evidence for the defendants, and after it was so received, the defendants excepted.

II. The second exception is not well taken, because it was not hearsay evidence—it is merely a history of the note of $500, marked exhibit J. The only material point was established by the testimony of the witness before he produced the note; and, moreover, no objection was made in time. After evidence is received without objection, the only means of getting it out of the case is by a motion to strike it out.

III. The conclusions of fact found by the Referee are sustained by the evidence; and the principles of law applied to those conclusions are elementary. Every doubt has most scrupulously enured to the benefit of the defendants.

IY. If the Court shall be of the opinion that any error has been committed by the Referee, and that such error can be corrected by deductions, we request that the proper deductions should be made, and the judgment affirmed as to the residue, instead of granting a new trial.

The Referee has found that Henry C. Goodwin, the plaintiff’s assignor, and the defendants, were partners, under the name of Foot & Cole, from the 1st of October, 1855, to the 1st of April, 1856. The Referee has also found that the sum of $1,415.79 was due, at the date of his report, from the defendants to the plaintiff, upon a just statement of the accounts between the partners. The defendants do not seek'to disturb the decision that Goodwin and Foot and Cole were partners. o

They complain that two counterclaims which they set up were rejected, and that they were not allowed certain credits; and to obtain a correction of the errors alleged in these respects, they have appealed from the judgment entered on the report of the Referee.

p. 116

As to the items of credit claimed by the appellants; and,

First. The item of $249.94.

Of the items composing this aggregate, three, viz., $61.22, $68.80, and $28, were allowed: the total is $158.02, and one-quarter is $38.25. Proof of these items was furnished beyond the fact that they were charged to profit and loss after the firm was dissolved. Of the remaining items composing such aggregate, no evidence, beyond that fact, was furnished. The making of such entries, after the firm was dissolved, is not, of itself, and without further proof, prima facie evidence that they are items of loss properly chargeable to the firm.

Second. The item of $318.73, being one-quarter of balance due from Z. Reuwee, December 24, 1856. The balance then due was $1,274.93. There is nothing in the evidence tending to show that this balance arose from, or is affected by, sales made between the 1st of October, 1855, and the 1st of April, 1856, unless the facts, that the balance due from Reuwee October 1, 1855, (when Goodwin became a partner,) was $8,536.47, and the balance due when Goodwin left was $1,274.93, tend to show it. This is not enough to demonstrate that the Referee erred.

Third. The item of $139.59, being one-quarter of an account against the Oatskill Mill for $558.35.

This account commenced in June, 1855, and ended January 1, 1857. While Goodwin was in the concern, the firm sold to the amount of $1,526.92, and received $1,969.48. The amount of debits, or of credits, subsequent té the 1st of April, 1856, and prior to January 1, 1857, does ntitl appear. Without the dates of the several items of debt and credit, subsequent to the 1st of October, 1855, we cannot see clearly that the Referee erred in rejecting this item.

Fourth. The item of $91.23, one-quarter of balance of $364. 92, alleged to be due from John S. Dye. It appears that, on the 29th of December, 1855, Dye confessed a judgment for $1,619, as security for what he then owed Foot & Cole. It does not appear that the $364.92 was not included in it. And it does appear that, on the 10th of September, 1857, the defendants settled with Dye all demands to that date, in full, and gave a receipt to that effect. This is sufficient to justify the disallowance of this claim.

p. 117

Fifth. The item of $176.06, amount of Porter’s note, forming part of the capital contributed by Goodwin.

It was proved that an execution, issued on a judgment recovered by Foot & Cole on this note, was returned satisfied. The presumption is that the judgment was recovered, and that the money collected on the execution was received by Foot & Cole. The claim to be allowed this item was properly rejected.

Sixth. The item, “ Bills recv. Dye’s notes, $1,303.50.”

The ground on which the Referee placed his rejection of this claim is tenable, and is alone sufficient to uphold his decision. If he believed the testimony of Goodwin as to the origin of the notes and the circumstances under which they were made, the claim might also have been rejected on other grounds.

The Referee has not found whether Goodwin induced Foot & Cole, by false and fraudulent representations, to take these notes. If he might have found that they made a sale to Goodwin, as purchaser and principal, and took these notes by reason of his fraudulent representations, it may be true that the mere fact that they canceled and surrendered the notes for a valuable consideration would not be a bar to this claim, although they were canceled for less than their face, if all was obtained for them that they were worth.

But, if we assume that, on such a state of facts, they might retain the notes and sue Goodwin for the damages sustained by the fraud, yet, as against his assignee of the balance due on an accounting between the partners, it is not obvious on what ground they could set up, as a counterclaim, a cause of action against Goodwin growing out of his fraudulent representations in a transaction disconnected from the partnership business. It is not a cause of action against "the present plaintiff. That objection is insuperable, and makes it impossible for the defendants to recover on that counterclaim—assuming the fact to be correctly found, that they have canceled and surrendered the notes to Dye for a valuable consideration.

With that fact existing, however the other facts might properly be found, their only remedy (if any) is an action against Goodwin for the damages caused by his fraud; and that cannot be made a counterclaim against Boyd, the present plaintiff.

Seventh. “ The debt against the Painsville Mill, $835.04.”

p. 118

The finding of the Referee, that this debt was a debt owing to the firm by the person running the mills, and not by Goodwin personally, is, in our opinion, warranted by the evidence. , We are not justified in holding that it is contrary to the evidence. The Referee has charged Goodwin, and Boyd as his assignee, with one-fourth of this claim. This is conceded to be correct, provided it be assumed, or must be held, that Goodwin is not liable for the debt as principal.

These views dispose of all questions made by the appellants on the appeal, except those connected with two exceptions taken during the progress of the trial,, and which two are the only exceptions taken during the trial to which our attention was directed on the argument, or which are noticed in the points of the appellants.

The exception taken to certain evidence of Goodwin, as being “ hearsay,” may be dismissed with the remark that the evidence objected to could not possibly have prejudiced the defendants. It related to the question whether a note dated October 8, 1855, for $500, made by McGee and Mitchell, had been paid. This note had been contributed by and credited to Goodwin as capital.

The witness on behalf of the defendants testified that $200 only of its amount had been paid; that it was compromised for forty cents on the dollar, the makers having failed. This was the fact, as the defendants sought to prove it. The Referee charged against Goodwin the $300, by reason of the failure of McGee and Mitchell, and the acceptance of $200 from them as a compromise of the $500.

Hence, it is evident that the defendants had all the allowance made to them which, by any possibility, could have been made, if no testimony had been given by Goodwin in respect to this item.

The only remaining exception was taken to the decision, that testimony in relation to the purchase of the Pittstown Mill was impertinent “ as the matter is not specified as a counterclaim in the pleadings.”

The defendants were apparently attempting to prove that this purchase was a partnership transaction. If it was, it was a proper item to be established, and the defendants were entitled to be

p. 119

allowed such sum as would be just with reference to its actual results.

The direct examination of Cole tended to show that the purchase was on account of the firm of Foot & Cole, while Goodwin ■was a member of it. His cross-examination had weakened somewhat the force of his evidence on the direct examination, when the Referee (apparently) arrested the examination and excluded the evidence in relation to this claim, on the ground that it was impertinent; and impertinent because the claim had not been set up in the pleadings as a counterclaim.

If the appellants were precluded, on this ground, from giving evidence to establish the fact that this mill was purchased for the firm with the assent of all of its members, the decision was erroneous.

In the view which we take of the decision made, the Referee interposed while Cole was under examination in respect to this item, and expressed the opinion and decided that all testimony on this point was impertinent, because the matter was not pleaded as a counterclaim. To this decision the defendants excepted.

It is indeed true that a full investigation of the matter may result in proof that the purchase was not made for and on account of the firm.

But that consideration does not meet the difficulty created by the Referee’s decision. That decision precluded the defendants from proving (however satisfactory the evidence which they were prepared and desired to give in that behalf) that it was a co-partnership purchase, and that they were entitled to a deduction by reason of it. It precluded them from proving these facts on the ground that the matter was not pleaded as a counterclaim.

It is not a counterclaim, but is one of the several partnership transactions, if the supposed facts do in truth exist.

But we think it unnecessary to grant a new trial, if the plaintiff will consent to a deduction of the whole allowance claimed by reason of this matter.

The direct examination of Charles Cole on this point presents the precise claim which the defendants make in this behalf, and its nature and extent. His testimony is that “ there are debts unpaid contracted when Goodwin was with us ; we bought for $1,500 a mill at Pittstown, FT. Y., on which was a mortgage of

p. 120

$3,000, on which we paid 10 per cent, the balance” ($1,350) “is still due and the parties claim payment of us; we have been unable to sell this property, although we have made great efforts; it is now in the hands of a Receiver and I have been notified that it will be sold on our account.”

This is the whole evidence given in relation to the nature and extent of the claim. It is the only statement respecting it found in the printed Case.

The appellants’ printed points state that “ Goodwin should have been charged with one-fourth of the loss on the Pittstown Mill. This mill was purchased while Goodwin was with Foot & Cole, and at his suggestion, for $1,500, the whole of which has been lost.” * * “ The transaction entered into the accounts between the alleged partners, and the loss on it should be charged one-fourth to the plaintiff.”

The claim, as here made, in the broadest construction which can be given to the language in which it is stated, is one-fourth of $1,500 and interest from the time of the purchase. The purchase could not have been made earlier than the 1st of October, 1855, the day the partnership was formed. If, therefore, $375 with interest from that date be deducted, the defendants will be allowed the utmost they can pretend to have claimed.

Allowing this will allow more than a fair construction of the language used may be thought to claim. The 10 per cent paid down, (viz.: $150,) if the matter was deemed and treated as a partnership transaction at the time, would naturally be charged to the firm when it was paid. If that was done, they have been allowed already one-quarter of that in the accounts as kept by the partners.

So too, if the property shall sell for any sum over and above the mortgage upon it, the loss will be only the difference between that excess and $1,500.

Hence if the plaintiff, rather than submit to the delay and expenses incident to a new trial, will stipulate to deduct from the balance found by the Referee $375 and interest thereon from October 1, 1855, to the date of the report, the judgment as a judgment entered on a report for the true balance arising on such a correction, may be affirmed. In that event it will be

p. 121

affirmed without costs of the appeal to either pprty, as it will, in substance, be affirmed in part and reversed in part.

The decision in Moffet v. Sackett, (18 N. Y. R., 522,) in our view of it, does not prevent our making this disposition of the appeal; we do not undertake to decide, upon conflicting or uncertain evidence, how much was lost by this transaction, but allow to the defendants the whole amount of their claim in this behalf.^[1]

If the plaintiff does not choose to make such a deduction, the judgment must be reversed and a new trial granted, with costs to abide the event.

Ordered accordingly.

1 See Chouteau v. Suydam, (21 N. Y. R., 1T9,185,) affirming the like order of this Court. Reporter.