Smith v. Mulock — 24 N.Y. Super. Ct. 569

Majority

p. 569

Willard H. Smith, plaintiff and respondent, vs. Maria Mulock, defendant and appellant.

Headnote

•1. A provision in articles of co-partnership, prescribing a definite period for its continuance, without any prohibition of an earlier dissolution, is sufficient to prevent either party from dissolving it at will.

2. Where the articles of co-partnership do not give either partner a right to dissolve it at will, an allegation hy one partner, contained in a pleading, which is not responsive to any proposal of his adversary, of his desire to dissolve, is not equivalent to the acceptance by him of an offer to dissolve made by the other party, a month previously.

3. Where a creditor made a loan to his debtors upon a promise by them that they would either repay it out of the proceeds of a note for a much larger amount which they had procured to be. indorsed by a third person for their accommodation, or would deliver the note to him; and they subsequently delivered such note, without having been discounted, to him, in satisfaction of such loan and a prior indebtedness of them to him;

Held that the contract was to he regarded as entire, and that he had parted with a new consideration sufficiently to make the indorsement binding.

It seem that the indorser in such case would not be exonerated by notice to

p. 570

such transferee of the note, subsequently to its date, merely that the partnership between the makers had been dissolved.

(Before Robertson, White and Barbour, JJ.)

Heard June 8, 1863;

decided July 30, 1863.

Appeal from a judgment entered on a verdict in favor of the plaintiff.

The complaint in this action, which was by Willard H. Smith against Maria Mulock, alleged, as a cause of action, the malting of a promissory note hy George W. Wood and William G. Mulock, hy their firm name of Geo. W. Wood & Co., for the sum of $2500, which was payable to the order of the defendant, and indorsed h'y her, and subsequently transferred, to the plaintiff before maturity, and for value.

The answer of the defendant stated that the note was not made or signed hy' the copartners of such firm, or for the business of the firm, hut that the firm name was signed to it hy Wood, for his individual benefit and gain, and in fraud of the defendant and his partner. It further denied that such note was made or signed on or about its date, or that it came into the possession of the plaintiff before maturity, or for value-; or that either after the same was so signed, or on the day of its date, or at any time since the date thereof, the defendant indorsed it in writing, or ever delivered it or authorized it to he delivered to the plaintiff; and that the plaintiff was the lawful holder, or that the defendant was justly indebted. It further. alleged that this action was prosecuted in the name of the plaintiff for the benefit and at the request of Wood, and in fraud of the defendant; that the indorsement was made before the note had any date, time of payment, or signature of maker, was without consideration and for accommodation of the firm named, and was obtained from the defendant by false representations by Wood and another person, a dormant partner! Other facts appear in the opinions.

The cause-was tried before Mr. Justice Barbour and a jury, on the 5th day of February, 1863. The jury, under the direction of the court, found a verdict for the plaintiff for the amount of the note and interest; "and judgment thereon hav-' ing been entered, the defendant now appealed therefrom.

p. 571

James T. Brady and Francis Byrne, for the defendant, appellant.

I. The notes were indorsed by the appellant, without consideration, solely for the accommodation of said firm, to be used during its existence, and for its business.

II. The agreement of partnership did not contain a stipulation (of a negative character) that the copartnership should not be dissolved. “ Either party ” might, therefore, “ by his own act,” dissolve the partnership, “ unless restrained by the compact between them to continue it for a definite period.” (Griswold v. Waddington, 15 John. 57 ; affirmed, 19 id. 538.) Mulock effectually dissolved said firm by the service of his notice and its publication, and Wood assented thereto, by his statement in his answer on-oath in the action brought to dissolve the copartnership, that he was “ desirous of having the partnership terminated and dissolved.” The firm was, therefore, dissolved by mutual consent at the date.

III. The right of one partner to bind even another by the signature of the firm name is not so much derived from their relation as partners, as from a presumed agency for each other for that purpose ; is limited to the duration of such partnership, and ceases on its dissolution. After that, neither can bind the other by issuing notes, signed with the name of the partnership, (Lansing v. Gaine, 2 John. 300 ;) nor, although authorized to settle partnership debts, indorse notes or bills given to the firm before the dissolution, (Sanford v. Mickles, 4 John. 224 ;) nor even renew a partnership note, &c. (National Bank v. Norton, 1 Hill, 572 . Mitchell v. Ostrom, 2 id. 520. Lusk v. Smith, 8 Barb. 570 . Kirby v. Hewitt, 26 id. 607 . James v. Pope, 19 N. Y. 324 . City Bank of Brooklyn v. McChesney, 20 N. Y. Rep. 241 . City Bank of Brooklyn v. Dearborn, Id. 244 . Robins v. Fuller, 24 id. 572.)

IV. But this is not even an action against a partner in a firm, but against an innocent person, whose authority to bind her was given to the firm only, and was limited to its duration. The partnership having been dissolved, the authority expired. (Michigan Insurance Co. v. Leavenworth, 30 Verm. R. 11.)

p. 572

V. The plaintiff acted'in collusion with Wood, and took the note sued upon in payment of the protested $2070 note of a previous loan of $500 to Wood. The circumstances, that the firm was insolvent and closing up its business; that the propperty was being removed from the store; that' the safe was being disposed of, and that a lady was the indorser, were sufficient to put him on inquiry.

VI. The statement in the answer of the defendant George. W.'.Wood produced, was proper evidence of a consent to dissolve the partnership, and ought to have been submitted to the jury, and the exception is tenable.

VII. The several requests of the defendant’s; counsel to charge should have been acceded to, and the facts should have been submitted to the jury for their determination, and the exceptions to the rulings and direction are valid.- (Bidwell v. Lament, 17 How. Pr. 357 .)

Henry W. Johnson, for the plaintiff, respondent,

cited, as to the sufficiency of the proof of the note and the authority to make it, Story on Prom. Notes, §§ 135, 380 and 387; Erwin v. Downs, ( 15 N. Y. Rep. 575 ;). Ogden v. Blydenburgh, (1 Hilt. 183.) And as to the presumption that the plaintiff was a bona fide holder, Vallett v. Parker, ( 6 Wend. 615 ;) Ross v. Bedell( 5 Duer, 462 ;) Case v. Mechanics’ Banking Association, (4 Comst. 166.)

The defendant became indorser 'of the promissory note in suit in this action, by writing her name on the back of a piece of blank paper, and deliv-? ering the same to her two sons, with intent that they should write a promissory note on the face thereof, to be used by them for the benefit of the firm of which they were members. She now claims that the firm in which they were partners was dissolved before such note was passed away ; that one of her sons subscribed the name of the firm to such promissory note after the dissolution, and passed the note to the plaintiff in satisfaction of a precedent indebtedness, or ■ with knowledge of such dissolution. • , . . .

p. 573

The partnership of the defendant’s sons began in January, 1860, to continue three years, under an agreement in "writing. The note in suit came into the plaintiff’s possession in February, 1862. In January previous, one of such sons, Mulock, served upon the other, his partner, Wood, and another person, Ackerman, whom he claimed to be a partner, a written notice that he had dissolved such partnership. A like notice' was published by the same partner in two papers in the city of New York, of large, circulation. Five days previous' to serving such notice, the partner giving it, Mulock, commenced an action against his copartners, Wood and Ackerman, to dissolve such partnership, in which he obtained an injunction.Subsequently, after discontinuing that action, he began a new one for the same purpose. As the. complaint in that last action was not in evidence, it does not appear what allegations were made in it in regard to a dissolution. The answer in it, however, put in on the 1st of February, 1862, contained this phrase : “ This defendant is desirous of having the partnership aforesaid terminated and dissolved.” This is claimed to' have produced an actual dissolution, by construing the notice of the 12th of January to have been an offer, and such allegation an acceptance of it. The original agreement made no provision for a dissolution ; and I apprehend, where such an agreement prescribes a definite period for the continuance of a partnership, it is sufficient, without prohibiting an earlier dissolution in order to deprive the parties to it of the right of dissolving at will. (Griswold v. Waddinyton, 16 John. 438 . S. C. 15 id. 57.) The announcement to the court by a party to an action, in a pleading, when not responsive to any proposal of his adversary, of a readiness, or even of the most earnest desire to dissolve a partnership, can not be converted into a contract in pais, or stipulation of record, in the former case, to be enforced by a specific performance, or in the latter by a decree without further" litigation. Still less could it be construed into the acceptance of an offer to dissolve, made a-month before; if the notice in January was such,1 and not a mere notification of the determination of the party notifying,

p. 574

whatever his partner might say. This, therefore, not creating a dissolution, and there being no other evidence of one, there was no question upon it for the jury; a mere willingness to dissolve being no evidence of a previous dissolution.

The consideration given for the note in question, according to the plaintiff’s testimony, was a loan of $500, a few days before the 14th of February. This loan was made upon a promise either to repay the same out of the proceeds of the note in suit, if it could be discounted, or to deliver that note. It was not discounted, but was delivered to the plaintiff in satisfaction of such loan, and. a prior note of the same firm held by him; This testimony is not contradicted even by the partner who delivered it, Wood. The promise to deliver the note or its proceeds in consideration of the loan, entitled the plaintiff in equity to one or the other ; and the time of the application of the residue of the plaintiff’s advance, consisting of the prior note, to such new note, whether at the time of the .agreement or when the latter was delivered, was immaterial. The contract was entire, and a new consideration parted with, sufficient to make the indorsement binding on the defendant.

Even if the plaintiff had, or was bound to' take notice of the dissolution of the firm, that knowledge would have an entirely different effect upon the liability of the member of the firm who did not sign the note, and that of the defendant. Without some authority remaining in the partner signing, the other partner would not be liable. But the defendant would be liable as indorser, whosoever’s name-was' subscribed to the note, unless the purchaser had notice of the limitation of the authority to make a note, to drawing one made for the benefit of the firm, and signed by it. The note in this case was delivered by one of that very firm to a purchaser, to discharge a liability incurred by it. The partner delivering it was responsible, at .all events, and it was not incumbent on the plaintiff to inquire who else was, provided the defendant was.

But in fact the case does not disclose any very clear request to submit any controverted question of fact to the jury, or to give them any instruction as to any point of law. The request

p. 575

to submit the question, “ Whether the plaintiff parted with value, without notice sufficient to put him upon inquiry as to the liability of the indorser or the validity ofthepaper,” was not sufficiently definite or pointed. The liability of the indorser, or the validity of the paper, was a question of law, and not of fact alone. The facts which were to absolve the defendant from liability, were either the dissolution of the firm, and knowledge of it by the plaintiff, or some limitation of the use to which the note was to be applied, transgressed in passing it to him. , The notice necessary thus to absolve the defendant, was, of course, of evidentiary facts, leading to the discovery of such ulterior facts. A mere notice to the plaintiff, that the indorser would not be liable, without knowledge of the facts by which she was to escape liability, would not acquit her ; and an inquiry which would end in that information alone would be of no avail. Of course, if that information, when obtained, would not render the note void in the hands of the plaintiff, notice of facts leading to an inquiry for it would be immaterial. But there was no evidence of any facts constituting notice of any thing to put the plaintiff on his guard. Notice that the makers of a note, signed with their firm name, had dissolved partnership, formed no ground for suspecting that such note, dated six months previously, was about to be diverted from the use for which it was intended, when employed by a partner in paying that firm’s debts. The defendant’s counsel did not disclose in his request what those facts were, of which he considered there was no evidence, and which he claimed to be equivalent to a notice of something which would relieve the defendant from liability, because it was sufficient' as 'matter of law, to put the plaintiff on inquiry after that which would produce such relief if known. Such request was therefore properly refused, not only as being too indefinite or irrelevant, but also as not having any basis in the evidence. There was, indeed, no evidence of any knowledge by the plaintiff of a misapplication of the note, or of a want of a new consideration for it, and the plaintiff was therefore entitled to judgment.

The judgment must be affirmed, with costs.

Cases cited

Lusk v. Smith 8 Barb. 570 N.Y. Sup. Ct. 1850-05-06 p. 571
James v. Pope 19 N. Y. 324 N.Y. p. 571
Bidwell v. Lament 17 How. Pr. 357 N.Y. Sup. Ct. p. 572
Vallett v. Parker 6 Wend. 615 N.Y. Sup. Ct. p. 572