Case ID: ad_124/html/0083-01.html
Source: Caselaw Access Project
Author: {"author": "Smith, P. J.:", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

Almira Akin, Respondent, v. P. Campbell Van Wirt, as Executor, etc., of David Akin, Deceased, Appellant, Impleaded with Albert W. Davitt, Individually, and as Executor, etc., of David Akin, Deceased, Defendant.
    Third Department,
    January 15, 1908.
    Bills and notes — liability of retired partner on promissory note — surety — bankruptcy — when failure to demand division of assets immaterial — part payment by debtor not as surety’s agent — partnership — estoppel of partner frbm showing retirement — Statute of Limitations — facts showing actual notice of retirement — burden of proof.
    Where members of a firm liable upon a promissory note sell out their interest in the firm they become merely sureties on the note while the members of the new firm become the principal debtors. Although the creditor accepts the new firm as the primary debtor, such sureties are not thereby released.
    It' is immaterial that in presenting a claim for the amount of such note in bankruptcy proceedings against one of the remaining members of the firm the plaintiff did not insist that the firm and individual assets of such bankrupt should be separated, and the claims classified accordingly, where it does not appear that plaintiff received a smaller' amount because she failed to make such demand.
    Although a surety tells the principal debtor to pay the interest on a note he does not thereby make the debtor his agent, nor ratify the payment so as to delay the running of the Statute of Limitations on his liability on the note.
    The rule that a former partner is estopped from showing his retirement in order to escape liability as to new transactions with old customers who have been given no notice of liis retirement, does not apply where it appears that such a customer had actual notice of his retirement.
    In an action brought in 1904 on a firm note for §20,000 against the executor of a-retired partner it appeared that the holder was the sister-in-law of the deceased partner; that the succeeding members of the firm were her son and son-in-law, and that they all lived within a short distance of each other. The defendant’s, testator .retired from the firm in 1896. On January 1, 1897, plaintiff accepted a check in payment of interest which showed that the name of the firm had been changed. Ho interest was paid after 1898, but plaintiff made no claim against the deceased. The plaintiff was sworn as a witness, but withdrawn, without giving any testimony.'
    
      Held, that the inference is irresistible that on January 1, 1897, plaintiff knew, that the deceased had retired from the firm, and, if so, this action is barred by the Statute of Limitations. *
    Under the circumstances plaintiff was not excused from testifying that she received no notice on the theory that the burden to show notice was upon the defendant.
    Cocheaste, J., dissented.
    Appeal by the defendant, P. Campbell Van Wirt, as executor, etc., from a judgment of the Supreme Court in favor of this plaintiff, entered in the office of the clerk of the county, of Rensselaer on the 3d day of October, 1906, upon the decision of the court, rendered after a trial at the Rensselaer Trial Term, a jury having been waived.
    The action-is upon a promissory note. Upon Januaiy 1, 1895, the firm of W. IT. Akin & Co., 'composed of William H. Akin, David Akin, the appellant’s testator, and Albert Akin, for value, delivered to John II. Akin, who was the father of Albert Akin, their promissory note for $20,000 payable in one year, and dated upon .that day. Upon April 1, 1895, W. II. Akin sold Ills interest-in the firm assets to the defendant Albert Davitt. Upon January 18, 1896, the appellant’s testator, David, also sold his-interest in the firm assets to defendant - Albert Davitt and Albert Akin, who agreed to pay the firm debts.. After the transfer of the' interest of William IT. Akin ii'pon April 1, 1895, the firm continued to do business under the firm name of “ W. IT. Akin & Co.” At the time of the transfer, of the interest of David Akin to Albert Akin and Albert. Davitt, January T8j 1896, the firm name was changed from “ W. IT. Akin & Co.” to “ Akin & Davitt.” This note was transferred by John H. Akin to his wife, Almira Akin, this plaintiff. The exact date of the transfer does not appear. Albert Akin paid the interest upon January 1,1896, with a check of W. H. Akin & Co., and thereafter with the check of Akin & Davitt. William H. Akin died in 1897. Albert Akin died in 1899. David Akin died in 1902. In 1908 Albert Davitt went into bankruptcy. ' This plaintiff presented her claim against the estate, and received a dividend thereon of upwards of $5,000. Thereafter this action was commenced against the executors of David Akin, and judgment was obtained therein as above stated. From the judgment entered upon the decision of the court one of the executors has appealed. Further facts are stated in the opinion.
    
      Oscar Warner [Andrew J. Nellis of counsel], for .the appellant.
    
      Henry J. Specie, for the respondent.
   Smith, P. J.:

Various defenses are urged to the plaintiff’s claim. We are unable to find any evidence.to sustain tlpe defense of a novation. It nowhere appears that David Akin, or his estate, has been expressly or voluntarily released by the plaintiff. Upon J anuary 18, 1896, when David Akin sold. out to Albert Akin and Albert Davitt, they assumed the debts of the firm. They thereupon became primarily liable for ■ this indebtedness, and David Akin as well as William H. Akin were simply sureties. I cannot see that it matters as to what transpired when William H. Akin went out of the firm upon April 1, 1895. This relation of- principal and surety, created by the assumption of the debts of the firm upon the retirement of David, was not subject to the will of the creditor; . an acceptance by the creditor • of this new firm as primary debtors would not in itself work a release of David Akin or William IT. Akin from their liability as sureties for the debt.

Nov do I find any release of the surety David Akin by reason of any matters connected with the bankruptcy proceeding of Albert Davitt. The claim presented by the- plaintiff in that action was. upon these firm notes. It is claimed that it was not there insisted that the firm assets held by Albert Davitt as survivor 'and his.individual assets should be separated and the claims of the different classes of creditors properly assigned to the different assets. It does not appear,' however, that the plaintiff lost anything by not demanding that her claim be paid from the firm ■ assets, and it is only to the extent of a loss caused thereby that the defendant could defend in this action.

Defendant’s main contention is to the effect that this claim is barred by the Statute of Limitations. David Akin left the firm upon January 18, 1896. This action.was not brought until 1904. The Statute of Limitations is a conceded defense, unless there has been some payment or some other acknowledgement within that time, which would save the statute from running.

To prevent the running of the statute the plaintiff relies upon two facts : First, that the payment of this interest in 1897 and 1898 was made by Albert Akin at the instance and direction of David Akin.' At this time David Akin was confessedly a. surety only for this debt. The firm of Akin & Davitt were the principal debtors. The fact as shown by the evidence is that David Akin spoke to Albert Akin, and told him that lie must keep that interest paid, for otherwise he would be compelled to pay the note. It has been held by the trial judge that this is such an. authorization and direction for payment of the interest, as to make the act of Albert Akin in thereafter paying the interest the act of the surety from which can be implied a new promise by the surety to become liable for the debt. In Littlefield v. Littlefield (91 N. Y. 203) the head note in part reads : “ One of three makers, of a joint and several promissory note, who in fact signed it as surety, upon being applied to for payment, requested the payee to tell the principal that he must make a payment thereon and that he (the surety) said so. -The payee made the statement to the principal as requested, who promised to and did subsequently make a payment; this he reported to the surety, who in response stated that it was all right; In an action upon the note, held, that these facts did not show an authority conferred upon the. principal to make a payment as the agent of the surety, so as to take the case as to the latter out of the Statute of Limitations; also, that they failed to establish, a ratification of the payment.” This authority would seem to be a complete answer to the plaintiff’s contention upon this point. The case of Winchell v. Hicks (18 N. Y. 558) is relied upon by the plaintiff in support of his contention. That casé, however, as far as it holds any different rule, must be deemed to have been overruled by the Little-field case cited. In the case at bar the direction of David to Albert to pay this interest was not to make payment for him as his agent, but was simply an insistance that Akin & Davitt should make payment for themselves, as they were bound to do, and thus save him from liability. The promise to renew the obligation, which is inferred from the judgment, must rest upon a payment made by ah agent for the principal, or a payment voluntarily made by himself as a recognition of existing liability. (McMullen v. Rafferty, 89 N. Y. 456.)

Plaintiff further, answers in defense of the Statute of Limitations that by the receipt of interest from that firm of W. H. Akin & Co., of which'David Akin was a member, January 1, 1896, she was a .customer of the old firm, and as to her the old firm continued up to January 1, 1897, at which time interest was paid by Akin & Davitt, inasmuch as no notice to. her is shown that David Akin had retired from the firm. If this payment January 1, 1897, be deemed the payment by David, the statute has not run. ■ The rule of law thus relied upon is that a partner is estopped as to new transactions with an old customer, from showing that he had left the firm, unless the old customer had been given notice of his retirement, because presumptively the old customer has relied npon Jiis credit in subsequent dealings with the firm. Were the question res nova, I should have doubt whether this estoppel would apply for the purpose of establishing an implied promise to renew a debt in favor of one who had full knowledge of the fact of the partner’s retirement long before the Statute of Limitations would otherwise have run. Upon this point, however, the plaintiff is supported by authority which this court must recognize. The payment of interest relied upon was upon January 1, 1897. That payment was made by Albert Akin with a check of Akin & Davitt, the new firm. The learned trial judge has held that that interest was received by the plaintiff without knowledge of the fact that David Akin had left the firm, and that such payment, therefore, constituted a renewed promise to pay the debt by David Akin, which prevents the running of the statute in this case. This finding of fact that the plaintiff had no knowledge at the time of the receipt of this payment of interest upon January 1, 1897, that David Akin was not then, a member of the firm, is strongly questioned by the appellant here, and the question thus presented is to my mind the most important as well- as the most difficult one in the case.

There is no proof that David Akin -gave to the plaintiff any specific notice of his retirement from the. firm, But'tile-situation here is most peculiar. David Akin- is dead- and cannot testify. This payment of interest was made by the check of Akin & Davitt, the new firm, organized January 18, 1896. This new firm consisted of Albert Akin and Albert Davitt. Albert Akin was the son of this-plaintiff; Albert Davitt was her. son-in-law; David and William,H, Akin were her brothers-in-law. This plaintiff was brought upon the'stand and sworn in her .own behalf, and. then was withdrawn from the stand without being asked to give any testimony. It is here urged that her silence must be construed most strongly against her upon the questiori as to whether she at that time had knowledge" that David Akin had retired from the firm. Plaintiff’s answer to this proposition is that she was not bound to speak until the defendant .had satisfied the burden of proof upon him of showing notice to her, and thus the learned trial court has held. In this holding, however, it appears to us that he has committed an error. At the time that she received this check of Akin & Davitt, she had notice at least that some change had been made in the firm. She was largely interested in that firm, because of the. fact that she had $20,000 in there. Knowing that that firm had been changed with her interest therein* all the' parties living within a short radius, the inference seems to me irresistible that she knew that the firm of Akin & Davitt was composed of her son and her son-in-law. That inference is strengthened by the fact that while after 1898 no interest was paid to her no claim seems to have been made against David Akin in his lifetime. With the probabilities so strong that she had knowledge of the retirement of David Akin, her failure to deny such knowledge, or at least to offer to be sworn thereupon, is in my judgment of controlling significance. If such evidence be offered and objected to" under section 829 of the Code of Civil Procedure, it is not intended to pass upon its admissibility. To allow a recovery in this case after the death of David Akin, without a denial on her part that she had knowledge that he had retired from the firm, with all the inferencesi pointing to the fact that she must have had kno.wledge, would, in my judgment, be against good conscience, and so far against the weight of evidence that it should not- he suffered in a court either of equity or law. As the judgment must rest then upon this finding, that she took this interest upon January 1, 1897, without knowledge of the retirement of David Akin from the firm, the judgment must be reversed on law and facts and a new trial granted, with costs to appellant to abide the event.

All concurred, except Cochrane, J., dissenting.

•Judgment reversed On law and facts and new trial granted, with costs to appellant to abide event.