Case ID: abb-pr-ns_1/html/0374-01.html
Source: Caselaw Access Project
Author: {"author": "By the Court—Robertson, J.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

SMITH against MULOCK.
    
      New York Superior Court ;
    
      General Term, July, 1863.
    Partnership.—Pleading.—Contracts.—Bills, Rotes and Checks.
    A provision in articles of co-partnership, prescribing a definite period for its continuance, is sufficient, without any prohibition of an earlier dissolution, to prevent either party from dissolving it at, will.
    Where the articles of co-partnership- do not give either partner "a right to dissolve at will, an allegation by one partner, contained in a pleading, and not responsive to any proposal of his adversary, of his desire to dissolve, is not equivalent to an acceptance of an offer to dissolve, which was made by the other party "a month previous.
    Where a creditor made a loan to his debtors, upon an agreement that they would repay it out of the proceeds of a note for a much larger amount which they had procured to be indorsed by a third person for their accommodation, or would deliver the note to him; and, the note not being discounted, they subsequently delivered it to him, in satisfaction of the loan, and of their prior indebtedness;—Held, that the contract was to be regarded as entire, and that he had parted with a new consideration,, sufficient to make the indorsement binding.
    
      It seems, that the indorser in such case would not be exonerated by mere proof of notice to the purchaser of the nóte, that the partnership between the makers had been dissolved, subsequent to the date of the note.
    Appeal from a judgment entered pn a verdict in favor of the plaintiff.
    The complaint in this action, which was by Willard H. Smith against Maria Mulock, alleged, in the usual form, as the cause of action, a promissory note made by George W. Wood and William G. Mulock, by them firm name of Geo. W. Wood & Co., for the sum of two thousand five hundred dollars,—payable to the order of the defendant, and indorsed by her, and subse- c quently transferred to the plaintiff before maturity, and for value.
    The answer of the defendant stated that the note was not made or signed by the co-partners of the firm, or for the business of the firm, but that the firm name was signed to it by Wood, for his individual benefit and gain, and in fraud of the defendant and of his partner. It further denied that the note was made or signed on or about its date, or came into the possession of the plaintiff before maturity,, or for value ; and denied that either after the same was so signed, or on the day of its date, or at any time since the date thereof, she endorsed it in" writing, or ever delivered, or authorized it to be delivered, to the plaintiff; and denied that the plaintiff was the lawful holder or that the defendant was justly indebted.
    It further alleged that this action was prosecuted in the name of the plaintiff, for the benefit and at the request of Wood, and in fraud of the defendant. Also, that the indorsement was made before the note had any date, time of payment, or signature of maker, and was without consideration and for accommodation of the firm named; and that it was obtained from defendaut by false representations alleged to have been, made by Wood, and another person, a dormant partner. Other facts appear in the opinions.
    The cause was tried before Hr. Justice Barbour, and a jury, on the 5th day of February, 1863. The jury, under the direction of the court, found a verdict for the plaintiff for the amount of the note, and interest; and judgment thereon having been entered, the defendant now appealed.
    
      James T. Brady & Francis Byrne, for defendant, appellant.
    I. The notes were endorsed by the appellant, without consideration, and solely for the accommodation of said firm, and to be used during its existence, and for its business.
    II. The agreement of partnership did not contain a stipulation (of a negative character) “ that the co-partnership should not be dissolved : therefore “ either party ” might, “ by his own act,” dissolve the partnership, “ unless restrained by the compact. between them to continue it for a definite period ” (Griswold v. Waddington, 15 Johns., 57; affirmed, 16 Johns., 438 ; 19 Johns., 538).
    And Muloek effectually dissolved said firm by the service of his notice and publication of the same, and Wood assented thereto, by his statement in his answer on oath in the action brought to dissolve the co-partnership “ that the defendant is desirous of having the partnership aforesaid terminated and "dissolved.” The firm was, therefore, on February 1st, 1862, “ dissolved by mutual consent.”
    III. The right of one to bind another by the signature of the firm name is not derived from the relation of partners, but on a presumed agency for each other for that purpose, and is limited to the duration of such partnership, and ceases on the dissolution ; and then neither can “ bind the other by issuing notes, signed with the name of the partnership ” (Lansing v. Gaines, 2 Johns., 300); nor endorse note or bills given to the firm before the dissolution, even though authorized to settle partnership debts (Sandford v. Mickles, 4 Johns., 224); nor even renew a partnership note, &c. (National Bank v. Norton, 1 Hill, 572 ; S. P., Mitchell v. Osborn, 2 Hill, 520 ; S. P., Lusk v. Smith, 8 Barb., 570; Kirby v. Hewitt, 25 Barb., 607; James v. Pope, 5 Smith, 324; City Bank of Brooklyn v. McChesney, 20 N. Y., 
      241; City Bank of Brooklyn v. Dearborn, Id., 244; Robinson v. Fuller, 24 N. Y., 572).
    IY. This is not an action against one who was a partner in the firm, but. against an innocent person whose authority to the firm to bind her was limited to thé time when the firm was in existence; the partnership having been dissolved, the authority was immediately extinguished (Michigan Ins. Co. v. Leavenworth, 30 Ver., 11).
    Y. The plaintiff acted in collusion with Wood, and took the note sued upon in payment of the two thousand and seventy dollar note that was protested, and as payment of five hundred dollars he had previously loaned to said Wood; the circumstances that the, firm was insolvent and closing up its business; that the property was being removed from the store; that the safe was being disposed of, and that a lady was the endorser, were sufficient to put him on inquiry.
    YI. The statement in the answer of the defendant George W. Wood produced, was proper evidence of a consent to dissolve the partnership, and ought to have been submitted to the jury, and the exception is tenable.
    YII. The several requests of the counsel of the defendant to charge should have been acceded to, and the facts should have been submitted to the jury for their determination, and the exceptions to the rulings and directions are valid (Bidwell v. Laurent, 17 How. Pr., 357).
    
      Henry W. Johnson, for plaintiff, respondent;
    cited, as to the sufficiency of the proof of the note, and the authority to make it Story on Prom. Notes, §§ 135, 380 & 387; Erwin v. Downs, 5 N. Y. [1 Seld.], 575 ; Ogden v. Blydenburgh, 1 Hilt., 183, And as to the presumption that plaintiff was a bona fide holder, Vallett v. Parker, 6 Wend., 615.; Ross v. Bedell, 5 Duer, 462; Case v. Mechanics’ Bk’g Ass’n, 4 N. Y. [4 Comst.], 166.
   By the Court—Robertson, J.

The defendant became endorser of the promissory note, in suit in this action, by writing her name on the back of a piece of blank paper, and delivering the same to her two sons, with intent that they* should write a promissory note on the face thereof, to be used by them for the benefit of the firm of which they were members. She now claims that the firm in which they.were partners was dissolved before such note was passed away; that one of her sons subscribed the name 'of the firm to such promissory note after the dissolution, and passed the note to the plaintiff in satisfaction of a precedent indebtedness ; or with knowledge of such dissolution.

The partnership of the defendant’s sons began in January, 1860, to continue three years, under an agreement in writing. The note in suit came into the plaintiff’s possession in February, 1862. In January previous one of such sons (Mulock), served upon the other (his partner, Wood), and another person (Ackerman), whom he claimed to be a partner, a written notice that he had dissolved such partnership. A like notice was published by the same partner in two papers, in the city of Hew York, of large circulation. Five days previous to serving such notice the partner giving it (Mulock), commenced an action against his co-partner (Wood), and Ackerman, to dissolve such partnership, in which he obtained an injunction. Subsequently, after discontinuing that action, he began a new one for the same purpose. As the complaint in that last action was not in evidence, it does not appear what allegations were made in it, in regard to a dissolution. The answer in it, however, put in on the 1st of February 1862," contained this phrase: “ This defendant is desirous of having the partnership aforesaid "terminated and dissolved.” This is claimed to have produced an actual dissolution, by construing the notice of the 12th of January to have been an offer, and such allegation an acceptance of it. The original agreement made no provision for a dissolution; and I apprehend where such an agreement prescribes a definite period for the continuance of a partnership, it is sufficient, without prohibiting an earlier dissolution, in order to deprive the parties to it of the right of dissolving at will (Griswold v. Waddington, 16 Johns., 438; S. C., 15 Johns., 57). The announcement to the court by a party to an action, in a pleading, when not responsive to any proposal of his adversary, of a readiness, or even of the most earnest desire to dissolve a partnership, cannot be converted into a contract in pais, or stipulation of record; in the former case to be enforced by a specific performance, or in the latter by a decree without further" litigation. Still less could it be construed into the acceptance of an offer to dissolve, .made a month before ; if the notice in January was such, and not a mere notification of the determination of the party notifying, whatever his partner might say. This, therefore, not creating a dissolution, and there being no other evidence of one, there was no question upon it for the jury; a mere willingness to dissolve being no evidence of a previous dissolution.

The consideration given for the note in question, according to the plaintiff’s testimony, was a loan of five hundred dollars, a few days before the 14th of February. This loan was fnade upon a promise either to repay the same out of the proceeds of the note in suit, if it could be discounted, or to deliver that note. It' was not discounted, but was delivered to the plaintiff" in satisfaction of such loan, and a prior note of the same firm, held by him. This testimony is not contradicted even by the partner who delivered it (Wood). The promise to deliver the note or its proceeds in consideration of the loan, entitled the plaintiff, in equity, to one or the other; and the time of the application of the residue of the plaintiff’s advance, consisting of the prior note, to such new note, whether at the time of the agreement or when the latter was delivered, was immaterial. The contract was entire, and a new consideration parted with, sufficient to make the indorsement binding on the defendant.

Even if the plaintiff had or was bound to take notice of the dissolution of the firm, that knowledge would have an entirely different effect upon the liability of the member of the firm who did not sign the note, and that of the defendant. Without some authority remaining in the partner signing, the other partner would not be liable. But the defendant would be liable as endorser, whosoever’s name was subscribed to the note, unless the purchaser had notice of the limitation of the authority to make a note, to drawing one for the benefit of the firm, and signed by it. The note in this case was delivered by one of that very firm, to a purchaser, to discharge a liability incurred by that firm. The partner delivering it was responsible at all events, and it was not incumbent on the plaintiff to inquire who else was, provided the defendant was.

But in fact the case does not disclose any very clear request [to submit any controverted question of fact to the jury, or to give them any instruction as to any point of law. The request to submit the question “ Whether the plaintiff parted “ with value, without notion sufficient to put him upon inquiry as to the liability of the endorser, or the validity of “ the paper f was not sufficiently definite or pointed.' The liability of the endorser, or the validity of the paper, was a question of' law, and not of fact alone. The facts which were to absolve the defendant from liability were either the dissolution of the firm, and knowledge of it by the plaintiff, or some limitation of the use to which the note was to be applied, transgressed in passing it to him. The notice, necessary thus to absolve the defendant, was of course of evidentiary facts, leading to the discovery of such ulterior facts. A mere notice to the plaintiff, that the endorser would not be liable, without knowledge .of the facts by which she was to escape liability, would not acquit her; and an inquiry which would end in that information alone would be of no avail. Of course, if that information, when obtained, wonld not render the note void in the hands of the plaintiff, notice of facts leading to an inquiry for it would be immaterial. But there was no evidence of any facts constituting notice of anything to put the plaintiff on his guard. Notice that the makers of a note signed with their firm name, had dissolved partnership, formed no ground for suspecting that such note, dated six months previously, was about to be diverted from the usefor which it was intended, when employed by a partner in paying that firm’s debts. The defendant’s counsel did not disclose in his request, what that was, of which he considered there was evidence, •and which was-equivalent to a notice of something which relieved the defendant from liability, because it was sufficient to put the plaintiff on inquiry after that which constituted such reliqf as matter of law. Such request was therefore properly refused, not only as being too indefinite, or irrelevant^ but also as not having any basis in the evidence. There was indeed no evidence of any knowledge by the plaintiff of a misapplication of the note, or of want of new consideration for it, and the plaintiff was entitled to judgment.

The judgment must be affirmed, with costs. 
      
       Present, Robertson, White and Barbour, JJ.