Case ID: sc-eq_24/html/0119-01.html
Source: Caselaw Access Project
Author: {"author": "Dargan, Ch.,", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

John Z. Hammond vs. James R. Aiken and Jos. Kennedy.
    
    A firm doing business in W. was dissolved, but no notice of the dissolution was published in a newspaper; about the time of the dissolution, K., a member of the firm, gave a note, in the name of the firm, to a bank at G., which note was, after the dissolution, renewed by an agent acting under a sealed power of attorney given by K. in the name of the firm; held, that the notice of the dissolution was insufficient, so far as the bank at C. was concerned; that the firm were liable on the note, whether given before or after die dissolution ; and that, if the renewal was void, the bank had the right to recover on the original note, which it had ■retained; held further, that an assignee of the firm, for the payment of the debts thereof, had properly paid this debt to the bank, although he, the assignee, may have had the requisite notice of the dissolution, and that the debt was contracted afterwards.
    K., before the dissolution, gave his individual note to H. & W., for another note, which he used for the benefit of the firm; K’s note was not paid at maturity, and he gave a draft for the amount thereof to H. & W.; the draft was protested, and then K , after the dissolution, gave H. & W. a note, in the name of the firm, for the amount of the draft; held, that the firm were not liable for this note; and that the assignee was not justified in paying it.
    
      Before Dargan, Ch., at Fairfield,-Term, 1850.
    The decree of his Honor, the presiding Chancellor, is as follows :
    Darga v, Ch. — The decree of the Court of Appeals remanded this case to the Circuit Court, only as to the two matters, namely, the note, purporting to be the note of the firm of Jos. Kennedy & Co. to the Branch Bank at Camden, amounting at its payment by the assignee to $312 85 ; and the note, purporting to be the note of the same firm, to Hazletine & Walton, amounting at its payment to $1129 81. The assignee, James R. Aiken, has paid these notes, as the notes of Jos. Kennedy & Co., and claims credit for their payment, in the settlement of his accounts. By the complainant, this is resisted, on the ground, that by the terms of the assignment, he was the assignee only for the payment of the debts of Jos. Kennedy & Go., and these are not the debts of Jos. Kennedy & Co., having been executed after the dissolution of the partnership.
    The dissolution took place some time in the fore part of the year 1841. But the precise time is not satisfactorily proved. A. H. Chambers says, “ there was a sale of the goods of Joseph Kennedy <fe Co., about the 15th of Feb., 1841; that sale was m pursuance of some advertisements posted up some time previous, at different places in the town of Winnsborough, in which the dissolution of the firm of Jos. Kennedy & Co. was made public.” This is loose. Was the dissolution at that time prospective, or had it then taken place ? Why were not the advertisements themselves produced, or some evidence offered to prove more specifically their contents? It seems certain, that the business of the firm went on after the auction ; for O. R. Thompson says he “ was acting as clerk for Jos. Kennedy & Co., in the spring of 1841; thinks he left them about the 13th March, 1841; feels pretty certain that the time is correct. After witness left them, one of the Mr. Twitt}^, or probably two of them, acted as clerks for the firm. Witness thinks the Twittys remained with Jos. Kennedy & Co. as clerks about three months. Witness knows of no dissolution of the partnership, but that while he was acting as clerk, there was an auction of goods that continued two days. Shortly after this auction, witness left their employment. There were goods remaining after the sale, but their amount was inconsiderable.” Strange, that there should have been an actual dissolution, and the acting clerk of the house know nothing about it! I shall assume, in what is to follow, that there has been no actual dissolution satisfactorily proved, prior to the 12th of May, 1841.
    The note paid by the assignee, the principal of which was for $300, and interest to the time of payment $12 85, was executed by Ch. J. Shannon, after the dissolution of the firm, under the authority of a sealed power of attorney, given him by Joseph Kennedy, in the name of the firm. This note was a renewal of a previous note, itself a renewal. The original debt to the bank was for $1000, secured by a note payable at sixty days, signed by “Jos. Kennedy &. Co.,” and dated 12th May, 1841. I am not satisfied, as I have said, that the partnership was dissolved at this time. The renewals may have been void as notes, having been executed after the dissolution, and by an attorney too, who, so far as it appears, may have been appointed by Kennedy after the dissolution. But if the renewals were void, the bank had a right to recover on the original note, (which it retained,) the balance that was due.
    In the foregoing, I have assumed that the original note to the bank was executed before the dissolution of the partnership. If it was afterwards it could not have been long. There is no proof that this firm had any previous dealings with the bank. “ When a partnership is dissolved, and one partner, for whatever reasons, is no longer willing to be responsible for the acts of his co-partners, reason and justice require that the world should be fully apprised of the dissolution of their joint liability, and that the severance of the partnership should be made as notorious as the partnership itself was. Accordingly it has been decided, that particular persons, such as those having dealings with the firm, must have particular notice, and the world in general must have general notice. If sufficient notice is not given, all the members will still be liable for contracts made by their co-partners.” Carey on Part. 182. “Notice in the gazette is sufficient to those who have had no previous dealings with the firm.” Ib. 183. The same author, p. 185, remarks: “ it has been decided, that a retiring partner is liable after the lapse of seven years from the period of dissolution, when no notice was given in the gazette, and the dissolution was not known to the creditor, though generally known in the neighborhood where the business was carried on.”
    There was no notice whatever of the dissolution of the partnership of Jos. Kennedy & Co. ever published in a newspaper. The only notice ever given, was that mentioned by the witness, Chambers, as having been introduced in the advertisement of sale posted up in different places in the streets of Winnsborough. This may have been sufficient for the general public of Winns-borough. I am of the opinion, that it is not sufficient for the citizens of Camden, more particularly at so early a period after the dissolution. I doubt very much the notoriety of this event, even in the community of Winnsborough; for of all the witnesses examined, there was but one who speaks of there having been a dissolution at that time. It was a fact not even known to the principal clerk of the house.
    If the payee of this note, from the want of notice of the dissolution, could have recovered against the partnership, the assignee was justified in paying it, and must have credit for the payment, though he may himself have had the requisite notice -of the dissolution, and that the debt was contracted afterwards. This was the opinion of the Court of Appeals, as expressed in its decree in this case. So much of the complainant’s first exception, as relates to the debt due to the branch bank at Camden, is overruled.
    The debt due Hazeltine & Walton stands upon a different footing. That debt unquestionably did not stand in the name of the firm until after the dissolution. The history of the transaction is as follows: one J. H. Propst held a note on J. & J. Nelson, for $890. About the 13th of February, 1841, he transferred this note to Kennedy; who, in consideration thereof, gave him a note, at 60 days, payable at the Commercial Bank, to Hazeltine & Walton. This note was, at its maturity, protested by the bank for non payment. Kennedy made an arrangement with Haseltine & Walton, by which he took up his note, and gave them for the amount thereof, a draft, at 60 days, on Shannon & McGee. This' draft was also protested. And Kennedy remained the individual debtor of Hazeltine & Walton. In satisfaction of the draft upon Shannon & McGee, Kennedy, after the dissolution of the partnership, executed the note to Hazeltine & Walton, in the name of “ Joseph Kennedy & Go.” The note was endorsed by James R. Aiken and J. J. Myers.
    In regard to this debt, no credit was given in its inception, to the firm of Joseph Kennedy & Co. Nor was any such credit given in any of the changes, or renewals, which it underwent, until the last. And in that transaction, Hazeltine & Walton, the payees of the note, took it from Kennedy, as a partnership note, knowing that it was the individual debt of Kennedy, upon which the partnership was not liable. They have no ground to complain of the want of notice of the dissolution, when they knew that the debt for which they took the partnership note, was not a partnership liability. Nor does it appear that there were any dealings whatever, between the payees of this note, and the firm of Joseph Kennedy & Go. For a creditor of an individual member of a partnership, to take from his debtor a note in the name of the firm, without their consent or knowledge, is a fraud upon the other members. And though such note, if taken during the continuance of the firm, and transferred to a third party without notice, may be binding upon the firm, such is not the case where the question is between the firm and the payee.
    The note of J. & J. Nelson, for which this debt was originally contracted, was devoted to partnership purposes. It was transferred by Kennedy to Trenholm & Tomlinson, in part payment of a bill of goods, furnished by them to Jos. Kennedy & Co. It is urged, that because the consideration of the note went to the use of the firm, they ought to be liable. There is no ground for any such conclusion. The credit was given to Kennedy individually, and he gave the credit by advancing his own funds to this extent, in paying the debts of the company. There is no equity for a subrogation. And if there was, the subrogation could be only to the rights of Kennedy. His rights depend upon a settlement of the accounts, and the closing of the balance sheet. If on accounting, he falls in debt, or the whole capital has been absorbed in losses, he has no rights in the property of the firm. The account has not been taken. And for all that I know, in advancing, for the use of the company, the note of J. & J. Nelson, he may have been discharging but a small- part of his obligations to the firm. This part of the first exception is sustained, and the Commissioner’s report in that regard is confirmed.
    The defendant, James R. Aiken, appealed, and moved the Court of Appeals to reverse the decree so far as regards the Haseltine <fc Walton claim; and failing in that, so to modify the same, as to reserve or suspend the final adjudication of the Court upon the said claim, until the accounting be had between the complainant and Joseph Kennedy, the defendant.
    The complainant appealed from so much of the decree as over-ruled his exception, on the grounds :
    1. Because the branch bank at Camden could not in law have recovered judgment against complainant on the note they held signed by Joseph Kennedy, in name of Joseph Kennedy &. Co., and therefore the payment of said note, by defendant Aiken, was unauthorized.
    
      2. Because, under the facts of the case, the complainant was not liable to the bank on said note, and the payment by Aiken was unauthorized.
    
      Cooke, McDowall and Boylsion, for defendants.
    
      Rutland, Boyce, for complainant.
   Dargan, Ch.,

delivered the opinion of the Court.

This Court is satisfied with the decree of the Chancellor who tried the case on the Circuit. And it is not deemed necessary to add any thing to what is said in the Circuit decree, in regard to the questions therein discussed. If, on the final adjustment of the accounts of Josephn Kennedy, with the firm of Joseph Kennedy & Co. it should appear that the said Joseph Kennedy is entitled to any thing, as a balance due him, arising on the effects and assets of the said firm, in the hands of James R. Aiken, the assignee, thé Circuit decree does not conclude, nor does this Court intend to conclude, the said James R. Aiken from using the debt of Hazeltine & Walton, which he has paid, as a discount, or sett off, against any balance that may be found due to Joseph Kennedy, on the settlement of his accounts, in manner as aforesaid.

It is ordered and decreed, that the Circuit decree be affirmed, and the appeals dismissed.

Johnston and Dunkin, CC., concurred.

Appeals dismissed.