Case ID: va_34/html/0735-01.html
Source: Caselaw Access Project
Author: {"author": "TUCKER, P.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

Galt’s Executors v. Calland’s Executor.
    December, 1836,
    Richmond.
    (Absent Cabr, J.)
    Equity Practice — Bond Given by nistake by One Member of Firm Instead of Promissory Note — Effect*— Liability of Deceased Partners Estate.  — A sum of money is lent to a firm, and the firm is charged with it on the partnership hoots, hut the partner with whom the transaction occurs, executes by mís-tate a penal obligation, in the name of the firm, under seal, instead of giving merely a promissory note ; one of the partners dying, those who survived him, and the executors of the decedent, convey all the effects belonging and debts due to the firm, in trust to pay the debts due from the firm ; then the creditor who lent the money files a bill in equity against the surviving partners, the executors of the decedent, and the trustee : Held. 1. That although atlaw there would be no remedy on the sealed obligation, except against the partner who executed it, yet equity has jurisdiction to correct the mistake, and hold all the partners as much bound as if there were no seal. 2. That, regarding the debt as a simple contract debt of the firm, the estate of the deceased partner cannot be charged, until the insolvency of the surviving partners and the deficiency of the trust subjects are first established.
    Appeal from a decree of the superiour court of chancery for the district of Lynch-burg.
    The bill was filed in October 1828 by John Smith junior, setting forth, That on the first day of January 1817, Elizabeth Calland lent to the mercantile firm of Galt, Bullock & Co. the sum of ¿£1547. 9. 4. for which she took a bond signed by John Bullock with the signature of Galt, Bullock & Co. That the said Elizabeth Calland, at the time she accepted the said bond, believed that it bound all the members of the said firm; and such (the plaintiff believed) was the opinion of the said John Bullock who affixed the signature. That the money was lent to the firm of Galt, Bullock & Co. upon the credit of all the partners of the firm, was credited upon the books of the firm, and was used for the benefit of the firm; and plaintiff was advised, that though at *law the said bond, being a sealed instrument, and being signed, sealed and delivered, bound only the said John Bullock, yet, as the money was lent to the firm, and was placed to the credit of the said Elizabeth Calland on th.e books of the firm, and used for the benefit of the firm, in equity each member of the firm was bound for the payment of the sum so lent. That the members of the said firm, at the time of the said loan and the execution of the bond, were William Galt, John Bullock and James Bullock. That the said William Galt was since dead, and John Allan and William Galt were his executors. That John and James Bullock and the said executors of William Galt had conveyed and assigned all the effects belonging and debts due to the said firm, to Chiswell Dabney, in trust for the payment of the debts due from the said firm. That John Bullock had lately become embarrassed in his circumstances, and plaintiff believed him unable to pay the amount of said bond. That the said Elizabeth Calland had died, having made her will and appointed the plaintiff executor thereof, who had qualified as such. That the aforesaid sum of money had never been paid, either to Elizabeth Calland in her lifetime, or to the plaintiff since her death, and with the interest thereon was still in arrear. Wherefore the bill prayed that the said John Bullock and James Bullock, the said John Allan and William Galt executors of William Galt deceased, and the said Chiswell Dabney might be made defendants, and answer the bill on oath : that the said debt and interest might be paid to the plaintiff by John Bullock, James Bullock and the executors of William Galt r that the plaintiff might participate, if need were, with the other creditors of Galt, Bullock & Co. in the funds which might come to the hands of the said Chiswell Dabney: and general relief.
    The bond referred to in the bill was exhibited therewith. It was in these words— “On demand we Galt, Bullock'& Company of Lynchburg do promise to nay to *Eliza Calland of Pittsylvania the just and full sum of fifteen hundred and forty-seven pounds nine shillings and four pence, current money of Virginia, for value received. We bind ourselves, our heirs &c.-in the penal sum of two thousand and ninety-four pounds eighteen shillings, and eight pence, like money as aforesaid. Witness our hands and seals this first day of January eighteen hundred and seventeen.
    Galt, Bullock & Company [Seal.]
    Teste,
    John Smith minor,
    John Smith junior.”
    Allan and Galt, the executors of William-Galt deceased, answered, That the mercantile partnership of Galt, Bullock & Co. was dissolved in the year 1822, more than five years before the commencement of this suit, and at least five years after the execution of the specialty mentioned in the bill. That neither their testator, nor the respondents as his executors, were bound by that specialty. That respondents were ignorant upon what consideration the said specialty was executed; but they insisted, that whatever might be the consideration, they were not answerable, and that the plaintiff’s claim in that behalf against them, or against the estate of their testator, was barred by the statute of limitations, of which they prayed the full benefit. That they, did not admit, but denied, that Elizabeth Calland lent to the firm of Galt, Bullock & Co. any sum of money at any time, and particularly the sum of ^1547. 9. 4. on the first of January 1817, as alleged in the bill: on the contrary, they believed that if the said specialty was executed in consideration of money lent, the same was lent to and borrowed by John Bullock for his private and separate benefit and use, out of the course of the trade of said firm, upon a corrupt and usurious agreement.
    *'John Bullock, James Bullock and Chiswell Dabney never answered the bill.
    Four witnesses were examined, and their depositions filed in the cause; all of them on behalf of the plaintiff, as it seemed. 1. W. Bailey deposed, that he lived with Galt, Bullock & Co. as a clerk in their store, from the earlj' part of 1817 till the latter part of 1818, and again from the early part of 1821 until the dissolution of the partnership : that there was a large balance standing on the books of the firm, to the credit of Elizabeth Calland, commencing in 1817, and regularly continued until the dissolution of the partnership: that William Galt was in the habit of visiting "Lynchburg once or oftener every year during the existence of the firm, and always carefully examined the books of the concern, at every such visit; and in one or two instances he particularly noticed the balance standing to the credit of Elizabeth Calland, observing that there was a pretty heavy balance due her: that deponent was not privy to the contract between said Elizabeth Calland and John Bullock, and did not know whether the whole or any part of the money claimed by the plaintiff was received by Galt, Bullock & Co. or appropriated to their use, but he had no doubt that it was so appropriated: and that deponent knew nothing about the rate of interest paid or contracted to be paid to Elizabeth Calland, though, during the existence of the firm, he had never known more than six per cent, interest to be paid on any debt whatever, and many loans were refused at six per cent. 2. S. Poindexter junior deposed, that he commenced living in the store of Galt & Bullock in March 1823, a short time after the dissolution of Galt, Bullock Co. and continued with Galt & Bullock until the spring of 1828, when the business was placed in the hands of Chiswell Dabnejr; during which period deponent generally wrote in the books of Galt, Bullock & Co. That on those books there was a balance of some four or five thousand dollars *to the credit of Elizabeth Calland, which sum had been regularly brought through several sets of books, and remained to the credit of Elizabeth Calland when the trust deed to Chiswell Dabney was made. That William Galt was in Lynchburg two or three times while deponent continued in the employment of Galt & Bullock, and always examined the books of Galt, Bullock & Co. and of Galt & Bullock, and took with him, when he returned to Richmond, a list of debts due to and from the concerns. That as to the receipt or appropriation of the money claimed by the plaintiff, deponent knew" nothing, but had always understood from John Bullock that the amount was justly due to Elizabeth Calland from Galt, Bullock & Co. And that deponent knew nothing as to the rate of interest agreed to be paid on the said amount, or whether any interest had been paid. 3. John S. Blair deposed, that he was the clerk of Chiswell Dabney, trustee of Galt, Bullock & Co. and Galt & Bullock, and as such had free access to the books of said concerns. That on the books of Galt, Bullock & Co. there was a balance to the credit of Elizabeth Calland, of between 5000 and 6000 dollars, first entered in 1816 or 1817, and continued through the books of that concern. That deponent had no knowledge whether the money was received by Galt, Bullock & Co. or appropriated to their use, nor what interest was paid or agreed to be paid therefor. 4. John Smith, minor, deposed that about the year 1816 or 1817, he witnessed a bond executed to Elizabeth Calland by John Bullock, for the firm of Galt, Bullock & Co. as he understood; but' without referring to the bond, deponent could not say what was the amount or date of said bond. That the business was transacted by John Bullock, and deponent had no recollection that any other member of the firm was present at the time. That deponent had no knowledge whether the mone3' was received by Galt, Bullock & Co. or appropriated to their use, nor what interest was paid or contracted to be paid therefor.
    *To the depositions of the three witnesses first mentioned, the defendants objected, so far as the witnesses spoke of entries in books which were not produced nor required to be produced.
    There was no proof in the record, that John Bullock was insolvent. The only evidence relating at all to this matter was contained in the deposition of Poindexter, the second of the witnesses before mentioned. This witness testified that John Bullock was somewhat in debt before he discontinued business in Lynchburg, which was early in 1828; that, he also bought propert}' to a considerable amount while witness lived with him and with Galt & Bullock, the greater portion since the dissolution of Galt & Bullock: but the witness did not know what his private and individual resources were. As to the solvency or insolvency of James Bullock, the record shewed no evidence whatever.
    The trust deed to Chiswell Dabney, mentioned in the bill, was no where contained in the record; nor did it in any way appear what were the provisions thereof.
    At the hearing of the cause, on the 29th of October 1830, the chancellor, — declaring that the suit was not brought upon the as-sumpsit of either or all of the members of the firm of Galt, Bullock & Co. but was founded on their penal bond dated the 1st of January 1817, which constitutes their joint and several obligation, binding them and their heirs to +he payment thereof; and that Galt, Bullock & Co. were as much bound to pay the obligation, as if it had been a promissory note — decreed, that John Bullock and James Bullock, out of their own estates, and the executors of William Galt, out of the estate of their testator in their hands, pay the plaintiff the sum of 5158 dollars 20 cents, with interest from the first day of January 1817 till payment, and his costs.
    The executors of Galt applied by petition to this court for an appeal from the decree; which was allowed.
    *Stanard, for appellants.
    Johnson, for appellee.
    
      
      Equity Practice — Specialty of One Partner for Partnership Debt — Effect.—On this question, the principal case is cited in foot-note to Weaver v. Tapscott, 9 Leigh 424; Ward v. Motter, 2 Rob. 552, 561; Parker v. Cousins, 2 Gratt. 390; Morris v. Morris, 4 Gratt. 327, 335; Brooke v. Washington, 8 Gratt. 257; Niday v. Harvey, 9 Gratt. 470; McArthur v. Chase, 13 Gratt. 704; Black v. Campbell, 6 W. Va. 64. And in Alexander v. Alexander, 85 Va. 365, 7 S. E. Rep. 335, the principal case is cited to the point that a partner cannot usually bind his co-partner under seal.
    
    
      
      Partnership — Death of One Hember of Firm — Liability of Estate. — In Jackson v. King, 12 Gratt. 505, it is said : “The modern English doctrine would seem to be that the liability of the estate of the deceased partner is direct and immediate, and does not depend on the state of the relations between the partners, or the result of measures taken to collect the debt from the surviving partner. But the cases in Virginia would seem to lead to a very different conclusion. Linney’s adm’r v. Dare’s adm’r, 2 Leigh 588; Sale v. Dishman’s ex’ors, 3 Leigh 548: Galt v. Calland's ex'or, 7 Leigh 594; Jackson v. King’s reps., 8 Leigh 689. These cases, and the opinions of the judges, tend strongly to show that the liability of the estate of a deceased partner in any case is not absolute and immediate, but contingent merely, depending upon the result of proper efforts to collect the debt from the surviving partner or his ascertained insolvency.” See also, citing the principal case for the above proposition, Glazebrook v. Harveys, 1 Va. Dec. 271, where it is held that, as a general rule the estate of the deceased partner remains liable for the debts which affected him at the time of his death. See monographic note on “Partnership.”
    
   TUCKER, P.

The first question in this case is as to the jurisdiction of the court of equity; the plaintiff being supposed to have a remedy at law under the act concerning joint rights and obligations. But it is a sufficient answer to the objection, that if the case was within the jurisdiction of a court of equity before the statute, it cannot be taken away by it. Wynn v. Bowles, 6 Munf. 23, 25. Eor, as there is nothing in the act excluding the cognizance of the court, it is construed to be cumulative, and to give only a concurrent remedy to the court of law.

Has the court of law, however, jurisdiction over this matter under the statute of joint rights and obligations? I think not. The case of Roane’s adm’r v. Drummond’s adm’rs, 6 Rand. 182, has extended the statute very properly to joint judgments, as being directly within the spirit of the act. But the case of simple contract debts due from a partnership stands on very different ground. They are confessedly not within the literal construction of the statute, and I am persuaded thej' are not within its meaning or intention. There are many strong reasons for confining the suability of a deceased partner to a court of equity. Book at the character of the demand. It is a demand which ought in justice to be paid, if possible, out of the funds of the concern. Those funds are fenced in against the claims of the creditors of the individual partners until the partnership demands are satisfied, because they are deemed peculiarly chargeable with the payment of the debts by which the funds themselves have been created or increased. Now, by the death of a partner, the whole of the effects of the concern become vested in the surviving partner, who alone can demand and sue for the debts due to the partnership, and who is entitled to take possession of *the stock in trade and apply it as far as necessary to the payment of the debts. The executors of the deceased partner have no agency or control whatsoever over the choses in action; and although they are either tenants in common, or joint tenants without survivorship, of the partnership effects, Gow on Partnership 47, yet they have only a right to a moiety of what remains after the payment of debts, and the amount of their interest is ascertained upon a final settlement of all the transactions of the firm. Thus situated, it is but reasonable that he who has the appropriate funds in his possession should be first chargeable. Hence a court of equity has always looked upon the representatives of a deceased partner in the light of a surety; as chargeable only in the event of the insolvency of the surviving obligor. Gow on Partnership 436; Linney’s adm’r v. Dare’s adm’r &c., 2 Leigh 588, 594; Hamersly v. Lambert & al., 2 Johns. Ch. Rep. 508; Ex parte Kendal, 17 Ves. 514; Sale v. Dishman’s ex’ors, 3 Leigh 548, 551, 557. I cannot think that the legislature intended to disturb this just and reasonable principle of a court of equity, and the rather, as there is no summary remedy afforded to the executors of the deceased agáinst the surviving partner. I am therefore of opinion that there was no remed3r at law for the appellee against Galt’s estate.

But it is said the appellee had a remedy at law against the surviving partners, and cannot implead the executors of the deceased in equity until the insolvency of the survivors has been ascertained. I do not concur in either of these propositions.

Eirst, I think the appellee had no remedy at law against the surviving partners, other than John Bullock, who was liable upon the obligation as his own. The demand against them at law would have been deemed to be extinguished; for in a court of law it is held that if upon making a contract by A. with B. C. gives his bond for it, the debt by simple contract is extinguished, *the obligation being made upon or in pursuance of the contract. 3 Bac. Abr. 107; Tom v. Goodrich, 2 Johns. Rep. 213. Now here the bond is the bond of John Bullock who signed it, and it was given for the demand of the plaintiff, and accepted as the documentary evidence of the demand, and as the bond of the firm. Now, although this was a mistake of the obligee, yet at taw this mistake could not be corrected, and equity only pan relieve against it. Indeed at law the appellee could not perhaps have been received to contradict the bond by evidence that the money was lent to the firm, when by the rigid construction of law the sealed inst'rument established that it was the debt of John Bullock in his individual character. I do not therefore think the appellee could have recovered at law.

But if he could, still a court of equity would have had concurrent jurisdiction to correct the plain mistake that has been committed here. Bishop v. Church, 2 Ves. 101; Simpson v. Vaughan, 2 Atk. 33; Underhill v. Horwood, 10 Ves. 227, 228; Sale v. Dishman’s ex’ors, 3 Leigh 548. I will go further. In equity, where the substance and not the form of things prevails, although the sealed instrument cannot and does not bind the partners as a deed would bind them, yet it does bind them as far as it would be binding if there was no seal. In the case of Tompkins v. Murray in the federal court, one of the partners made a transfer of the partnership effects, by deed of trust signed by the name of the firm. The chief justice sustained the transaction in equity, on the ground (if my memory does not deceive me) that as one partner could dispose of the goods by parol, his annexation of a seal could not make the act of transfer void, when it would have been undoubtedly good without it. It would indeed be anomalous if a court of equity, which habitually considers the seal as having no influence to overrule the real intent and meaning of a contract, should hold the seal affixed by a partner *to release his copartners from the obligation of a contract made for their benefit and enuring to their advantage. It was under these impressions that in Sale v. Dishman’s ex’ors I remarked that “the contract thus signed, and by mistake sealed also, was nevertheless binding in equity upon both partners. In equity the form of the thing- is immaterial, if the substance of the contract was to bind both.” If this view of the case be correct, there can be no question whatever as to the jurisdiction. But suppose the jurisdiction can only 'be sustained on the ground of the insolvency of the surviving partners, is it essential that that fact should be established by action at law, before the creditor can sue in equity? I think not; first, because I have found no case which establishes such a principle. Secondly, because I think it inconvenient and unnecessary to encounter the delay and -expense of two suits, when one will suffice. Thirdly, because the case is analogous to that of a surety seeking contribution, in which, although he has remedy at law, by motion here, or by action in Hngland, it is not required that the principal’s insolvency should be established by previous action at law. M’Cormick v. Obannon, 3 Munf. 484; 1 Cox’s C. C. 275. Fourthly, the •deed of trust having in this case vested the funds in trustees for the benefit of the creditors of the firm, the creditor had a right to come here in the first instance.

Having said thus much on the subject of jurisdiction, which (unfortunate^, I think) is too often the most prominent subject of •discussion, I shall very shortly say that the merits seem to me clearly with the appel-lee, though the decree itself is grossly erroneous in charging the estate of Galt before the insolvency of the surviving partners and the deficiency of the trust subject had been established by the proper proceeding. As to the statute of limitations, I incline to believe it will be found, upon farther inquiry, to operate no bar here. The proceedings *shew that there has been a trust executed for payment of debts, which prima facie would seem to take the debt out of the statute. If the debts be scheduled and this be among them, or if the deed refer to the books and this debt be on the books, there can be no doubt that the statute does not bar. This will be ascertained when the cause goes back. With these views of the case, I am of opinion to reverse the decree as premature against the executors, who cannot properly be chargeable until the deficiency of the trust fund and the insolvency of the surviving partners be established, and to send the cause back for further proceedings.

The other judges concurred. Decree reversed, and cause remanded for further proceedings.