Case ID: misc_84/html/0514-01.html
Source: Caselaw Access Project
Author: {"author": "Chester, J.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

Nicholas F. Marx and Frank Q. Miller, Copartners Doing Business Under the Firm Name and Style of Schenectady Well Drilling Company, Plaintiffs, v. The Valley Stone Company and Frank Q. Miller, Defendants.
    (Supreme Court, Albany Special Term,
    March, 1914.)
    Partnership — refusal by one of the partners to join in action by the firm to recover for services — agreement by both partners through their attorneys that one of them should act as liquidator for firm — fraud.
    Where one of two partners refuses to join in an action by the firm to recover for services and is made a party defendant, he cannot later, against his partner’s wishes and after the dissolution of the partnership, satisfy the judgment obtained in said action in consideration of a promise by the judgment debtor to give him its bonds to the amount of the judgment. This is especially so where it appears that said bonds are considered of little, if any, value by the other partner, that the defendant partner is insolvent, and that prior to the satisfaction of the judgment both partners had agreed through their attorneys that one of them should act as liquidator for the firm and should have entire charge of the judgment.
    The satisfaction piece is a fraud not only on the rights of the dissenting partner, but also on the rights of the attorney of record in the action who had a lien on the judgment for his agreed compensation and costs.
    On motion by the plaintiff partner and the attorney of record such satisfaction piece will be set aside to the extent of the attorney’s lien, and of the plaintiff partner’s interest in the residue, leaving the other partner to take the proposed bonds for his interest.
    Motion to vacate a satisfaction of a judgment.
    Harry Cook, for motion.
    Hayner & Ward, opposed.
   Chester, J.

The plaintiffs, Nicholas F. Marx and Frank Q. Miller, were copartners doing business under the name of Schenectady Well Drilling Company. They had a claim for services against the defendant Valley Stone Company. That company was in financial difficulties and was engaged in a scheme of reorganization. The plaintiff Marx desired to sue the claim owned by him and his partner. The partner objected to the bringing of the suit. Marx, however, brought the suit for the benefit of the partnership making his partner, Miller, a defendant because the latter refused to join in the suit as plaintiff. The summons was served in May, 1913. The Valley Stone Company interposed an answer but after answering made a confession upon which a judgment was entered against it, September 30,1913, in the Schenectady county clerk’s office for $300.35 damages and $17.19 costs, a transcript whereof was filed in the Montgomery county clerk’s office. After the commencement of the suit, Marx wrote a letter to his partner dissolving the partnership between them and it seems to be conceded that the partnership was thereupon duly dissolved. On November 7, 1913, Miller through his attorney agreed that Harry Cook, the attorney for his partner, Marx, should collect in the property of the partnership including the judgment in question and act as liquidator for the firm. One of the officers of the stone company on the 5th of January, 1914, requested Miller’s attorney to advise Miller to satisfy the judgment against the stone company and the attorney refused to give such advice on the ground that he had arranged that Harry Cook should have entire charge. of the action and judgment, and Miller was advised by Ms counsel not to execute any satisfaction piece of the judgment. Miller was in the employ of the stone company and while in their employ and at their request contrary to the advice of his counsel, on the 7th day of January, executed a satisfaction of the judgment as one of the members of the firm of the Schenectady "Well Drilling Company and such satisfaction was thereafter filed and such judgment satisfied of record in both Schenectady and Montgomery counties.

There was no consideration for the execution of the satisfaction except an agreement on the part of Miller that he would accept in payment of said judgment, and for the satisfaction thereof, one of the five per cent, bonds of the Valley Stone Company which it proposed to issue as part of its plan of reorganization, for the face value of the judgment. The plaintiff Marx had refused to satisfy the judgment on that basis or accept such bond in payment thereof, claiming that it would be of doubtful value and that the judgment was abundantly secured as a first lien upon lands owned by the Valley Stone Company.

It appears that Harry Cook as liquidator of the firm has received enough money to satisfy all the claims of the creditors of the firm, so that they are not concerned in this application. It also appears that John T. Cook, who was the attorney for the plaintiffs and who procured the judgment, had an agreement with Marx that he would pay him the sum of $100 and taxable costs if he obtained judgment against the Valley Stone Company in the suit.

It is undoubtedly the general rule that where a debt is owing to a partnership, payment by the debtor to any partner will extinguish the claim of all, but here there has been no payment of the firm’s claim. There has been simply an agreement of one partner that he would take something in satisfaction of the claim that the other partner would not agree to take and which the other partner believed had little if any value. Therefore the general rule of law which has been stated cannot apply to this case. The satisfaction here is a fraud not only on the rights of the partner who was diligent in prosecuting and securing the partnership claim but also on the rights of the attorney who had a lien upon the judgment for the amount of his agreed compensation and costs. The partner who executed the satisfaction seemed to be more inclined to aid his employers than to enforce the collection of the judgment owned by the partnership and after assenting through his attorney that Cook should collect it, in favor of the partnership, undertook in violation of his agreement and in violation of the rights of his partner and the attorney who procured the judgment to satisfy the claim, not for cash but for something that had a doubtful value. The claim is made that Miller is insolvent so that any claim that Marx may. have against him for damages for improperly satisfying the judgment would be valueless.

I think under such circumstances, there being no claim of creditors involved, that the satisfaction piece should be vacated to the extent of the interest of Marx in the judgment as well as to the extent of the attorney’s lien thereon, leaving Miller to take the proposed bonds of the Valley Stone Company to cover his interest only in the judgment.

An order to that effect, with ten dollars costs of the motion, is granted.

Ordered accordingly.