Case ID: ad_21/html/0570-01.html
Source: Caselaw Access Project
Author: {"author": "Ingraham, J.:", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

Waldemar Bendix and Adolf Davidsohn, Respondents, v. Clinton P. Ayers and Richard Wagner, Appellants, Impleaded with Leopold Pinkus.
    
      Agreement to release some copartners who pay a pwrt of the firm debt — extent to' which evidence must be offered where some competent evidence on the subject has been, rejected.
    
    Where the articles of dissolution of a copartnership provide that the continuing partner shall take the firm assets and pay the firm creditors, and, with-knowledge of the articles of dissolution, certain firm creditors enter into an agreement that upon payment by the retiring partners of part of the indebtedness due to them, they will release such retiring partners from liability for the balance unpaid, for which amount they will retain the liability .of the continuing partner, the agreement finds a sufficient consideration for its support in the advantage the creditors derive from the actual, payment made by the retiring partners individually, without the creditors being under the necessity of resorting to legal proceedings to first exhaust their remedy against the copartnership property.
    .Where the court has excluded competent evidence to show an agreement, which, if proved, would have defeated the plaintiffs cause of action, and has also refused to allow the defendant to prove facts which tend to show that such agreement has been carried out by the defendant, the latter is not bound to prove, or offer to prove, all the facts showing the performance of such agreement. .
    Appeal by the defendants, Clinton P. A.yers and another, from a judgment of the Supreme Court in favor of the plaintiffs, entered in the office of the clerk of the county of New York on the 4th day of March, 1897, upon the verdict of a jury rendered by direction of the court..
    
      Gibson Putzel, for the appellants.
    
      Samuel Fleischman, for the respondents.
   Ingraham, J.:

The complaint alleges three causes of action, the first of which is to recover for a balance of $833.81, due from the defendant Pinkus to the plaintiffs on the 1st of January, 1893, which, at that time, the defendants, as copartners under the firm name of Pinkus, Ayers & Co., promised and . agreed to pay to. the plaintiffs. The second cause of action is for goods sold and delivered in .the month of March, 1893, upon a statement of which a balance was due from the defendants as such copartners, to the plaintiffs, of $12,781.92, of which has been paid the sum of $6,444.21, judgment. being demanded for the balance. The third cause of action is to recover the same demand as is specified in the first- and second causes of action from the firm of Pinkus* Ayers & Co. upon an account stated.

. The defendants Ayers & Wagner answered the complaint, alleging that they have no knowledge or information sufficient to form a belief as to the allegations contained in the complaint, denying the allegations contained in paragraph 4 of the first cause of action and the allegations contained in paragraph 3 of the second cause of action; and, for a separate and distinct defense^ the defendants alleged, the formation of the copartnership between the defendants on the 1st of January, 1893, the transfer to the copartnership of certain goods' purchased by said Pinkus from the plaintiffs, and that the new copartnership assumed the liability of Pinkus to the plaintiffs; that the plaintiffs sold to the defendants, as copartners, the goods described in the second cause of action; that on the 18th of April, 1893, the copartnership of Pinkus, Ayers & Co. was dissolved by mutual consent, the agreement of dissolution .providing that the stock of linens belonging to the said firm was to be transferred to the defendant Pinkus, the said Pinkus to pay the purchase price of siich goods to the creditors of the firm of Pinkus, Ayers & Co., including the plaintiffs; that subsequently, and about May 27, 1893, an agreement was entered into by the plaintiffs, whereby the plaintiffs agreed to release the firm of Pinkus, Ayers & Co. and the defendants Ayers & Wagner of and from liability of said firm, and of the said Ayers & Wagner on the debt , due by the said firm of Pinkus, Ayers & Co. to the plaintiffs upon payment by the said defendants Ayers & Wagner of the sum of $6,444.21; and that, upon the payment of that suni, the plaintiffs would release the said defendants Ayers & Wagner from the balance due on said account between the plaintiffs and the firm of Pinkus, Ayers & Co., and would hold said Pinkus personally for the' balance; that said Ayers & Wagner paid such sum of $6,444.21, and that thereby the defendants Ayers & Wagner were duly released and discharged from liability to the plaintiffs.

The amount due to the plaintiffs from the firm of Pinkus, Ayers & Co. having been admitted by the answer, the plaintiffs proved the copartnership of the plaintiffs and then rested. The defendants then, to support the defense set up in the answer, proved the receipt by the plaintiffs of a notice of dissolution of the firm of Pinkus, Ayers & Co. by a letter dated at New York April 24, 1893, which was received by the plaintiffs in the beginning of May. The defendants then offered in evidence a letter from the plaintiffs to the defendants Ayers & Wagner, dated May 29,1893. This letter was objected to by the plaintiffs as immaterial, irrelevant and incompetent, and not embraced within the issues in.the pleadings. That objection was sustained and the defendants excepted. That; letter is a part of the record' and recites the receipt of a cable from the' defendants, which reads: “-Will pay Bendix half with sixty-day note if released for balance and goods remain our possession,” and continues: In reference to this cable we will agree to the proposal made by Mr. Leopold Pinkus to settle the balance of our account according to statement sent with letter of Hay 17th, showing to our favor a balance for Marks 53428.45 for June 1st, 1893, as follows: We draw on you for Marks 26714.22 a 4.18 & 2 Mks. Interest Dolls. 6444.21 first of Exchange per July 31st, 1893, payable at Messrs. Freund, Foise & Co., New York, 13 & 15 White street. After this draft will be promptly paid when due we release you fully for the balance of our acct.’ and will keep for it only Hr. Leopold Pinkus responsible, with whom we will settle this Marks 26714.23. We mailed the draft to-day,- and beg to accept the same kindly when presented.” The defendant Wagner was then called as a witness and was asked the question : “ (Paper shown witness.) This bill of exchange was drawn on you by Waldemar Bendix, the plaintiff % ” This question was objected to as immaterial, irrelevant and incompetent, and as not embraced within the issues That objection was sustained and the defendants excepted. •

We have thus the defense alleged in the answer, that after the dissolution of the firm which was indebted to the plaintiffs in the amount alleged in the complaint, to recover for which the action was brought, an agreement was made whereby the property of the copartnership was to be transferred to Pinkus, and Pinkus was to pay the copartnership indebtedness. Knowledge of the dissolution and of this agreement was communicated to the plaintiffs, and an agreement was entered into between the plaintiffs and these defendants and Pinkus by which the plaintiffs were to accept one-half of the amount due from the dissolved firm to the plaintiffs, in cash from these appellants, and an agreement by the plaintiffs to release these appellants for the .balance of the account, holding Pinkus, as successor in business of the firm of which the defendants were members, for-the other'one-half of such balance; and to prove that agreement the defendants offered in evidence a letter from the plaintiffs containing such agreement on their part and offered evidence tending to show payment of the amount required to be paid under the agreement, which agreement and evidence were excluded by the court.

In the state of the record it is quite apparent that evidence competent to show 'the agreement between the plaintiffs and these defendants was excluded by the court; and if the defense set up in the answer was a good defense if proved, and the court refused to receive evidence offered by the defendants which proved such defense, such error requires a new trial. It would be putting the defendant in an unfair position to hold that, where the court had excluded competent evidence to show an agreement which if proved would haye defeated the plaintiffs’ cause of action, and had also refused to allow the defendant to prove'facts which would tend to., show that such agreement had been carried out by the defendants,' the defendants were bound to go on and prove or offer to prove all' the facts showing the performance of the agreement which the court, had held was not a defense, to the cause of action alleged.

"We haye first to determine whether or not the facts alleged in the answer were a. defense to the cause of action as against these two' defendants. While the answer is not skillfully drawn, it is not. difficult to ascertain what it was intended to allege as a defense. The third causó of action was against all of the defendants as members of a copartnership. That copartnership had been dissolved under an agreement by which the defendant Pinkus was to pay the amount due plaintiffs, and the defendants Ayers & Wagner were, as between the individual members of the copartnership, sureties for the payment by Pinkus of the amount due to the plaintiffs. The. cause of action being against the members of the firm, the firm property. was. primarily liable for the payment of the debts of the firm-, its members being individually liable'for any deficiency .after the' application of the firm’s property to the payment of its debts. This being the situation, the agreement between these defendants „and the plaintiffs provided that if these appellants should pay to the plaintiffs the sum of $6,444.21, the plaintiffs would release them from liability for the payment of the balance due on account between the plaintiffs and the said copartnership and. would hold Pinkus personally for the balancethat .thereupon these defendants did pay the said sum of $6,444.21, and that by such payment and acceptance these defendants were released and discharged of and from liability to the plaintiffs'.

. The question here is not as to whether such a release of the two members,of thé firm (the appellants) operated to release Pinkus as a joint debtor, but whether such an agreement fully executed operated to release these appellants from the payment of the balance of the indebtedness. We think that such an agreement between two members of a copartnership, whereby such two members individually paid a portion of the firm debt on condition of their being released from liability for the remainder of the debt, was a valid agreement founded upon a good consideration.

The rule of the common law, that payment by a debtor of a portion of a conceded indebtedness is not a sufficient consideration to support an agreement by the creditor to release the balance of the debt, has been much criticised by learned judges and text book writers as extremely technical and not well supported by reason. It is, however, a well-settled rule of the common law, and applied in cases coming strictly within it. The tendency of the courts has been to apply this rule only when the facts bring the case clearly within the principle stated. Where the creditor gets any other advantage besides that of a part payment by the original debtor who is principally liable for the debt, the courts have held that such an advantage to the creditor is a consideration sufficient to support the promise to release the balance of the debt.

The Court of Appeals in two well-considered cases has held that “ the case of accepting the sole liability of one of two joint debtors or copartners in satisfaction of the joint or copartnership debt is an illustration. This is held to be a good satisfaction, because the sole liability of one of two debtors may be more beneficial than the joint liability of both, either in respect of the solvency of the parties or the convenience of the remedy.” (Allison v. Abendroth, 108 N. Y. 470; Luddington v. Bell, 77 id. 138.) In the latter case it was held that the acceptance by the creditor of the individual note of one of the members of a copartnership, after dissolution, for a portion of the copartnership debt, was a good consideration for the creditor’s agreement to discharge the maker from further liability. Under the authority of these two cases it is clear that if the pleader had alleged the exact facts in the answer, viz., the making of the agreement and the acceptance of a draft hy these two defendants for the amount which they were to pay in satisfaction of the plaintiffs’ claim against them individually, a good defense would have been alleged. It is difficult to conceive why the giving of a note for the payment of a portion of an indebtedness is a greater advantage, to the creditor than the actual payment by the debtor or a pérson con-, tingently liable for the payment of a portion of such indebtedness. The acceptance of a note of the debtor by the creditor is certainly not as advantageous to the creditor as the acceptance of the actual money by the creditor. By such a payment the creditor receives a portion of his demand from one of the debtors, when he would not be entitled to sue such debtor without joining the other joint debtor and could not enforce his judgment against the individual property of his debtors until he had exhausted the joint property. As was said by the Court of Appeals in Luddington v. Bell (supra), in speaking of an obligation that one copartner' received in discharge of a copartnership indebtedness, “ an individual obligation may be a higher security than .that of a copartnership, and a debt due from partners may not always be as substantial and safe as a debt against one of them, for such copartnership debt must be first collected out of the copartnership assets, and not out of the individual property of the several partners, until these are exhausted, and then only after the individual debts are fully paid. Take the case of an individual who has assets out of which a debt may be collected. It is easy to see that the chance of collection would be far better against one of a firm than against .a copartnership which had met with losses and was not in a condition to meet its pecuniary obligations.” Applying what was said to the case at bar, it seems quite clear that a payment -by an individual copartner out of his own property of a debt due from the copartnership may be a substantial advantage to the creditor, as the creditor, to collect his debts, must first proceed against the copartnership property, and the individual property of the copartners would only be liable to pay the copartnership debts after the individual debts of the copart-' nership had been paid. As was said by the Court of Appeals in Allison v. Abendroth (supra), “ this rule of the common law is -x- ■ * -x ‘ technical and not very well supported in reason,’ but it has been steadily maintained by the courts in cases coming strictly within it. But it is held that where there is an independent consideration, or the creditor receives any benefit, or is .put in a better position, or one from which there may be legal possibility of benefit to which he was not entitled, except for the agreement, then the agreement is not nudum pactum, and the doctrine of the common law to which we have adverted has no application. * * * Following the same principle, it is held that when the debtor enters into a new contract with the creditor to do something which he was not bound to do by the original contract, the new contract is a good accord and satisfaction if so agreed. The case of accepting the sole liability of one of two joint debtors or copartners in satisfaction of the joint or copartnership debt is an illustration. This is held to be a good satisfaction, because the sole liability of one of two debtors may be more beneficial than the joint liability of both, either in respect of the solvency of the parties or the convenience of the remedy.”

These facts as alleged in the answer are clearly within the principle thus established. The payment by these two defendants of a sum of money, without compelling the plaintiffs to resort to their legal proceedings against the copartnership, and exhausting, their remedy as against the copartnership property, is clearly an advantage to the creditor, which is sufficient to sustain this agreement which released-the copartners making such payment; and we see no reason why this agreement, being based upon a valid consideration, and having been fully executed, should not be enforced, and why these defendants were not thereby discharged. It clearly appears from the record that the court excluded all evidence of the facts alleged in the answer on the grounds that the facts alleged did not constitute a defense. TTpon no other principle could the letter of the plaintiffs to the defendants, accepting the proposed payment in full settlement of the plaintiffs’ demand, have been rejected; and the refusal of the court to allow the defendants to testify that a bill of exchange was. drawn on one of these defendants by the plaintiffs was a refusal to allow evidence of the method by which the payment provided for by the agreement had been made. We think that the defense set up in the answer is a good defense, and that the action of the court in refusing to allow the defendants to prove the facts which establish such defense was error.

The respondents insist that as the complaint alleges that on or about June 1, 1893, an amount was stated between the plaintiffs and the defendants upon which a balance was found due of $12,781.92, which allegation is not denied in the answer, and as the agreement is stated to have been made on or about May 27, 1893, such agreement could not have released a debt which existed on June 1,1893. The answer does not purport to state when this agreement of May 27, 1893, was fully carried out so as to have been an executed agreement and thus to have operated to release the indebtedness. It might well be that an indebtedness had existed on June first which was subsequently satisfied by the execution "of the agreement made May twenty-seventh, and which was not fully executed until after June first. Nor is the date of the agreement by which these appellants agreed to pay the sum proposed to be paid’by the plaim tiffs to release them individually stated in the answer. May 27, 1893, is the date upon which it is alleged that Pinkus entered into an agreement with the plaintiffs, and the answer then alleges that thereupon the plaintiffs agreed with the defendants Ayers & Wagner that if the said defendants would pay the said sum of $6,444.21 due the- plaintiffs, then they, the said plaintiffs, would release the said deféndants Ayers & Wagner from the balance due on the said account between the plaintiffs and the said firm of Pinkus, Ayers & Co., and would hold the said Pinkus ■ personally for the balance; that thereupon Ayers & Wagner agreed to pay and did pay the said sum of $6,444.21, and were thereby duly released and discharged of and from liability to the said plaintiffs.

There is nothing in this allegation to show that this agreement became an executed agreement, and thus an accord and satisfaction prior to the 1st of June, 1893, at which time it is alleged that the accounts between the plaintiffs and the copartnership were stated.

It follows that the judgment must be reversed and a new trial ordered, with costs to the appellants to abide the result.

Van Brunt, P. J., Williams, Patterson and O’Brien, JJ., concurred.

Judgment reversed, new trial ordered, costs to appellants to abide event.