Wright v. Storrs — 19 N.Y. Super. Ct. 600

Majority

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Henry J. Wright, Plaintiff and Respondent, v. Richard A. Storrs, Survivor, &c., and John Paine, Administrator, &c., of D. Burgess, deceased, Defendants and Appellants.

Headnote

1. The joinder of a cause of action against a surviving partner, with one against the administrator of the deceased partner for the same debt, must be objected to by demurrer. The defect is waived by answering the complaint.

2. A surety is not discharged by a contract, made with his assent, between the creditor and principal debtor, although it may operate to extend the time of payment.

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

Heard, May 15th;

decided, June 2d, 1860.

Appeal by the defendants from a judgment rendered on a trial had in February, 1859, before Mr. Justice Hoffman, without a jury. The action is brought by Henry J. Wright, as plaintiff) against Richard A. Storrs, survivor of Daniel Burgess, (who composed the firm of Daniel Burgess & Company,) and John Paine, administrator, &c., of said Daniel Burgess, to recover a sum alleged to be due to the plaintiff from said firm of D. Burgess & Company.

The complaint prayed, and the judgment entered declared, that plaintiff recover judgment against Storrs, as such survivor, for $15,344 and interest, and that Paine, as administrator, apply the assets in his hands, as such administrator, to pay the plaintiff and other creditors of said firm, and stated the facts on which the right to such relief was based.

The Judge found, as facts, that, on and after the 23d of' February, 1856, Burgess and Storrs were partners as booksellers and publishers, under the name of Daniel Burgess & Company.

That, on the 23d of February, 1856, that firm entered into an agreement of that date with the plaintiff, under which he loaned

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the firm moneys amounting, with interest to June 14, 1856, to $14,043.62, and entered into and continued in the employment of the firm until it was dissolved by the death of Burgess on the 13th of May, 1856; and that there was due to the plaintiff, at the date of his decision, by reason of said loan, $14,982.45.

By this contract of February 23,1856, the plaintiff was to loan said firm certain sums of money, as therein stated; and was to enter into and continue in their employment at the rate of $2,500 per annum, when he was to be admitted as a partner, having a one-fifth interest; and said firm thereby, as collateral security for the payment of money to be so loaned, assigned to the plaintiff two publishing contracts theretofore made by them with one David B. Tower, of Boston, together with the stereotype plates in said last two contracts mentioned: one of said two contracts was dated June 7, 1854, whereby Tower conveyed to said firm and their assigns the exclusive right of publishing certain school books therein named, of which Tower was the author: the other of said two contracts is dated November 6, 1855, and conveyed the like exclusive right to publish a certain other book of which Tower (in connection with Benjamin F. Tweed) was the author.

The Judge also found that on the execution of this agreement, the two contracts between the said firm and Tower, were then delivered to and have since been held by the plaintiff. That the said stereotype plates were then in the possession of one O. A. Alvord, a printer, who afterwards printed books therefrom for said D. Burgess &" Company; and that the plaintiff on the making of the agreement of February 23, 1856, notified Alvord thereof, who gave the plaintiff a receipt to the effect that he had received said plates from, and held the same subject to, the plaintiff’s order.

The Judge also found that on the 29th of April, 1856, Burgess and Storrs entered into an agreement of that date, whereby Storrs agreed to sell and Burgess to purchase all the interest of the former in the property and effects of said firm; Burgess to pay all of the firm’s debts, and Storrs to allow his name to be used as a partner until the 1st of February, 1858. That the making of this agreement was not known to the plaintiff, or generally until after the death of Burgess, which occurred May

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13, 1856: That John Paine was duly appointed Administrator of Burgess, on the 5th of June, 1856.

That on the 6th of J une, 1856, a contract of that date was made "between Storrs and Paine as such Administrator, which recited the fact that Storrs and Burgess had been partners; and also the said agreement of the 29th of April, 1856; the subsequent death of Burgess and the appointment of Paine as his Administrator; and which contract transferred to Paine, as such Administrator, all the title and interest of Storrs in and to all the property and effects of said firm of Burgess & Company.

That on the 16th of June, 1856, an agreement was entered into between said Paine as Administrator of the first part, and said David B. Tower and one Cornelius Walker as parties of the second part, which recited that Burgess and Storrs had been partners; the two contracts of June 7, 1854, and November 6, 1855, and set forth copies thereof; also recited and set forth a copy of the agreement of February 23, 1856, and .recited the fact of a loan by the plaintiff under it, of $14,043.62, including interest to June 14, 1856; and also recited the agreement of April 29, 1856, the subsequent death of Burgess and the appointment of Paine as his Administrator, and the agreement of June 6, 1856: an indebtedness of Burgess & Company to said Walker & Tower severally, also to one Levi Tower as assignee of D. B. Tower, by which contract said party of the first part transferred to said parties of the second part, the said publishing contracts subject to the plaintiff’s lien thereon, and the parties of the second part agreed, inter alia, to satisfy the debt due to L. Tower and also covenanted * * * to pay to the plaintiff the said sum of $14,043.62 with interest * * * from June 14, 1856,” and released said party of the first part and said D. Burgess & Company from all claims and liabilities upon or by reason of any of the recited matters.

That on the 18th of June, 1856, a contract of that date was made between said D. B. Tower and C. Walker of the first part, and O. L. Sanborn, J. H. Bazin and Ezra Carter composing the firm of Sanborn, Carter & Bazin, of the second part, which recited the agreement and facts stated in the said contract of June 16th, 1856, and also the making of that contract, and whereby the parties of the first part transferred to said parties of the

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second part all their interest in the said two publishing contracts, together with said plates subject to the plaintiff’s lien thereon, and the parties agreed to pay to said Walker and to Levi Tower a specified sum for each copy they should sell of said books, and to pay to the plaintiff the sum of $14,088.16 as follows, viz.: on each 1st of August, a sum equal to the sum to be payable under said contract to Tower & Walker, but not to pay otherwise or faster, on any greater amount to the plaintiff, than by such rates they would become liable to pay to Walker & L. Tower.

That on the said 18th of June, 1856, a contract of that date was made between the plaintiff of the second part, and said San-born, Carter & Bazin of the first part, which recites the said agreement of June 18th, 1856, and the agreement of February 23d, 1856, the loan by the plaintiff, and that there was due to him June 14th, 1856, $14,038.16; and that Sanborn, Carter & Bazin had succeeded to the rights of D. Burgess & Company in the said two publishing contracts, and declares that they, in consideration of the premises and “ of said Wright permitting them to use said stereotype plates for the purpose of publishing the books,” agree to pay the plaintiff semi-annually in installments, on each 1st of August and February, until the whole $14,038.16 is paid, “ each installment to be equal to the amount of the sums paid for copyright as specified in said contracts, on the copies of said books that shall have been sold during the six months previous to the time of payment of such installments.” It then specifies “ the sum to be paid for copyright on each of said books.” It states that the plaintiff is to retain possession of the two publishing contracts, and to retain his interest in them until fully paid; that Sanborn, Carter & Bazin are to be permitted to use the plates to publish said books, and they agreed to publish the same and use all means to keep the market supplied, and it was declared that they were not to be liable to pay a greater sum to plaintiff than shall accrue or be payable, as therein provided for copyright.

The Judge also found, that on the same 18th of June, 1856, a contract of that date was made between the plaintiff and said C. Walker, by which the latter agreed, “ as a part of the arrangement and agreement between said Sanborn, Carter & Bazin, and

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the said Wright, to guaranty to the said Wright that the amounts of the several payments, provided for in said agreement, shall be such that the whole of said principal sum of $14,038.16,” with interest, due and to grow due, shall grow due and be paid in the manner therein provided, in two years and six months from that date.

He also found, that on the 18th of June, 1856, the plaintiff, by a written order of that date, directed to C. A. Alvord, reciting ■that he had agreed with Sanborn, Carter & Bazin, “that they shall take and use (for publishing) the stereotype plates, * * requested him to please deliver all of said plates to" them.

That Paine, as Administrator, by an order of the same date, made the like request of Alvord, and that on the receipt of said two orders, and on or about that day he also delivered the plates to them.

“That all the said agreements or instruments bearing date on the 16th and 18th days of June, 1856, were negotiated and made in the city of Hew York, with the knowledge of all the parties to this action, and without objection from or by any of them.

“ That at the time said agreements were made, the contracts and plates then held by the plaintiff, as pledgee under and in pursuance of said agreements of February 23d, 1856, were in danger of deteriorating in value and of becoming valueless, or .nearly so; and that it was necessary, in order to preserve their value, to make some arrangement by which they might be placed in the hands of a responsible publisher. And that such arrangement was consequently made in and by the said agreements of the 16th and 18th days of June, 1856, by and with the consent of all the said parties, and which arrangement was thought by the said parties, at the time, to be and was for the undoubted benefit of all interested.”

And that the sum of $14,043.62, with interest to 8th June, 1859, after allowing all sums received by the plaintiff on account of the same, amounts to $14,982.45.

And the said Justice also decided, as conclusions of law—

First. That the defendant Storrs, as surviving partner of said late firm of Daniel Burgess & Company, is personally liable to the plaintiff for said sum of $14,982.45.

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Second. That the said firm of Daniel Burgess & Company was dissolved, as between Burgess and Storrs, on 29th April, 1856, and as between them Burgess then assumed and became individually liable to pay all the debts of the firm, and to protect said Storrs, his estate and representatives, from and against the same. And as between said Burgess and Storrs, Burgess then became, and was individually, the owner of all the property and effects of said firm, subject to the payment of said debts.

Third. That the said agreements, dated 18th June, 1856, or any or either of them, were not in effect either separately or together, nor did they operate as to the defendants, or either of them, as a payment of the said amount of $14,043.62, and the interest thereon, or any part thereof, except to the extent of the amount of money since received by the plaintiff upon or under the same.

Fourth. That the plaintiff is not, by, under, or by reason of, the said agreements, dated 18th June, 1856, or any, or either of them, barred of or from, nor has he thereby lost or relinquished, his claim against said defendants, or either of them, or the estate of said Daniel Burgess, deceased, for the said sum of $14,043.62, with interest, or any part thereof.

Fifth. That the plaintiff is entitled to judgment against the defendant, Richard A. Storrs, as survivor of said Daniel Burgess, deceased, for the said sum of $14,982.45.

Sixth. That all assets, property, and rights of property, which belonged to said firm of Daniel Burgess & Company, on 29th April, 1856, and were in the control or possession of said Daniel Burgess at the time of his death, and have since come to the possession or control of the defendant, John Paine, as Administrator, are assets of said firm of Daniel Burgess & Company, in the hands of said Administrator, and applicable to the payment of the debts of said firm, (including said debt due to the plaintiff) and said debts of said firm are entitled to priority of payment out of said assets over any individual debts of said Burgess.

Seventh. That said plaintiff is also entitled to the benefit of the collateral securities which he held for the payment of his debt, until the whole of said debt is paid.

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Eighth. That, after the whole of the plaintiff’s debt ($14,982.45) shall have been paid, the defendant, John Paine, as Administrator as aforesaid, will be entitled to the said collateral securities now held by the plaintiff, or so much thereof as shall then remain.

To each of which findings and decisions, the defendants made and filed exceptions.

By the judgment entered, the plaintiff rcovered against Storrs $14,982.45; and it was declared that Paine, as Administrator, should apply the assets mentioned in the sixth conclusion of law, to pay the plaintiff and other creditors of D. Burgess & Company, pro rata.

From this judgment the defendants appealed.

Dan Marvin, for appellants.

I. By and under the agreement of February 23d, 1856, the two contracts of Tower & Walker with D. Burgess & Company, and the stereotype plates of the books therein mentioned, were pledged to the plaintiff, to secure the payment of the money agreed to be loaned, and were put into his actual possession and under his complete control.

II. By the agreement of April 29th, 1856, the copartnership of D. Burgess & Company was dissolved, and thereupon Burgess became the owner of all the property of the firm, and individually liable for all its debts.

The bona fides of this transaction is not questioned.

III. As Administrator of the estate of Burgess, Paine became possessed of, and entitled to represent, all the property of D. Burgess & Company prior to the dissolution, and any interest therein which Storrs might by possibility have retained was transferred to him by the assignment dated June 6th, 1856.

IV. By the agreement made June 16th, 1856, between Walker & Tower, and Paine, as Administrator, Walker & Tower, for good consideration, assumed, and became primarily liable, as between them and Paine, and Burgess’ estate, to pay the debt due Wright.

And thereupon the estate of Burgess, and Paine as Administrator, became sureties merely for the payment of such debt.

V. By the three agreements, dated June 18th, 1856, made between Tower & Walker, Sanborn, Carter & Bazin, and Wright, (the plaintiff,) Sanborn, Carter & Bazin, for good consideration,

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assumed the payment of, and became primarily liable for, the debt which was due to Wright, the plaintiff, and were recognized by him as primarily liable to pay that debt. And the plaintiff agreed to receive payment thereof in the particular manner specified in the contract between them. And in consideration of such new agreement, Wright (the plaintiff) sold to Sanborn, Carter & Bazin his interest in the contracts pledged and in the stereotype plates.

This transaction operated as, and effected, a payment of the debt of Burgess & Company to the plaintiff, Wright, so far as the estate or the Administrator of Burgess, or Mr. Storrs, were liable therefor. (The Herkimer Man. & Hyd. Co. v. Small, 2 Hill, 127 , [1841;] S. C., 21 Wend., 273 ; Case v. Boughton, 11 id., 106; Morgan v. Plumb, 9 id., 287; Lansing v. Goelet, in error, 9 Cow., 346 .)

VI. The plaintiff is also barred of any claim against Burgess’ estate, because he has given time to Sanborn, Carter & Bazin, the primary debtors, and has thereby released the estate of Burgess, which stood in the position of a surety. (King v. Baldwin & Fowler, 2 Johns. Ch. R., 554; Pain v. Packard, 13 John. R., 174; King v. Baldwin, 17 id., 384 .)

VII. The rule in respect to a surety is, that the principal contract cannot be varied without his consent, and this rule obtains even where the variance is, or appears to be, for his benefit. The surety has the right to say, non in haec foedera veni.

VIII. In any event the plaintiff is bound, in the first instance, to exhaust his remedies against the pledged property, and also against Tower & Walker, Sanborn, Carter & Bazin, and upon Walker’s guaranty, before he can come upon the estate of Burgess, or have an action against the administrator, and he can in that case only proceed for the balance or deficiency of his debt which he may not have thus realized. The judgment of the Special Term ought to be reversed.

E. S. Young, for respondent.

I. The assets and property which belonged to the firm of Daniel Burgess & Company, on the 29th April, 1856, and which afterwards came into the possession of the defendant Paine, Administrator, &c., are assets of said late firm of Daniel Burgess &

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Company, in the hands of said Administrator, and the creditors of said firm are entitled to priority of payment out of said assets, over any individual creditors of said Burgess. The firm being insolvent, the assets were converted into a trust fund for the payment of its debts. (3 Kent’s Com., 64, &c., 6th ed; Nicholson v. Leavitt, 4 Sand., 302, 306; Dillon, v. Horn, 5 How. Pr. R., 35; Burtus v. Tisdall, 4 Barb., 571 -578, &c.)

1. The trust arises as soon as the insolvency exists. In this case, the firm being insolvent long prior to the agreement between Burgess and the defendant, Storrs, of 29fch April, they could not, by any arrangement as between themselves, divest the copartnership assets of its character of joint property, so as to deprive the joint creditors of their prior right to the joint funds for the payment of their debts. And further, no notice of dissolution was given; as to persons dealing with them, the firm continued to the time of the decease of Burgess. (Cases above cited; Coll. on Part., §§ 889, 897, 898, &c.)

II. The arrangement made by the instruments of 16th and 18th June, 1856, for preventing the contracts, publishing rights, &c., held by the plaintiff as collaterals, from becoming valueless, in nowise affects the plaintiff’s claim against the assets of the firm, or the estate of Burgess. The condition of those collaterals was such, that it was requisite, for the protection of all parties interested in them, that something should be done to prevent them from depreciating and becoming valueless. The arrangement was with the concurrence of all parties interested in them, and was thought the best that could be made for all the parties concerned. The plaintiff’s assenting to an arrangement necessary for preserving the value of the collaterals held by him, cannot be held to prejudice his right to proceed against his debtors, or the estate in their hands, for the amount due him. (Story on Bailments, § 329.)

The arrangement made was highly beneficial to the estate of Burgess & Company, relieving it of debts to the amount of $18,169.57, over and above the amount that should accrue therefrom, towards paying the debt due to the plaintiff. The arrangement was not only with the knowledge of the defendants, but was suggested by the defendant, Paine. The defendants cannot take advantage of an arrangement proposed and desired by them

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selves, to defeat or prejudice the claim of the plaintiff against them, or the estate, for the debt, for securing which the col-laterals were taken and held by him.

III. The contracts and plates being held by the plaintiff as collateral security, he had a right to proceed against his debtors personally for the debt, independently of the collaterals. (Story on Bailments, §§ 316, 320.)

The contracts and plates were delivered to, and held by, the the plaintiff in pledge, as collateral security. If the plaintiff had used the pledges in a manner injurious to the defendants, or had converted them, the defendants’ remedy would be an action against him for damages sustained thereby. But they could not set it up in bar of the plaintiff’s claim. (Story on Bailments, §§ 315, 349 ; Wilson v. Little, 2 Comst., 443; Steams v. Marsh, 4 Denio, 227 .)

The firm of D. Burgess & Company owed the plaintiff the amount found at Special Term to be due to him.

The plaintiff had a right to proceed against the defendant, Storrs, at law, as the surviving member of that firm, to recover from him the sum due. He also had the equitable right, Storrs having sold his interest to Burgess on his agreement to indemnify Storrs against all debts of the firm, to be paid by Paine, as administrator, pari passu; with other creditors, out of the copartnership assets, the firm being insolvent.

If both causes of action could not be united in one suit against the will of the defendants, it is enough to say that this defect appeared on the face of the complaint, and if the defendants wished to object to it, they should have demurred to the complaint. (Code, § 144, sub. 5, and §§ 147, 148.)

The plaintiff has done nothing to affect his legal or equitable rights, unless the agreement of the 18th of June, 1856, to which he is a party, in connection with the other agreements of that date, and that of the 16th of that month, work that result.

The two contracts, one of June 7,1854, and the other of November 6, 1855, between David B. Tower of one part, and D. Burgess & Company of the other, and which had been assigned by the latter to the plaintiff as security for the payment of the

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money due from them to him, could not be made productive of results which would pay any part of the debt due to the plaintiff, or bring money into the hands of the Administrator of Burgess, unless the latter could sell them at a premium, or they could be executed in behalf of the estate of D. Burgess in such wise as to produce profits. That estate was insolvent, and Storrs had ceased to have any title to the contracts, and the firm of D. Burgess & Company had been dissolved by the death of D. Burgess.

The Court found at Special Term, that the arrangement effected by the several agreements of the 16th and 18th of June, 1856, was made “by and with the consent of all the said parties, and which arrangement was thought by the said parties, at that time, to be and was for the undoubted benefit of all interested.”

By the agreement of June 16, 1856, Paine, as Administrator of Burgess, assigned to D. B. Tower and C. Walker, all of Paine’s interest in the two contracts of June 7, 1854, and November 6, 1855, and Tower released D. Burgess & Company, and Paine as Administrator of Burgess, from all claims and demands under or by reason of said contracts; and Tower and Walker covenanted to pay to the plaintiff the amount due to him from D. Burgess & Company, viz.: $14,043 with interest thereon from the 14th of June, 1856.

Thenceforth, neither Storrs nor Paine, as Administrator of Burgess, could do anything under those contracts which D. Burgess & Company had originally agreed to do, and the plaintiff could not in any event find any indemnity in the performance or execution by either of them, of those contracts on behalf of D. Burgess & Company.

Tower and Walker by contract dated the 18th of June, 1856, assigned their interest to Sanborn, Carter & Bazin, and the latter agreed to pay to the plaintiff certain sums on account of the debt due to him, but not, unconditionally, to pay him in full.

The agreement of the 18th of June, 1856, to which Wright is a party, does not transfer his interest in the contracts to Sanborn, Carter & Bazin, but merely contains his consent that they may use the stereotype plates, on the terms and for the consideration therein stated, and the guaranty of C. Walker of the same date.

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After the execution of the agreement between Paine as Administrator, and Tower and Walker, the latter did not become, at law, the plaintiff’s principal debtors. The covenant of Tower and Walker was to a person, not personally liable to pay to the plaintiff the debt owing to him by D. Burgess & Company.

Whether the plaintiff could maintain any action by reason of that covenant, against Tower & Walker, to recover the debt due to him from Burgess & Company, will, to say the least, admit of some doubt. (Doolittle v. Naylor, 2 Bosw., 225 ; Trotter v. Hughes, 2 Kern., 74; King v. Whitely, 10 Paige, 465.)

On the facts as found, this contract and those of the 18th of the same month, were, in the intent of the parties, parts of a single arrangement, which looked to securing competent and responsible publishers, as the only method of making the contracts, which had been pledged to the plaintiff, of any value to him, or to Storrs, or Paine as Administrator of D. Burgess, or to the owners of the copyrights.

In Chester v. The Bank of Kingston, (16 N. Y. R., 338,) Mr. Justice Comstock, speaking of the dealings between the creditors and principal debtor, relied upon as a discharge of the sureties, says, that “ if they did so deal without the assent of the plaintiffs, (the sureties,) the latter were, to the amount of the note, discharged in equity, if not at law. If, however, they assented to the dealing, or have placed themselves in a situation where they cannot object, then their liability still remains, unless they have some other answer to it.”

No authority is cited, but the rules enunciated are stated, as being elementary or well settled law.

Mr. Theobald states the rule to be, that the surety is not discharged by the creditor’s agreeing to give time, if the agreement was authorized or ratified by the surety. (Prin. & Agent, [by Theobald,] p. 87, § 165.)

In Ex parte Harvey, In re Blakely, (27 Eng. L. & Eq., 280,) Turner, L. J., says: “It is not disputed that a surety, who concurs in an arrangement between the principal and a creditor, is not discharged by such arrangement.”

The concurrence or assent of the surety, or his express agreement, if there were one, may be shown by parol. ( Wyke v. Rogers, 12 Eng. L. & Eq., 162.)

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A knowledge of the arrangement while it is being negotiated, taking part in and encouraging it, or aiding in perfecting it, will justify a finding that the surety assented to it. (Woodcock v. Oxford and Worcester Railway Co., 21 Eng. L. & Eq., 285.)

Mr. Storrs testifies, that he knew at the time of the arrangement between Sanborn, Carter and Bazin, and Mr. Wright; that these arrangements were understood by the parties generally before any of the contracts were executed; that the arrangement was desired by himself and Paine, and that neither of them objected to it.

Mr. Paine testified, that he knew generally, the features of the arrangement between Wright and the firm of Sanborn, Carter & Bazin; that he heard it talked about, and thinks he “ suggested the plan of paying Mr. Wright by a double copyright, (the one adopted,) or they spoke to me of it, and I thought it was fair.” Although each of them says he was “ not asked to assent ” to this arrangement, yet we think there was enough proved to warrant the finding, as a fact, of actual assent by Storrs and Paine, to the agreements of the 18th of June, 1856, and that Mr. Wright signed the paper of that date which he did execute, in the full conviction that its execution was desired by them, and received their cordial assent, and that he was justified in acting on that belief.

The judgment should be affirmed.