Case ID: misc_14/html/0607-01.html
Source: Caselaw Access Project
Author: {"author": "Daly, Ch. J.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

James M. Sinclair et al., Respondents, v. Robert A. Hollister, Impleaded, Appellant.
    (New York Common Pleas
    General Term,
    December, 1895.)
    A firm note made after dissolution to one who had dealings with, the firm and was without notice of the change in the partnership .is valid and binding upon the retiring partner.
    In an action upon such note, where actual notice of the dissolution to plaintiff is not shown, evidence of the dissolution, or that some portion of the work for which the note was given was not ordered until after the dissolution took place, is immaterial.
    A judgment rendered on a former trial of the action against two of the defendants, and which has been vacated and is not pleaded, is not admissible in evidence as a bar or estoppel.
    Appeal by the defendant Hollister from, an affirmance by the City Court, General Term, of a judgment of the Trial Term, entered upon a verdict by direction of the court for the sum of $1,718.27, and from an order denying a motion for a new trial.
    The action was- brought to recover the amount, with interest, -of two promissory notes signed William J. Merritt & Co. to the order of H. Sinclair’s Sons, payable at the Mount Morris Bank, New York, for value received, both dated June 6, 1888, one at three months for $623, and one at four months for $622. The defendants were sued as copartners under the name of William J. Merritt & Co., and defendant Hollister answered, denying each and every allegation in the complaint, except that he admitted that the defendants were copartners under the firm name of William J. Merritt & Co. in the year 1887. The complaint alleged that the consideration of the notes was work done and materials furnished to the defendants at their request in the latter part of the year 1887, and in the months of January, February, March, April, May and June, 1888.
    
      Reginald H. Arnold (Gilbert ■ W. Minor, of counsel), for appellant. ■ '
    
      Artemas B. Smith and Arthur L. Henthorn, for respondents.
   Daly, Ch. J.

By the admission in his answer it was established that the appellant Hollister was a partner in the firm of William J. Merritt & Co. in the year 1887, when they gave, according to the plaintiffs’ evidence, the order for the work which formed the consideration of the notes sued upon. Payment of the notes is resisted on the ground that, although in the firm name, they were made by Merritt, one of the partners, after dissolution of the firm, and without authority of the appellant. It was not shown that the plaintiffs had notice of the dissolution at the time they received ti^e notes. As dealers with the copartnership they were entitled to notice, and in the absence of it the extension of a new credit to the firm, by accepting notes for the firm debt, entitled them to recover.

While the general rule is that one partner cannot bind the other after dissolution, even by the renewal of the partnership' note, an exception is made in favor of one having dealings with the firm and taking the new note without actual notice of the dissolution. The holder of the renewed paper is a dealer with the firm. National Bank v. Norton, 1 Hill, 572. “ In case of the dissolution of a copartnership, actual notice of the dissolution must be brought home to all persons with whom the firm has had dealings, to protect, as to such persons,, one partner from the acts of another in the use of the partnership name after the dissolution. Where a note was made by a firm in the copartnership name, which was discounted by a bank for the accommodation of the payee, and was repeatedly renewed, it was held that the firm must be considered as having had dealings with the bank within the meaning of the rule requiring actual notice of the dissolution.”' Vernon v. Manhattan Co., 22 Wend. 183. It was held in Morrison v. Perry, 11 Hun, 33, that a note given after the. dissolution of the firm by one partner, without the authority of the others, for a previous copartnership debt due to the. holder, could nót be enforced against such other persons, though the holder had no actual notice of the dissolution. The reasoning in that ’ case is that no new debt is contracted by taking a note for the old partnership obligation, as the existing indebtedness still remains good. , The opinion takes, no notice of Vernon v. Manhattan Co, supra, holding the-contrary doctrine; and cites National Bank v. Norton, supra, as authority for the principal proposition, “ that after the dissolution of a partnership neither of the partners can give notice or accept bills so as to bind the other partners,, even when it is done for the purpose of providing for a debt due from the former firm,” while that case, as we have seen,, excepts from the general rule cases where the new note is given to one having had dealings with the firm without actual notice of dissolution. The reasoning in Morrison v. Perry is that the new note is not a new debt. But the taking of a new note is the giving of a new credit, and a new contract is made-therefor. The other cases cited in Morrison v. Perry are cases where the creditor took the new security with knowledge-of the dissolution of the firm, where the question of notice was not raised, or cases of new acknowledgment of formercopartnership debts. In the present case the plaintiffs, who were dealers with the appellant’s firm, had no- notice of the . 'dissolution at the time they received the notes in suit, and under the authority of National Bank v. Norton and Vernon v. Manhattan, Co., supra, are entitled to recover under the protection of the rule which makes a retiring partner liable for subsequent engagements made - by his former partner in •the firm name with those who had previous dealings with the ■firm, and who entered into the new transaction witiou't notice . -of the change in the partnership. Austin v. Holland, 69 N. Y. 571.

The exceptions to rulings upon evidence remain to be con- - ssidered:. The defendant offered in evidence the agreement of •dissolution, but as it was ineffectual to discharge .him unless 1 v -.actual notice of it.to the plaintiffs was shown, -and' as defend-'unt did -not offer to show -notice, the agreement was properly ^rejected. .The defendant attempted to show- that some of the work by plaintiffs was ordered after the dissolution of- the-firm, but as the copartners would have been liable therefor unless, plaintiff had notice of dissolution, this -evidence -was ' .•also properly rejected. It is now urged that the evidence .-should have been- admitted as.it was intended'to elicit proof that the materials, which plaintiff had testified were ordered "before dissolution, were not, in fact, ordered- or furnished •until afterwards.- The form of the question put to the witness - .gave no indication of the intention to bring out such evidence.Its plain scope was to show that some of the goods, not all, were ordered after the dissolution, It was as follows:' “ Q. . Mow, turn to plaintiffs’ exhibit D, which has. been offered in -evidence in this case,.being a bill dated May 29, 1888, to William J. Merritt & Co. from Sinclair & Son, and state, if you •can tell, what materials in that bill were ordered in those houses after the dissolution of that firm of Merritt '& Co.” ■ ’The question assumed, in fact, that some of the materials . were ordered before the dissolution. ' If'.so, and plaintiffs had uo notice of the dissolution, defendants were liable for the material's ordered in the firm name afterwards, Mohe of the -cpiestions objected to and ruled out indicated another purpose ‘ now claimed for them, it e., to show that the notes were accepted by the plaintiffs from the defendants Merritt and Tilton in satisfaction of the claim against the old firm.

Exception was taken to the exclusion' of a certain judgment-roll in this action, in favor of the plaintiffs against two of the defendants, Merritt and Tilton, only, for the amount sued on. It is claimed that this judgment was a bar to the action. The record was objected to on the ground that the judgment had not been pleaded as a defense;■ that application for leave to plead it had been denied and the order therein affirmed by the General Term of the City Court and by this court on appeal, and further that the1 judgment had been vacated: The judgment in question was entered after the first trial' of the case upon the direction of the trial court of a verdict in favor of plaintiffs against the defendant Merritt, who signed the firm name to the notes, and the defendant Tilton, who did not defend the action, while the cause was dismissed as to this appellant Hollister. The judgment of dismissal in favor of Hollister was reverséd by the City Court, and the judg-' ment against the.other two defendants was vacated. The appellant’s contention is that the entry of that judgment against two of the partners was fatal to a recovery against the other.

The effect of the judgment in question, and of the order vacating it, and of the order denying the motion of appellant Hollister to set it up as a defense to this action, Avere fully considered by this court on the appeal from the latter order. Sinclair v. Hollister, 16 N. Y. Supp. 529; 41 N. Y. St. Repr. 349. We held that the entry of judgment against two only of the joint contractors was a mere irregularity, the correction of which by the court below was not the subject of review by us, and we held that defendant’s motion for leave to set it up as a defense by supplemental answer was denied' in the exercise of a discretion in the City Court, which also was not the subject of review. The judgment was not permitted to be pleaded as a defense, and not being pleaded was not admissiblé as a bar or estoppel (Krekeler v. Ritter, 62 N. Y. 372), and "was properly rejected.

. The evidence in .the case was ample to sustain the plaintiffs’. claim that the work was ;all, ordered at oné timé and while appellant was a member of the firm, according to his ‘own admission. The copartnership thus admitted continued, as to all persons dealing with the firm on the faith of the copartnership,- until notice .of dissolution was- shown, and so the complaint in its full'scope was proved when the case was closed. The defendant expressly waived the right to go to the. jury upon any question of. "fact, and the court was authorized to dispose of any such question- in the case by directing a verdict. No'other exception called for-a reversal.

Judgment and order affirmed, with costs.

Bisohoef and Pryor, JJ., concur.

Judgment and order-affirmed, with costs. ' -