Case ID: abb-pr_2/html/0333-01.html
Source: Caselaw Access Project
Author: {"author": "W00DRUFF, J.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

ENGLIS a. FURNISS.
    
      New York Common Pleas; General Term,
    
      December, 1855.
    PaktNeks. — Bights of, in Equity.
    At law no action can be maintained between the members of two firms, having one member common to both.
    In equity, such an action may be maintained.
    But the plaintiffs, to sustain their action, must clearly show equities upon all the circumstances of the case, entitling them to relief.
    An assignment by the common member of both firms, to his partner in the firm holding the claim against the other, of his interest in such claim, does not deprive the members of the other firm of any equitable defences which they would be entitled to maintain against their partner the assignor, were no such assignment made.
    Appeal from a judgment entered upon the report of a referee.
    The complaint in this action, which was verified, was as follows:—
    Title of the Cause.
    
      City and County of New York, ss.—
    John Englis, plaintiff in tliis action, by Martin, Strong and A. F. Smith, bis attorneys, complains of William H. Brown and William P. Furniss, defendants in this action, and alleges and avers—
    That at the several times herein mentioned, the defendants were the owners of the steamboat Rhode Island.
    That on or about November 10, 1849, the plaintiff and William H. Brown, then being co-partners in business, under the name and firm of Brown & Englis, at the request and for the benefit of the defendants, made certain repairs upon the said steamboat Bhode Island, and furnished a large quantity of materials, with which to repair said steamboat, and also paid and laid out several large sums of money in and about repairing said steamboat.
    
      That the costs of said repairs, the value of said materials, and the said sums of money so paid and laid out as aforesaid, amounted in the whole to the sum of $4,969 71, and that by reason of the premises, the said defendants became indebted to said firm of Brown* & Englis, on said tenth day of November, 1849, in said sum of $4,969 71, which sum, or any part thereof, said defendants, or either of them, have not at any time paid.
    .That on or about the seventh day of August, 1851, the said William H. Brown, of said firm of Brown & Englis, duly assigned and released to the plaintiff all his right, title, and interest, of, in, and to the said claim of said firm of Brown & Englis, against said defendant, for said repairs, materials, and moneys above mentioned, and of, in, and to all moneys to be collected on account of said claim, and that the plaintiff is now the sole lawful holder and owner of said claim.
    Wherefore the plaintiff demands judgment against the defendants for the sum of $4,969 71, with interest thereon from November 10, 1849, besides the costs of this action.
    JOHN ENGLIS.
    The answer of Furniss contained a general denial. Brown did not appear.
    On the trial before William Kent, referee, the following facts appeared in evidence.
    The plaintiff and the defendant Brown, were, in 1849 and 1850, partners in business as ship carpenters doing business in New York City. On July 23, 1849, Brown, being the owner of the steamer Rhode Island, entered into a written agreement with the defendant Furniss, whereby he sold to Furniss one-half of the Rhode Island, for $25,000. By further provisions of the agreement Brown was to repair and fit up the steamboat; which was to be employed in the coasting trade in the Pacific, under the sole direction of Furniss, but for the joint account of Furniss & Brown. Furniss was to pay one-half the expenses of the repairs, by notes.
    The repairing and fitting up of the steamer, which by the above agreement, Brown undertook to do, was done by the firm of Brown & Englis; and without any other agreement being entered into by Furniss respecting the work, than that with Brown above mentioned. But Furniss in part superintended and directed the repairs.
    Furniss paid Brown the sums which by the agreement he was bound to pay, and indeed considerably overpaid him; so that on and before August 7, 1851, Brown was indebted to Furniss in an amount exceeding that of Brown & Englis’ bill for the repairs of the steamer.
    On August 7,. 1851, Brown assigned to Englis, the plaintiff, all his interest in the bill for the repairs done by Brown & Englis. Brown failed in 1851.
    Upon these facts the referee reported that the complaint should be dismissed ; and judgment was entered accordingly, from which defendant appealed.
    
      A. F. Smith, for appellant.
    I. Brown & Furniss were joint owners of the Rhode Island, and as against third persons, nothing else being proved but the joint ownership and the repairs, both Brown and Furniss would be liable therefor. (Rich v. Roe, Cowp., 639; Ingersoll v. Yan Bokkelin, 7 Cow., 670; Marquand v. Webb, 16 Johns. M., 89).
    II. Though it were proved, in addition to the joint ownership and the repairs, that the repairs were done by the firm of Brown & Englis, still no difficulty would exist against a recovery. Brown & Furniss would not be liable to Brown & Englis in an action at law, but in equity there is no difficulty in the way of a recovery. (1 Story’s Fq. Jur., §§ 679, 680; Story on Partn., 323 d? n. 343; Porter v. McClure, 15 Wend. 187).
    III. Assume that the ownership is proved, and that the repairs were done, and by a third person. Admit that as between Brown and Furniss, Brown is by agreement to pay for the repairs, in the first instance. Beyond question the third person could recover from Brown & Furniss unless notice of the private agreement was brought home to him and he assented to it — in other words unless he gave credit to Brown alone. (Rich v. Coe, Cowp., 539).
    IY. Now though the repairs were done by Brown & Englis, instead of by a third person alone, still Brown & Englis are entitled to recover. 1. The private agreement obliging Brown to pay for the repairs, does not bind the partnership of Brown & Englis as a contract — first, because it was without the scope of the partnership business, (Story on Partn., § 111, 112; Gan-sevoort v. Williams, 14 Wend. 133 ; Wilson v. Williams, 14 Wend., 146), being not an agreement for the repairing of ships, but for the sale of one, and for an adventure in California;— and second, because it did not assume to bind the firm, but was the contract of Brown alone. {Story on Pa/rtn. § 102). 2. Then it could bind the firm only as a notice. It could not operate as notice to the firm, because it was in a matter not pertaining to the partnership business. The partners are not agents for one another beyond the scope of their partnership concerns.
    Y. It has been repeatedly held that one partner cannot pay his private debt with a debt due to the firm, nor with the goods of the firm. In the one case the debt to the partnership still remains; in the other, the partnership may sue for the price of the goods. (Evernghim v. Ensworth, 7 Wend., 326; Gram v. Stewart, 5 Cow., 489; Dob v. Halsey, 16 Johns. B., 34). The cases are in point. Brown was under obligation to Eurniss to repair the boat. (He owed a debt). He makes the repairs by his firm of Brown & Furniss. (He pays the debt with partnership property).
    YI. The defence hinges upon the agreement of Brown to do the repairs himself. That agreement did not bind Englis. It was individual by Brown, and was beyond the scope of the partnership business.
    
      William Tracy and William Curtis Noyes, for respondent.
    I. The repairs made upon the Bhode Island, were made by Brown & Englis, for William H. Brown, then one of the firm, and not for the defendant, as owner or otherwise. 1. Brown was bound by the contract with Furniss to make them, and Furniss was to pay his half by notes. Brown’s knowledge of the duty he thus owed Furniss, was notice to Brown & Englis of the fact, and precluded the idea that the repairs were made under an implied promise from Furniss to pay Brown & Englis. Besides, no one can doubt he had actual notice also. 2. There was no request on the part of Furniss to make the repairs. The agreement for the sale of the steamer was an executory one; the payment, by the giving the notes, was not to be made until she was repaired and ready for sea. The repairs were for the benefit of Brown alone, to enable him to complete the sale by a delivery. They were not for Furniss’ benefit, nor was any credit given to him, as owner; nor was he, as between Brown and the plaintiff and himself, the owner.
    II. The repairs, when made pursuant to the contract, did not create a debt from Brown & Furniss to Brown & Englis, aud being made to be paid for by Furniss’ notes, when the steamer was ready for sea, Furniss having given his notes for them to Brown, in pursuance of the contract, and then having paid the notes, such payment was a valid payment, and extinguished all possible claim that could exist in favor of any one.
    III. The claim for repairs by Brown & Englis, Brown, himself, being bound to make them, and he having made them, in pursuance of his contract, was incapable of assignment by Brown to Englis, so as to give the latter any cause of action. The assignment of such a claim by one partner to another, is nothing but a piece of dishonest effrontery, and, in this instance, has upon its face every evidence of fraud.
   W00DRUFF, J.

In the view that I take of the right of the appellant to maintain this action, it is not necessary that I should consider the question whether the agreement between Brown and Furniss vested a present interest in Furniss at the time of the execution and delivery thereof so as to make him a joint owner of the steamboat Bhode Island, at the time when the repairs in question were made, — for my conclusion is, that assuming such joint ownership of the boat, the plaintiff cannot maintain this action.

In the first place I deem it quite clear that the plaintiff, by virtue of the assignment to himself by his copartner Brown, acquired no right which he and Brown jointly had not before the assignment was made. The claim to recover for the repairs, if any existed, against Brown and Furniss, was vested in Brown & Englis, and whatever defences existed as against the latter firm in favor of Furniss could not be defeated by Brown’s assignment to bis partner. The form of the action in respect to parties may be altered by such assignment, but in respect to the original title to recover from Furniss, he has a right to treat it as standing upon the footing of a copartnership claim.

In the next place it may be observed that this is not an action by Englis founded upon his right as a copartner to compel Brown (or Brown & Furniss) to restore copartnership funds or property applied by him to the use of Brown & Furniss, and which is necessary for the payment of the debts of the firm of Brown & Englis, or requisite to his indemnity against such debts, and to the payment to himself of all his share in the capital and profits of the last named firm. Conceding as above suggested, that Brown & Furniss were joint owners of the steamboat, and as such liable to third persons under the terms of their agreement as partners in the transactions relating to the steamboat Rhode Island, and conceding that (notwithstanding the agreement of Brown to make the repairs in question himself) the firm of Brown & Englis by doing the work became creditors of Brown & Furniss in equity in such a sense that Englis cannot be prejudiced by any private arrangement between Brown & Furniss respecting the manner in which, or party by whom, the repairs should be paid for, it is no doubt true that Englis may sustain an action against Brown, to which Furniss would be a proper defendant, in which an account should be taken ; and if upon such account Brown were found indebted to Englis after the payment of their partnership debts, Brown & Furniss would be held liable to the extent of the repairs done, to make him whole. Be this as it may, this is not such an action, nor is it in any respect of that nature. It is nothing more nor less than an action to recover the value of the work and materials, and the sums of money paid and applied by Brown & Englis in the repairing of the steamboat of Brown & Furniss, and there is no averment in the complaint or suggestion in the prayer thereof, which places the title to recover upon any other ground than sifeply that one firm (the defeadants) are indebted to the other firm (the plaintiffs); and in respect to such indebtedness the defendants are under this complaint in precisely the same position as if no assignment had been made to Englis. It is true that since this court is a court of equity as well as a court of law, the complaint may be said to be a complaint in equity, and in respect to parties to the action, the suit is free from objection in form, but it still remains an action by one copartnership against an alleged other copartnership, in which one partner is common to both firms, to recover an alleged debt by the latter to the former, upon the single allegation that such a debt exists. I do not think it necessary to consider whether the action can be at all sustained upon this mere allegation without some averment that shows that the fund which the plaintiff avers to have come to the possession of Brown & Furniss is necessary to the just settlement of the affairs of Brown & Englis, irrespective of the fact that Brown assigned his interest in the claim to him, or if he rested his claim upon that assignment, then that as between Brown & Furniss it ought to be paid over by them to Brown. Whether these averments ought to be inserted in the complaint or might be dispensed with, it seems to me quite clear that the claim of the plaintiff necessarily and from its very nature brings into view all the equities existing between the parties, and the moment it appears that as between Brown & Furniss it is inequitable that the fund should be taken from the latter firm, Englis cannot require its payment without showing a higher equity. Brown is his partner and he cannot claim such payment, nor can Englis make such claim through Brown — neither can he separate himself from Brown, and escape the effect of the rule that notice to one partner is notice to all, without showing some equity that is peculiar to himself.

It is not denied that Brown undertook to make the repairs himself. It is found by the referee, and the evidence clearly warranted it, that upon a settlement between Brown & Furniss, the latter has advanced to Brown enough and more than enough to cover the whole amount. *

At law there could be no recovery by Brown & Englis against Brown & Furniss under these circumstances, because Brown cannot sue himself, and because at law Bi'own cannot become indebted to himself, and so at law (as insisted by the plaintiff’s counsel) there can be no set-off of a debt due by the copartner against a copartnership claim, nor will the fraudulent application of the copartnership claims to the private debt of one partner defeat a recovery by the firm. But where, by reason of the membership of the one partner in both firms, the alleged creditor firm comes into equity for relief, they come to do equity as well as to seek it. The complaining plaintiffs come also upon their own equities, which are alleged to be prejudiced. These equities cannot be ascertained, nor can it be discovered what is requisite to the doing of equity, without ascertaining what is equitable as between all the parties.

In Bailey v. Bancker (3 Hill, 190), where one stockholder sued his associates (the statute having in principle established a relation between themselves and Siso as to third persons) for a contribution, Bronson, J., in giving the opinion that the action could not be sustained, says — “ they may go into chancery for an account and have the claims of all parties settled upon equitable principles. So where a necessity to go into chancery arises from the fact that two firms have one or more common members, the rule that whatever assets arose out of the business of the one firm shall be deemed to belong to them, though it consists of an indebtedness by the other firm, does not over-ride the equity of the partners in the latter to compel the common partner to do justice to them.”

The case of Jacand v. French (12 East, 317), goes to a great length in affecting a copartnership by means of what is done with another firm having with the former a common member ; and when such common member had agreed with the drawer of a bill that his last named firm should pay it, and acting for such firm had received securities out of which funds were realized for the purpose, it was held that his other firm being holders of the bill could not recover of the acceptor. As to him the bill was satisfied, and he could not, by uniting with his partners in the last named firm, maintain the action, although not a dollar had come to their hands, and although the other partners were ignorant of the arrangement. In some respects that case resembles the present. The firm of Englis & Brown cannot divest themselves of the consequences of Brown’s knowledge that the repairs they were making were done for his benefit, and in performance of his express undertaking to do them himself, and therefore, as before, when compelled to come into equity, the equities existing between Furniss & Brown can only be overcome by showing a higher equity in favor of Englis; so far as his claim rests upon Brown’s equity he must fail. He cannot, therefore, in my judgment, maintain the action upon any ground, unless be shows that upon a settlement with Brown, this money is necessary to the adjustment of their accounts. I do not, in this view of the subject, mean to exclude the idea that where a partner in the one firm by his dealings with another firm in which he is also a member, has diverted partnership property in such wise as to amount not •only to a withdrawal of capital, but to a contravention of the copartnership articles, the injured partner may not have a bill to compel its restoration for the purposes of the trade, or that a court of equity will not in general treat the assets of a firm as a fund devoted to the payment of copartnership debts and the fair settlement of the accounts between the partners, and marshal them accordingly wherever they obtain proper jurisdiction for that purpose, but the plaintiff has not placed his present claim upon that footing, nor shown any facts warranting a judgment founded upon such an equity. He comes as assignee of Brown’s interest in the claim, insisting that he has become such creditor of Brown & Furniss, and seeking to recover on that ground, not for the copartnership purposes of Brown & Englis, but for his own sole use.

Another view of the subject seems to me to pwesent a like obstacle to the plaintiff’s recovery. Furniss, by force of the covenant of Brown to make the repairs himself, and in virtue of the advances made to Brown which render it inequitable that he should be required to pay the money, has become entitled in equity to every defence which Brown himself could make to an action by Englis to recover for these repairs, and Brown, by uniting with Englis in the action, could not deprive him of this right, — and what Brown could not do directly he cannot accomplish indirectly by an assignment to Englis upon which he may sue alone. Suppose then Englis had filed this complaint against Brown & Furniss without averring any assignment by Brown to himself, it seems to me clear that Fur-niss, upon showing Brown’s agreement to make the repairs, and that he had paid or advanced to Brown moneys sufficient and more than sufficient upon a due accounting between them to cover this claim, might successfully insist that until Englis established a right to compel Brown to restore the money for the protection of his equities as a copartner, he could not recover. Furniss, under such circumstances, cannot in equity be compelled to pay this money to be enjoyed by Brown in common with Englis, and as the case may be, to come into Brown’s pocket in the division of profits between them; and as before suggested, Brown’s assignment to Englis does not drive Furniss from this position.

If it be suggested that Furniss has his remedy over against Brown, the answer is obvious — a court of equity will not, where full justice can otherwise be done, compel a party to resort to such circuity of action: and besides this, the proofs showed without contradiction that Brown failed in July, 1851, and before his assignment of this claim to Englis, and is (in his private business) insolvent. The report of the referee, though it contains no specific finding of that fact, exhibits a finding in support of that conclusion. I hold it inequitable that Brown, an insolvent, should on the 7th of August, 1851, (the date of his assignment to Englis), take from Furniss moneys which, as between Brown & Furniss, the former was bound both at law and in equity to pay, and throw them into the hands of his firm of Brown & Englis, who are not insolvent, where they would (for aught that appears irrespective of the artifice resorted to, viz., Brown’s assignment), have been given back to Brown himself or his representatives as a dividend of the copartnership effects. Nothing less than higher equities shown by Englis as copartner, existing independently of any assignment by Brown to him, can entitle him to insist upon any such payment by Furniss.

These views do not conflict with the rule that one partner may not pay his own debt with the property of his firm or that he may not release a debt due to his firm in consideration of a benefit derived to himself alone, or that an individual debt of a partner cannot be set off against a copartnership claim — and there are other cases no doubt in which a firm standing in a court of law upon their joint title cannot be defeated by the transactions of one of the partners in his private dealings.

But where the firm are compelled to come into a court of equity, to assert the copartnership title, that tribunal will take care that in recognizing the joint title of the firm and enforcing it against the act of one of the members, no injustice is done, and where such member is insolvent, it will not take money from a third person which such member ought to pay, unless protection of the rights of the other parties makes it necessary.

In the present case, stating it most strongly in the plaintiff’s favor, it is the plain duty of Brown to pay for these repairs. He having become insolvent, Purniss has the right to insist that his interest in the copartnership should be so applied. Indeed it may better, perhaps, be said that Brown has himself made that application by repairing the ship at the yard of the firm. Nothing in the case impeaches the good faith of Furniss in this matter. Brown was engaged in shipbuilding on his own account — in the department of repairing. Englis was his partner — and doubtless, Englis was entitled to claim from Brown & Furniss that the bill for repairs be regarded as co-partnership assets. But the circumstance that the repairs were so done, does not warrant any imputation upon Furniss of collusion with Brown to appropriate the firm property to Brown’s private purposes. Even if he is to be deemed chargeable with notice of Brown’s partnership with Englis in the business of repairing, he had reason to believe that what was done, was done under Brown’s covenant with him, and it is not bad faith on his part that he assumed that Brown caused these repairs to be made upon his own responsibility to Englis, and upon a full understanding with him on the subject.

Had Brown when he agreed to make these repairs had no interest in the ship, but having made a covenant to repair the vessel upon terms agreed upon, had taken her into his own possession for that purpose, and the repairs had been made by himself and Englis, the right of Englis & Brown as partners to recover for such repairs, notwithstanding advances made by Furniss to Brown in good faith and in reliance upon such covenant, would not have been free from doubt; and it appears that although Furniss’ advances were not on terms applicable to this one vessel, they were made in reliance upon Brown’s two agreements, only one of which was in any sense performed— and Furniss is clearly, I think, entitled to the benefit of them as an advance upon that relating to the Rhode Island, for it was made in reliance on that agreement, though not solely on that agreement. But I do not pursue this inquiry nor rest my conclusion upon any solution of the doubt suggested.

The precise grounds upon which the decision of the referee was based do not appear by his report. His conclusion of law is given in sweeping terms without informing us of the particular conclusions from which his result was derived. But for the reasons above stated, I think his decision was correct, and should be sustained by an affirmance of the judgment.