Geery v. Cockroft — 33 N.Y. Super. Ct. 146

Majority

p. 146

SAMUEL W. GEERY, Plaintiff and Appellant, v. JACOB H. V. COCKROFT, Defendant and Respondent.

Headnote

The property and effects of a copartnership or its personal property, such as goods, wares, and merchandise of a grocery store, cannot be sold, alienated, or its title divested from the firm by one partner to the personal creditor of the latter, in payment or on ac

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count of such partner’s debt to such creditor, without the knowledge and assent of the other partner or partners of the copartnership, and whether or not such creditor knew the same to be partnership property does not affect the question.

The right and title of such creditor to the property of the partnership, thus sold and transferred to him by a member of the firm, who was his debtor, and on account of the personal debt of such member depends, not upon the knowledge or lack of knowledge of such creditor, that it was partnership property, but upon the fact whether the other partner or partners of the firm had assented to such disposition of the property or not.

The cases of Dobb v. Halsey ( 16 Johns. 88 ), and Rogers ». Bacheler ( 12 Pet. 229 ), considered and commented upon.

Decided February 4, 1871.

Appeal from a judgment.

The pleadings in this action consist of a complaint and answer, of which the following are copies.

Complaint.

“The plaintiff above named hereby complains against the above named defendant, and respectfully shows to the court—

“That, at the times hereinafter mentioned, this plaintiff and one Arthur Kendall were copartners in trade, doing business in the city of New York, under the firm name and style of Geery & Kendall.

‘ ‘ That, as such copartners, the said Geery & Kendall sold and delivered to the said defendant, at his request, on or about the 26th day of June, 1868, certain goods, wares and merchandise, at the agreed price, and which said merchandise was reasonably worth the sum of sixty-seven dollars.

“That on or about the 25th day of June, 1869, the said Arthur Kendall duly assigned all his right, title and interest in and to the said claim to this plaintiff, who is now the lawful owner thereof.

“That said sum has not been paid, nor any part

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thereof, but the whole amount thereof is still due and owing to this plaintiff from said defendant, on account of said sale, although the same has been duly demanded.

‘ ‘ Wherefore this plaintiff demands judgment against said defendant for the sum of sixty-seven dollars and interest thereon from June 26th, 1868* besides the costs of this action.”

Answer.

“ And the defendant, for answer to the complaint in this action, by Charles N. Black, his attorney, denies that said Geery & Kendall, as copartners or otherwise, sold and delivered to the said defendant, and at his request, the goods, wares and merchandise, referred to in the said complaint, at the agreed price of sixty-seven dollars, or any other price, on or about the 26th day of June, 1868, or at any other time.

‘ And the defendant further alleges that he has not sufficient knowledge or information to form a belief as to the said alleged copartnership of said Geery & Kendall, or said alleged assignment set forth in said complaint, and, therefore, denies the same, and this defendant denies that said sum of sixty-seven dollars is due from the defendant to the said plaintiff.

“Wherefore the defendant demands that said complaint be dismissed with costs.”

The cause came on for trial before the court and a jury. The facts alleged in the complaint were substantially proved or admitted subject to this explanation. Upon the trial the facts alleged in the complaint were substantially proved or admitted subject to this qualification, or explanation. The goods sold consisted of two baskets of wine, and while Kendall was a member of the firm, and in June, 1868, were sold by Kendall to defendant, under the circumstances, detailed by him substantially, as follows:

“I owed him (defendant) some money for interest

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on a note, and I offered to send him in payment of that interest, two baskets of wine, and I did so. The wine was taken from' the copartnership effects (Q-eery & KendaE). I suppose defendant knew I was a partner of the fu;m ; my name was above the door and it had been pubEshed in the papers. I sent defendant the wine, on a private account between me and him. He has never since paid me for the goods. It was a private transaction between him and me.”

Matthew MEler, g coEector for Gfeery & KendaE, testified that in October, 1868, he caEed upon the defendant, to coEect this biE of wine, who asked witness how much it was. BiE introduced in evidence. Witness answered that it was sixty-seven doEars, and defendant said, “I will call up and settle with Mr. KendaE.” Afterwards, when he called, defendant told him, “ I do not owe any bEl.”

On resting the case of the plaintiff the court directed the jury to render a verdict for the defendant, which they did and the appeal is from that ruEng and direction, and the judgment entered upon said verdict.

H. F. Averill, attorney for appellant.

Thomas Allison, of counsel.

The evidence given on plaintiff’s behalf being wholly uncontradicted, and the court having peremptorily directed a verdict for defendant, the exception brings before the court the question whether or not as matter of law the plaintiff was entitled to a verdict on the facts. It is only where there is a dispute on trial as to the facts, that a party must request to have questions of fact submitted to a jury (Bunge v. Koop, 5 Robl. 11, opinion by Robertson, Ch. J. ; Sheldon v. Atlantic F. and M. Ins. Co., 26 N. Y. 465 ; Barnes v. Price, 12 Id. 22).

The delivery by KendaE to the defendant of the two baskets of wine, belonging to the firm, to pay the in

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terest due on Kendall’s separate account, to the defendant, was a sale of that wine.

1. The parties to the transaction intended to transfer the title to the wine to defendant for a consideration. The only question is. as it was partnership property, could they agree that the price should be paid by canceling Kendall’s debt without G eery’s consent.

2. The evidence as to defendant’s promise to settle the bill when presented by Geery & Kendall’s collector, was a sufficient evidence of a sale and delivery to defendant.

3. Dobb v. Halsey ( 16 Johns. 34 ), was the same as the case now before the court, so far as the question whether or not a delivery of partnership effects by one partner to his separate creditor to pay his separate debt, will sustain an action for the sale and delivery of goods by the firm, is concerned. In Dobb v. Halsey, one partner, named Moore, offered to and did deliver partnership timber to his separate creditor to pay his separate note, and the creditor received the timber for the purpose of having his note paid, and delivered up to Moore the note, and paid him, in cash, the difference between the amount of the note and the value of the timber. Moore’s partners sued for the price of the timber as goods sold and delivered. The court held that defendant purchased the timber, and that the action was ex contractu, and Moore should have joined with his copartners in the suit (Dobb v. Halsey, 16 Johns. 34 ).

The effects of a partnership cannot be applied by one partner to the payment of his separate debt without the assent of his copartner. If the effects of a firm be so applied, the question as to the liability of the creditor receiving them for such purpose, does not depend upon the creditor’s knowledge that they were partnership effects, but depends merely upon the fact whether

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or not the copartner other than the one to the payment of whose debt the effects were applied, assented to such application of the firm effects. The burden of proving this assent, is upon the creditor who receives partnership property for the separate debt of one of the partners.

Spencer, J., in delivering the opinion of the court in Dobb v. Halsey, ( 16 Johns. 38 ), says: “This court has decided, in several cases, that where a note is given in the name of a firm, by one of the partners, for the private debt of such partner, and known to be so, by the person taking' the note, the other partners are not bound by such note, unless they have been previously consulted, and consent to the transaction (Livingston v. Hastie, 2 Caines, 246 ; Lansing v. Gaine, 2 Johns. 300 ; Livingston v. Roosevelt, 4 Id. 251). In Ridley v. Taylor (13 East, 175), the court of king’s bench held, that if one partner draw or indorse a bill in the name of the partnership, it will, prima facie, bind the firm, although passed by one partner to a separate creditor, in discharge of his private debt, unless there be covin between such debtor and creditor, or, at least, the want of authority, either expressed or implied, in in the debtor partner, to give the security of the firm' for his separate debt.

“The only difference between the decision of this court and that of the king’s bench, consists in this : We require the separate creditor who has obiained the partnership paper for the private debt of one of the partners, to show the assent of the whole firm to be bound. The rule of the king’s bench throws the burden of avoiding such security on the firm, by requiring them to prove that the act was covinous on the part of the partner, for whose private debt the paper of the firm was given, by showing that it was done without the knowledge, and against the consent of the other partners, and that the fact was known to the sep

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arate creditor when he took the paper of the firm. I can perceive no substantial difference, whether the note of a firm be taken for a private debt of ohe of the partners by a separate creditor of the partner, pledging the security of the firm, and taking the property of the firm upon a purchase of one of the partners, to satisfy his private debt. In both cases the act is equally injurious to the other partners ; it is taking their common property to pay a private debt of one of the partners” (Dobb v. Halsey, 16 Johns. 38 ).

Mr. Justice Story, in delivering the opinion of court, in the case of Rogers v. Bachelor ( 12 Pet. 229 and 230, says:

“The first instruction raises these questions: whether the funds of a partnership can be rightfully applied by one partner, to the discharge of his own separate pre-existing debt, without the assent, express or implied, of the other partner ; and whether it makes any difference in such a case, that the separate creditor had no knowledge at the time of the fact of the fund being partnership property. We are of opinion in the negative on both questions. The implied authority of each partner to dispose of the partnership funds, strictly and rightfully extends, only to the business and transactions of the partnership itself; and any disposition of those funds, by any partner, ■ beyond such purposes, is an excess beyond his authority as partner, and a misappropriation of those funds for which the partner is responsible to the partnership ; though in case of bona fide purchaser, without notice, for a valuable consideration, the partnership may be bound by such acts. Whatever acts, therefore, are done by any partner, in regard to partnership property or contracts, beyond the scope and objects of the partnership, must, in general, in order to bind the partnership, be derived from some further authority, express or implied, conferred upon such partner, beyond that

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resulting from Ms character as partner. Such is the general principle ; and in our judgment, it is founded in good sense and reason. One man ought not to be permitted to dispose of the property, or bind the rights of another, unless the latter has authorized the act. In the case of a partner paying his own separate debt out of the partnership funds, it is manifest that it is a violation of Ms duty and of the rights of his partners, unless they have assented to it. The act is an illegal conversion of the funds; and the separate creditor can have no better title to the funds than the partner himself had.

“Does it make any difference, that the separate creditor had no knowledge at the time that there was a misappropriation of the partnership funds? We think not. If he had such knowledge, undoubtedly he would be guilty of gross fraud ; not only in words but in.law. That was expressly decided in Sheriff t>. Wilks (1 East, 48), and, indeed, seems too plain upon principle to admit of any serious doubt. But we do not think that such knowledge is an essential ingredient in such a case. The true question is whether the title to the property has passed from the partnership to the separate creditor. If it has not, then the partnership may reassert their claim to it in the hands of such creditor.”

The learned justice then discusses some of the English cases, and quotes wtth approval the opinion of Chief Justice Speeoer, in Dobb v. Halsey {supra), that the burden of proof is on the creditor who receives firm effects in 'payment of the separate debt of one of the partners, to show the assent of the other partners ; and at page 232, says : “ It is true, that the precise point now before us does not appear to have received any direct adjudication; for in all the cases above-mentioned, there was a known application of the funds or securities of the partnership to the payment of the separate debt. But we tMnk that the true prin

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ciple to be extracted-from the authorities is, that one partner cannot apply the partnership funds or securities to the discharge of his own private debt without their consent; and that without their consent their title to the property is not divested in favor of such separate creditor, whether he knew it to be partnership property or not. In short, his'right depends not upon his knowledge that it was partnership property, but upon the fact, whether the other partners had assented to -such disposition of it or not.”

--These opinions of Justices Story and Spencer establish the principles that where partnership effects are shown to have been applied by one partner, to the payment of his separate debt, the creditor receiving the same is liable to the firm as for goods sold and delivered, unless he shows the assent of the other partner to such application, whether such creditor knew that the goods were partnership effects or not. These opinions are approved law (Colly. on Partn. (Perkins’ ed.) § 501).

Charles A. Black, for respondent.

After the plaintiff had closed his case, the court directed the jury to find a. verdict for the defendant, and to this general direction the plaintiff excepted. The exception should be to some specific part of the charge, or to some specific request to charge.

The case does not show the terms of the articles of copartnership between Kendall and the plaintiff (folio 34). Without this appearing it cannot be seen upon what testimony the court acted in directing a verdict for the defendant.

It appears that Kendall owed the defendant one thousa-nd and nine dollars, and that he paid the defendant one year’s interest on this sum, with the two baskets of wine (folk 35, 36, 37, 38).

- This payment was perfectly valid. There was no

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proof that the defendant knew that the wine belonged to the firm of Gfeery & Kendall. The testimony shows that the transaction was perfectly fair. There is no pretense that the defendant knew that the wine was misapplied, neither is there any testimony showing that it was misapplied.

The presumption, from the testimony is, that the interest was paid from the private property of Kendall. That he had the right to use it in the manner which he did (Dobb v. Halsey, 16 Johns. 33 -39).

This appeal raises this question: Can the effects of a copartnership be applied by one partner to the payment of his private debt, without the assent of his copartner or copartners 1

I am of the opinion that they cannot; and that the title of the firm to property cannot be divested in favor of, or vested in, said separate creditor, without the assent of the other members of the firm. This principle was clearly established in Dobb ». Halsey ( 16 Johns. 38 ), although the cases are not parallel, so far as the character of the property and interest of the firm involved.

But the counsel for the respondent urges strongly that there is no proof in this case that defendant knew this was partnership property; and to make him liable as the purchaser from the firm, it must appear that he knew at the time he received it on his private debt, that it was partnership property.

There is some evidence that the defendant had such knowledge, but for the purpose of a decision in this case, I will assume an entire absence of proof on that point; and I hold that this ignorance or want of knowledge as to the property belonging to a firm, makes no difference.

if the effects of a firm be so applied, the question of the liability of the creditor receiving them, to account

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for and pay to the firm, does not depend upon the creditor having or not having knowledge of the same being partnership property, but depends upon the fact as to whether or not the copartners assented to the transaction.

The authority of a partner to sell and dispose of the firm effects extends only to the business and transactions of the partnership ; whatever he does beyond this that is claimed or that can be held to bind the partnership, must be based upon some authority, express or implied, or the intervention of some principle of law or equity beyond his general authority as a partner. If he gives the written obligation of the firm, or takes the chattels or goods of the firm, and applies the same directly, in payment of his private debt, he must have the assent of his copartners. He should not be permitted to dispose of their property or make them liable, unless he has been authorized by them so to do. It is true the firm may become liable to bona fide purchasers of their negotiable paper, or in like manner, they may lose title to their specific chattels, by reason of a bona fide purchase and payment of the same, in such manner as would prevent them from claiming title; but the latter questions do not arise here. The defendant parted with nothing. He received the specific property of Geery & Kendall, on account of the private debt of Kendall, due to him, without the consent or assent, or even knowledge of the other copartner (plaintiff Geery). I hold, that under the circumstances, the title did not pass from the firm, and the latter, or its assigns, may reassert title, and claim and recover the value of the property, ás if sold by them.

The opinion of Judge Stoby, in the case of Rogers v. Bachelor ( 12 Pet. 229 , 230), is directly in point. He concludes his views on this point, by saying:

“But we think that the true principle to be extracted from the authorities is, that one partner cannot

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apply the partnership funds or securities to the discharge of his own private debt without their consent; and that without their consent their title to the property is not divested in favor of such separate creditor, whether he knew it to be partnership property or not. In short, his right depends not upon his knowledge that it was partnership property, but upon the fact, whether the other partners had assented to such disposition of it or not.”

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

Cases cited

Dob & Dob v. Halsey 16 Johns. 34 N.Y. Sup. Ct. p. 150