Case ID: abb-pr-ns_9/html/0263-01.html
Source: Caselaw Access Project
Author: {"author": "By the Court.—Ingalls, J.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

RICHTER against POPPENHUSEN.
    
      Court of Appeals,
    
      June Term, 1870.
    Partnership.—Executors and Administrators.— Joint Debtors.—Summons to show cause under Judgment.
    Executors of a deceased partner will not be held liable as partners, for transactions subsequent to the death of the decedent, on the ground that they consented that the business might proceed under the direction of the surviving partner for a time, and that a debt for necessary goods, either previously furnished to the firm or subsequently furnished to meet the necessity of the business, should be paid, as far as the executors were concerned, in the due course of administration. Such an understanding does not constitute the executors joint debtors with the surviving partner.
    Section 375 of the Code of Procedure,—allowing a judgment creditor, having recovered judgment against one of several persons jointly indebted on contract, to summon the other joint debtors to show cause why they should not be bound by the judgment,—does not authorize a proceeding against the executors of a deceased partner, after judgment against the surviving partner, on service on him alone, unless the evidence shows an engagement on the part of the executors to continue the business and become liable as partners with the survivor.
    Appeal from a judgment.
    In 1866, the plaintiff, Gustavus Richter, commenced an action to recover on the demand here in suit, by service of summons on John G. Perzel, and in 1867, he obtained judgment by default. The parties named as defendants in the action, were John G. Perzel, A. Iwan Yon Auw, and Conrad Poppenhusen, executors of Herman A. Schleicher, deceased, composing the firm of John George Perzel.
    The summons and complaint were served only on John G. Perzel. The executors who were made defendants, were not served. The complaint alleged that the plaintiff had sold and delivered to the defendants certain property mentioned in the complaint, and demanded judgment for the price.
    After judgment entered against all the defendants, the plaintiff served upon the defendants, Poppenhusen and Yon Auw, the executors, a summons under section 375 of the Code of Procedure, to show cause why they should not be bound by the judgment. The answer was a general denial. The issue came on for trial before Mr Justice Gilbert and a jury on January 25 and 26, 1869.
    On the trial, a witness for the plaintiff who was known to have had dealings with defendants’ firm, was asked:
    
      Q. Do you know whether Perzel was insolvent or not at the time of the commencement of this suit ?
    This was objected to, excluded, and plaintiff duly excepted.
    Plaintiff then offered to show that Perzel was insolvent long before the commencement of this action, and that execution on plaintiff’s judgment against him had been returned wholly unsatisfied.
    The testimony was excluded, on defendants’ objection, as immaterial, and plaintiff duly excepted.
    Plaintiff proved the death of Mr. Schleicher, July 17, 1866, and read the will of Mr. Schleicher and the letters testamentary issued to the defendants Yon Auw and Poppenhusen.
    The other material parts of the evidence sufficiently appear in the opinions of the supreme court and the court of appeals.
    At the close of the trial, by order of the court, the pleadings were amended so as to conform to the facts proved, showing a partnership between the defendants.
    Defendant moved to dismiss the complaint. The court granted the motion, and the plaintiff excepted, and after judgment entered thereon, the plaintiff appealed to the court at general term. The appeal was heard in December, 1869, and the following opinion rendered:
    By the Court. The issue tried was between the plaintiff and the defendants named, as executors of Mr. Schleicher, deceased, and arose upon a denial of the allegation in the complaint that the plaintiff sold and delivered coal to the defendants at various dates between June 20, 1866, and October 1, 1866, at an agreed price therein stated.
    The evidence showed a sale in fact of most of the coal to a partnership composed of the defendant Perzel, and the deceased, Mr. Schleicher, and a portion thereof to the surviving partner after the death of the latter. It was sought, however, to make the executors of Mr. Schleicher liable, on the ground that they, had carried on the partnership business in connection with the surviving partner, after the death of their testator.
    The court below deemed the evidence insufficient to establish this fact, and dismissed the complaint. Upon a review of the evidence, we are satisfied this ruling was correct. The material facts are these.
    The partnership between Mr. Perzel and the testator was formed for the manufacture of woolen goods, and was to continue until October 3, 1870. The articles provided that in case of the death of Mr. Schleicher, the capital contributed by him, being twenty thousand dollars, should remain for the benefit of his representatives, and the business should be continued until the expiration of the term. Mr. Schleicher died July 17, 1866. The defendants qualified as executors on September 11, following.
    Mr. Perzel, the surviving partner, was called as a witness by the plaintiff, and testified that the sign put out on commencing business was “Pioneer Woolen Millsthat he continued the business up to October 5, 1866, and bought coal of the plaintiff and others, and whatever was required to carry on the establishment after Mr. Schleicher’s death.
    The plaintiff testified, that on September 16 or 17, 1866, he went to see the executors to know what he had to do about delivering coal at the factory; that Mr. Poppenhusen referred him to Yon Auw.; that he told Mr. Yon Auw that he had a contract with Mr. Schleicher to deliver coal for the Pioneer Woolen Mills, and asked him what he had to do as to the delivering of any more coal there, and that he had been advised not to deliver on Perzel’s order. He further testified, “ Mr. Yon Auw told me the business is going on just the same ; we are going on with the business there just the same as before Mr. Schleicher’s death; he wanted me to go on and deliver coal, only to be very careful that I only delivered what was wanted ; that I should be paid, but he would not pay anything before the estate was settled. After this I went on and delivered coal.” The amount so delivered was about one third of the coal sued for. Two other witnesses testified to sales of goods to the firm of John George Perzel after the death of Mr. Schleicher, and that after suits against the surviving partner and executors, the bills were paid by work at the mills.
    This was all the evidence connecting the executors with the business carried on after the death of Mr. Schleicher, and we are of opinion that it is insufficient to make them liable as partners. To create such a liability, it is necessary to show that they voluntarily employed the testator’s assets which had cometo them, in the trade. It is not sufficient that the business is carried on by the surviving partner with their assent and encouragement, for it was his right and duty to do so without either. The surviving partner succeeded primarily to all the rights and interests of the partnership. He had the entire control of the partnership property, and the sole" right to collect the partnership dues (Voorhies v. Childs, 17 N. Y., 356). Nor do executors incur any responsibility by allowing the share of the capital-of the testator to remain in and be employed in the business of the partnership after his death, for the benefit of the cestuis que trust, when it is done in accordance with the testator’s instrnctions, contained in his will, or with the partnership agreement; but assets so directed to be employed are liable to make the debts contracted during their employment. To this extent the estate of a deceased partner will in equity be applicable to the liquidation of the demand of those who have become creditors of the partnership after his decease (Devaynes v. Noble, 1 Mer., 616, 622; Vulliamy v. Noble, 3 Id., 614; Whightman n. Townroe, 1 M. & S., 412; Exp. Garland, 10 Ves., 119; Exp. Holdsworth, 1 M. D. & D., 475; Thompson v. Andrews, 1 M. & K., 116; Cut-bush v. Cutbush, 1 Beav., 184; Thompson v. Brown, 4 Johns Ch., 627; Story on Partn., § 70).
    The executors, however, cannot be made liable personally without entering into the partnership. When this is done, then they become liable as partners, although they derive no profit personally, but are concerned only for the use and benefit of others, and this liability arises either by virtue of an actual agreement, or upon the familiar principle that they have held themselves out to the world as partners.
    We have looked into the other exceptions, but find-no error in the rulings of the court. The evidence rejected, however relevant to establish grounds of equitable relief, was wholly impertinent to the issue presented for trial.
    The judgment should be affirmed, with costs.
    Judgment accordingly.
    Prom this judgment the plaintiff appealed to the court of appeals.
    
      George H. Forster, for the plaintiff, appellant.
    I. The general term by which the appeal was heard, was without jurisdiction, because the justice whose decision was appealed from, took part (Judicial Article of 1869, § 8).
    II. The evidence shows a purchase and sale by the defendants, the executors.
    III. The transfer of the business of the limited partnership to Brooklyn, without filing a certificate in Kings county, made the partnership a general one. On the evidence, the plaintiff was entitled to recover for his coal sold and delivered to the factory (Exp. Garland, 10 Ves. Jr., 119; Collyer on Partn., §§ 601-603; Thomson v. Brown, 4 Johns., 619-627; Wightman v. Townroe, 1 Maule & S., 412).
    
      IY. The evidence as to the sale of the goods made at New York by Schleicher’s firm, was improperly excluded, as the same tended to show such an inteference in the business by Schleicher as to make him thus liable as a general partner, and thus made the partnership which his executor continued after his death a general partnership.
    Y. The question whether plaintiff communicated to Yon Auw the arrangement with Schleicher, should have been allowed.
    YI. The proof of the insolvency of Perzel was improperly included. The only relief sought by plaintiff in this action was the recovery of money; consequently, by section 253 of the Code, whether the grounds for such relief were what, before the Code, would have been termed equitable or legal, the cause was one of those which must be tried by a jury. The evidence offered as referred to in point IY, was offered as showing equitable grounds for the recovery of the money demanded. No other relief but the recovery of money is desired by plaintiff; but if he was entitled to such relief on equitable or legal grounds, he was entitled to have his proof in the case. The same question arose in the Yan Riper case, already referred to. That cause was also brought to trial before a jury, but the court admitted the evidence of insolvency, and then, on the evidence in this case, which was considered as taken in that case, found for the plaintiff. Repeated cases have decided that where an equitable defense is interposed to an action before the Code denominated legal, such defense is to be entertained, and the same Code authorizes but one mode of trial for an action where the relief is the recovery of money, whether the grounds of such relief are equitable or legal. The plaintiff was entitled to show any equitable as well as legal grounds for the recovery of the money due him. The nature of the action under the Code was for the recovery of money. The amendment allowed, removed any technical objections arising from the form of the pleadings to any evidence sustaining such a recovery. The exclusion of evidence which would have sustained such recovery on equitable grounds was improper (Chase v. Peck, 21 N. Y., 586; Blair v. Claxton, 18 Id., 533; Despard v. Walbridge, 15 Id., 378; Phillip v. Gorham, 17 Id., 275; Dederick v. Hoysradt, 4 How. Pr., 352; Burget v. Bissel, 5 Id., 193; Auburn City Bank v. Leonard,. 20 Id., 195).
    VII. The plaintiff, proceeding duly under section 375 of the Code, proved the judgment, and that no payments had been made on it; and on this proof he was entitled to recover.
    VIII. The trial was a mistrial. The dismissal of the complaint, with the direction that exceptions be heard, in the first instance, at the general term, was improper (Hoagland y. Miller, 16 Abb. Pr., 103).
    IX. The court should have found on the evidence that plaintiff was entitled to recover. There was at least sufficient evidence to go to the jury. Plaintiff was erroneously nonsuited. The exception to the dismissal of the complaint should be sustained. Plaintiff’ s exceptions were well taken, and should be sustained, judgment reversed, and a new trial ordered.
    
      Ira D. Warren, for the defendants, respondents.
    I. The surviving partner and his deceased partners’ executors are not joint debtors, within the statute. They are not only not joint debtors, but they cannot legally be joined in an action at law (Voorhis v. Childs, 17 N. Y., 374; Higgins v. Freeman, 2 Duer, 650; Grant v. Shurter, 1 Wend., 150; Lane v. Doty, 4 Barb., 534; 1 Chitty Pl., 50). Plaintiff can only sustain a suit in equity by alleging and proving that he has exhausted his remedy against the surviving partner, and that the partnership property has been applied (Trustees v. Laurence, 2 Denio, 577; cases cited above). Neither can a proceeding of this character be sustained against personal representatives of a deceased joint debtor (Kellogg v. Olmsted, 6 How. Pr., 487; Foster v. Wood, 1 Abb. Pr., 150; Mills v. Thursby, No. 10, 2 Id., 432). The only provision in the Code for summoning representatives (section 376) does not apply to this case, as Mr. Schleicher died before any suit was commenced.
    II. It has been held that this partnership was dissolved by the death of Mr. Schleicher (Walkenshaw v. Perzel, 4 Robt., 326; S. C., 32 How. Pr., 239). The statute (Laws of 1858, p. 450), requires the assent of the 61 legal representatives’’’— not one of them. One executor could not bind the other executor for the estate by any such statement (Forsyth v. Ganson, 5 Wend., 561; McIntire v. Morris, 14 Id., 97; Cayuga Co. Bank v. Bennett, 5 Hill, 237; Thompson v. Peters, 12 Wheat., 565; Peck v. Botsford, 7 Conn., 172). The statute means all the legal representatives; there is no pretense that Poppenhusen, the other executor, ever gave his assent or made any statements in regard to it.
    III. The only issue presented by the pleadings was whether or not the goods mentioned in the complaint were sold and delivered to the defendants at various times between June 20, 1866, and October 1,1866. Yon Auw and Poppenhusen are the executors of Herman A. Schleicher, Schleicher, before his death, was the partner of the defendant, John C. Perzel. Schleicher did not die until July 17, 1866. Yon Auw and Poppenhusen became executors on September 11, 1866. Nearly all the coal was sold and delivered before the defendants became executors. On October 3, 1866, the defendants, Yon Auw and Poppenhusen, commenced proceedings against Perzel to close up the affairs of the partnership. On these facts and the other facts mentioned. in the opinion of the court below, no jury would have been permitted to find a verdict for the plaintiff on this issue, to wit: that the coal mentioned in the bill of particulars was sold and delivered to the defendants. The only inteference with the property or assets of the firm of John Gr. Perzel by these executors, was through judicial proceedings to wind up its affairs, which were commenced within three weeks after they qualified as executors.
    IY. The statement made in the court below, that the special partnership became a general one by reason of an alleged omission of such special partnership to file a certificate in Kings county, is not supported by any evidence.
    
      
      Present, J. F. Barnard, Gilbert and Tappen, JJ.
    
   By the Court.—Ingalls, J.

The plaintiff failed to establish a state of facts which entitled him to the remedy which he sought under section 375 of the Code. That section provides as follows : “When a judgment shall be recovered against one or more of several persons jointly indebted upon a contract, by proceeding as provided in section 136, those who were not originally summoned to answer the complaint may be summoned to show cause why they should not be bound by the judgment in the same manner as if they had been originally summoned.” Section 136 provides that in case the action is against defendants jointly indebted upon contract, the plaintiff may proceed against the'defendant served, and judgment may be entered against all the defendants thus jointly indebted, and may be enforced against the joint property of the defendants, and against the separate property of the defendant served with process.

It is very clear that the executors were not jointly indebted with Perzel, for the coal in question, within the meaning of said section 375. The surviving partner, Perzel, had the control of the business, and the legal right to settle the partnership debts. The executors of a deceased partner cannot be joined with the surviving partner in an action at law to collect a debt against the partnership (Voorhis v. Childs, 17 N. Y., 354; Higgins v. Freeman, 2 Duer, 650; Lane v. Doty, 4 Barb., 534). In the last case, Judge Paige remarks: “In case of a joint contract, if one of the parties dies, his executor or administrator is, at law, discharged from liability, and the survivor alone can be sued ” (Tracy v. Suydam, 30 Barb., 110). In case of the death of one of the partners, the creditor must exhaust his remedy against the survivor, in the first instance, and- having failed to collect his debt, may resort to an equity action against the representatives of the deceased partner.

The evidence falls far short of establishing an engagement on the part of the executors to continue the business, and to become liable as partners with Perzel.

The plaintiff testified that he called upon Mr. Poppenhusen in regard to his contract for the delivery of the coal, and he referred him to his co-executor, Yon Auw, with whom the plaintiff had a conversation in regard to the coal. A portion of the interview is given by tile plaintiff as follows: “ Mr. Yon Auw told me the business is going on just the same; we are going on with the business, doing just the same as before Mr. Schleicher’s death, only he wanted me to go on and deliver coal; only to be very careful that I delivered only what was wanted. And so I told him I would deliver it.” And so after this—Q. “What did he say when you told him you would deliver it; did he tell you you should be paid ?”

A. “Yes; and he told me he could not pay anything right away, before the estate was settled.

Q. “There was then an amount due ?”

A. ‘‘ Yes—three hundred and eighty-eight dollars.”

Q. “And you asked him to pay it ?”

A. “Yes.”

Q. “ And he said he could not pay it until the estate was settled?”

4. “Yes.”

It the time of that conversation, there was due for coal delivered, three hundred and eighty-eight dollars. It is apparent from the conversation, as detailed by the plaintiff, that the executors had not the slightest idea of becoming partners in the business. The plaintiff was told expressly that no payment could be made, except out of the estate, and that, too, only in the due course of administration. The purport of the conversation was, in short, that the business would proceed under the direction of Perzel for a time, as it had done, and the plaintiff’s claim for coal already delivered, and that which should be furnished to meet the necessity of the business, would be paid, so far as the executors were concerned, in the due course of administration of the estate. The plaintiff was not justified in concluding from the conversation that the executors undertook to become joint debtors with Perzel for the coal delivered and to be delivered. Ho liability was assumed by the executors beyond an engagement to pay such an amount as became properly chargeable to the estate of Schleicher, and such amount to be paid as a claim in the settlement of the estate.

This view of the case renders it unnecessary to consider the various exceptions which were taken to the admission and rejection of evidence, because they become immaterial, as the result could not be changed.

The appellant’s counsel insists that the general term had not jurisdiction to hear this case, because Judge Gilbert, who tried the case at the circuit, participated in the decision at general term, on December 30,1869. This court, at the present June term, decided, in the case of Real v. People, that the judiciary article took effect, in this particular, on January 1, 1870

The judgment must be affirmed with costs.

Judgment accordingly.