Case ID: nc_42/html/0034-01.html
Source: Caselaw Access Project
Author: {"author": "Ruffin', C. J.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

ANDERSON MITCHELL & AL. vs JOHN H. DOBSON & AL.
    Where A. and B., as co-partners, gave a note to C., and afterwards the co-partnership of A. and B. was dissolved, B. agreeing to pay all the debts, and a copartnership was then formed between B. and C., Held, that this did not operate as an extinguishment of the note, unless it was so expressly agreed betwee n B. and C. at tbe time their copartnership was formed, although it is alleged in the bill, that this note was to form a part of C’s. stock in the firm.
    Cause removed from the Court of Equity of Wilkes County, at the Spring Term 1S50.
    Samuel F. Patterson and William H. Martin were partners and carried on the mercantile business in Wilkes-borongh, and, in September, 1830, they borrowed from Benjamin S, Martin, a brother of William H., the sum of $300, for which they gave their promissory note. In January 1840, Patterson and Martin dissolved, and the latter undertook to pay all the debts of the firm, and Mitchell and the other plaintiff became bound with him in a bond to Patterson for his performance of the under* taking. In January 1841.. William II. Martin and Benjamin S. Martin entered into articles of copartnership in a store in Wilkesboro’, to be conducted by William H.. under the name of William II. Martin & Co., and in a tavern in the same place, to be conducted by Benjamin S., under the name of Benjamin S. Martin & Co., and each of them was to put in stock to the amount of $3000 ; that of William H. to be in merchandise and that of Ben'jamin S. to be in money, each paying interest on any deficiency of his stock and sharing the profits and losses equally. The business continued until 1S44, when the firm and each of the partners failed, and they both after-wards took the oath of insolvency, leaving a large amount of the debts of the firm unpaid. Before doing so, however, Benjamin II. Martin endorsed the note to his father, John Martin, in 1845, and the latter endorsed it, in trust for himself, to the defendant Dobson, who brought an action on it, against Patterson and the three Martins and recovered judgment in 1847.
    The bill was then filed against Dobson, t’he Mart-Ins and Patterson, and alleges, that Benjamin S. Martin knew, that, by the contract between Patterson and Wil- . liam H. Martin, the latter was bound to pay the note of $300, and all the other debts of Patterson and Martin, and that the plaint,ffs were his sureties therefor, and-that’ ^with that knowledge, in 1S41 he ¡¡passed the said note, '"then over due, and the sum was named, as so much capital stock paid in by Benjamin S. The bill thereupon ' charges, that, inasmuch as William H. was to pay the debt, the same was thereby extinguished, and was so con® sldered between those persons during the whole duration of the partnership; and that, afterwards, by a combination between the three Martins, with a view of reviving the note and raising the money from Patterson, and ultimately charging the plaintiffs upon their bond of indemnity to Patterson, the note was endorsed as aforesaid to John Martin in trust for his two sons or one of them, or without any valuable consideration, and then by him endorsed to Dobson, as before mentioned. The prayer is, that it may be decreed, that the debt was extinguished before the assignment of the note to John Martin, and that Patterson may be restrained from paying the judgment at law, and Dobson be perpetually' enjoined from enforcing the payment thereof.
    William H. and Benjamin S. Martin deny positively, that the note was paid in or received as a part of the stock of the latter in their partnership, or was in any manner paid or extinguished, or so considered by them ; and they say, that Benjamin S. Martin paid in his whole stock in cash raised by him from other sources ; and John Martin denies, that he has any knowledge or belief to the contrary. They all state further, that the note was endorsed to John by Benjamin, in consideration of money to n much larger amount, paid by him, John, as the surety of Bénjamin S. or of the firms of Benjamin S. and William H. Martin.
    
      Boydcn, for the plaintiffs.
    
      H. C. Jones, for the defendants.
   Ruffin', C. J.

Upon the evidence, the conclusion of the Court upon the points, on which the parties are at issurj would, probably, be, that the note of Patterson and Mai • tin, though not endorsed to William H. Martin & Col was transferred to the firm, as a part of the stock of Bet.» jamin S. Martin, and, moreover, that the sums, which John Marlin appears to have paid as the surety of his sons, was in fact paid by the sale of property, which le^ally belonged to the sons, so as to prevent that from constituting a valuable consideration for the note. If the cause, therefore, depended on those points, the decree would, probably, be for the plaintiffs, especially as the argument of bad faith, in making the assignment to the father without consideration, is much fortified by the subsequent devices of suing in the name of Dobson, and making the persons, for whose benefit the suit was hrought, parties defendant with Patterson. But the decree must lie against the plaintiffs, because, upon their own shewing, the case is against them in point of law. The bill does not allege, that the note was paid by Patterson and Martin, or either of them, to Benjamin S. Martin. On the contrary, it states that he paid it into the firm, as a subsisting note, in part of his stock ; nor does it allege, that payment was made to the firm by the makers, nor set' forth any facts from which actual satisfaction of the note to the firm by William H. Martin or afterwards can be inferred. It is not stated, oven, that he paid in his own share of the stock, much less that he is now or ever was in advance of the firm. As far as appears, then, the debt is still justly due to the firm, and is much needed for the creditors, to whom, the bill state's, this insolvent firm is indebted to a large amount. The bill, indeed, does not put the right to relief upon the equitable ground, that the debt had been once satisfied by payment, and therefore, that it was against conscience to raise the money- a. second time; but it rests upon a supposed extinguishment of the debt, by reason that William H. Martin, had obliged himself to pay this debt, and he was one of. the persons, as a member of the firm, to whom it was to be paid. Now that is a doctrine of the common law, and might have put'the firm to difficulty, as to an action.on .the note, if it had been endorsed. A Court of Equity, however, proceeds upon no such principle of extinguishment, but the contrary one of relieving against it generally, when produced by the law ; and hence, equity entertains suits between partners and charges each with what he justly owes, without regard to the form of security or its validity or invalidity at law. In this case, indeed', there was no extinguishment, as has been determined in the action at law p for the- note was not endorsed to the firm, but stood i.n the name of the payee, Benjamin S Martin,, in trust for the firm, as we are now considering the question. The other partner,. William H„ could not extinguish it without the consent of his companion ; since, it would be taking the effects of the-firm, to- satisfy his personal engagements to Patterson. But it is not pretended that he attempted to do. Consequently. Patterson and Martin became equitably the debtors to William H. Martin & Co., upon this note, and ought to- have been charged on their books as such, and the rights of the partner, Benjamin S. and the creditors of the firm, require that Patterson and Martin should now pay it, as it has not been done hitherto. If, indeed, the two brothers had agreed that the old note should be cancelled or considered paid, and that William H. Martin, by himself, should be the debtor to the firm for the amount and Patterson discharged, it would be different. But there is no evidence at all of such an agreement, nor is it charged distinctly, or otherwise than as legally to be inferred from the fact, that William H. Martin had bound himself to Patterson to pay this debt, an inference, already shewn to be inadmissible. It is true, it may be said, that John Martin claims the note for himself, though he is not' entitled to it,, but holds it in trust for the firm, and, therefore, that William H. Martin, ■has an interest in. it, and to that extent the plaintiff ought to be relieved. But the bill is not framed with that view for the interest of each partner can only be ascertained by taking an account of the partnership, and ascertaining 'the surplus, for division,, after the payment of all debts-—a thing that does not exist, according to the statements oí the bill. The Court is obliged, therefore, to dismiss the bill, and, though reluctantly, with costs.

Pee Cueiam. ©ecreé accordingly.