Case Name: The BANK OF WILMINGTON, &c. against ALMOND and Others
Court: Supreme Court of Pennsylvania
Jurisdiction: Pennsylvania
Decision Date: 1836-01-26
Citations: 1 Whart. 169
Docket Number: 
Parties: The BANK OF WILMINGTON, &c. against ALMOND and Others.
Judges: 
Reporter: Reports of cases adjudged in the Supreme Court of Pennsylvania (Wharton)
Volume: 1
Pages: 169–176

Head Matter:
[Philadelphia,
January 26,1836.]
The BANK OF WILMINGTON, &c. against ALMOND and Others.
IN ERROR.
A., B., C. and D., copartners under the firm of A. & Co., gave their promissory note to the plaintiffs. Afterwards the partnership was dissolved by the retirement of A., the business being continued by the others, under the firm of B. & Co.; and a bond ofindemnity was given by them to A. against the debts of the old firm. The firm of B. & Co. failed, and executed an assignment of their effects in trust for the payment of their creditors; and a release of all demands was executed by the creditors, among whom were the plaintiffs, who received a dividend from the assignees, on the note of A. & Co. Held, that by these acts of the plaintiffs, A. was discharged from his liability to them.
This was a writ of error to the District Court for the City and County of Philadelphia, to remove the record of an action of assumpsit, brought by the Bank of Wilmington and Brandywine against William Almond, William Warner, John Torbert, and Lewis Summerl, lately trading under the firm of William Almond & Co.
The action was founded on a promissory note drawn by the defendants, Almond, Warner, Torbert, and Summer!, as co-partners under the firm of William Almond & Co., in favour of the plaintiffs, for §1180, dated July 1st, 1822, payable two years after date.
The suit was commenced by capias to December term, 1824, to which a return of “ C. C. & B. B. as to William Almond &N. E. I. as to the other defendants,” was made. An alias capias issued to March term, 1825, and return made, “C. C. & B. B. as to Lewis Summed & N. E. I. as to the other defendants.”
The defendants, Almond and Summed, who had been brought in, signed an agreement for judgment in favour of the plaintiffs, “for the sum of §1248 78, on the 17th of June, 1825, as on an award of arbitrators of that date;” which agreement was filed and judgment entered on the 14th of March, 1826.
On the 28th of March, 1826, the defendant, Almond, by his counsel, upon affidavit filed, obtained “ a rule to show cause why the judg merit should not be opened, and the defendants let into a defence;” which rule was made absolute, and the judgment opened on the 5th of December, 1826.
Upon the trial of the cause, the plaintiff gave in evidence the promissory note in question, and there rested his case.
The defendant, Almond, by his counsel, in defence gave the following matters in evidence, viz.:
A notice of the dissolution of the firm of William Almond & Co., published in the American Watchman, and Delaware Advertiser of Wilmington, (Del.) of April 1st, 1823, as follows:
“ Dissolution of Partnerships.
The partnership of William Almond & Co. is this day dissolved by mutual consent. All persons having accounts with them, will call on Lewis Summerl & Co., at the factory, for settlement.
William Warner,
John Torbert,
William Almond,
Lewis Summerl.
“ The business of the Nemours Cotton Mill, on the Brandywine, will be continued by the subscribers, under the firm of Lewis Summerl & Co. William Warner,
John Torbert,
Lewis Summerl.
Nemours Cotton Mills, March 28, 1823.”
The defendant then gave in evidence a bond of indemnity in the penal sum of $10,000, dated the 22d day of March, 1823, from Warner, Torbert, and Summerl, to Almond, reciting, that,
“Whereas the said William Almond, William Warner, John Torbert and Lewis Summerl, heretofore formed a partnership under the style of William Almond & Co., and carried on the business of cotton spinning, in a cotton mill formerly known by the name of Hagley’s Cotton Factory, and since called Nemour’s Cotton Mill, which Eleuthere Irene du Pont, Samuel M’Call, and Robert M’Call, by their deed, bearing date the twenty-eighth day of May, in the year of our Lord one thousand eight hundred and twenty-two, leased and demised to the said William Warner, John Torbert, and William Almond, for a certain term how unexpired ; and whereas the said William Almond has withdrawn from the said concern, and the said partnership has been this day dissolved, by mutual consent, and the said William Almond hath, by a certain instrument under his hand and seal, bearing even date herewith, granted, assigned, and bargained and sold, all his interest, title, property and claim in the said lease, and in and to all of the goods, effects and credits' of the said partnership, and in and to all contracts made with the same, subject to the debts, covenants, contracts and engagements thereof, and subject, also, to the covenants and contracts in the said lease contained, to the said William Warner, John Torbert, and Lewis Summed: and whereas, the said William Warner, John Torbert, and Lewis Summed, have agreed to pay, and the said William Almond to receive, such sum of money as may be due to the said William Almond on the book of the said partnership, in manner following; that is to say, provided the said balance shall not exceed one thousand five hundred dollars, the same shall be paid in four equal instalments, at the expiration of three, six, nine and twelve months, respectively, with lawful interest thereon, from the date hereof, but if the said sum shall exceed one thousand five hundred dollars, then one thousand five hundred dollars thereof shall be paid in four equal instalments as aforesaid, and the residue thereof shall be satisfied by their promissory note, payable at sixty., days after the date hereof: and whereas, the said William Almond hath agreed to continue in the service of the said William Warner, John Torbert, and Lewis Summer!, as manager and overseer of the said Nernour’s Cotton Mill, until the first day of July next, if they shall require him so long to act in the said capacity, and hath agreed to relinquish the salary, which the said partnership has heretofore stipulated to pay to him, and hath consented to receive of the said William Warner, John Torbert, and Lewis Summed, for his services as such manager and overseer, past and future, a salary at the rate of eight hundred dollars per annum, the said salary to commence at the expiration of six months after the commencement or formation of the aforesaid partnership of William Almond & Co., and to end whenever he shall be discharged by the said William Warner, John Torbert, and Lewis Summed, the said William Almond thereby freely giving his services during the first six months after the commence'ment of the said partnership.
Now the condition of this obligation is such, that if the said William Warner, John Torbert, and Lewis Summed, do and shall well and truly pay all debts whatsoever, due from the said partnership of William Almond & Co., and do and shall within one month after the date hereof, procure the said William Almond to be released from the aforesaid lease and demise, and from the rents and covenants therein reserved and contained, and do and shall, will and truly, keep, perform and fulfil, all and .every the contracts, covenants and engagements made at any time heretofore, by, or on behalf of the said partnership, and shall save and keep harmless, the said William Almond from all such debts, rents, covenants, contracts and engagements, and from costs, charges and expenses, arising or accruing by reason of the same. And if the said William Warner, John Torbert, and Lewis Summed, do and shall, well and truly, pay such sum of money as may be due upon the books of the said partnership to the said William Almond, to him in manner and form as herein before recited to have been agreed on;' and if the said William Warner, John Torbert, and Lewis Summerl do and shall, well and truly pay to the said William Almond, for his past and future services as manager and overseer of- the said Nemour’s Cotton Mill, the aforesaid salary, at the rate of eight hundred dollars per annum, to commence from the expiration of six months after the formation of the said partnership, and to end at the time when he shall be discharged from their service as aforesaid — then the obligation shall be void and of none effect, or else shall be and remain in full force and virtue, in law.”
The defendant then gave in evidence an indenture, executed the 29th day of October, 1825, between William Warner, John Torbert, and Lewis Summerl, composing the firm of Lewis Summerl & Co. of the first part, William Seal and Joseph Grubb of the second part, and “ all other, the creditors of the said Lewis Summerl & Co., who shall have signed and sealed these presents, or who shall execute a release according to the terms thei-einafter mentioned,” of the third part, assigning “ unto the said William Seal and Joseph Grubb, all and singular the said machinery, stock and effects of said company, debts, sum and sums of money due or belonging to said firm,” “ in trust,” (after deducting for rent, &c.) “ to pay, apply, and appropriate all the said money arising from the said assigned premises, to and among all such of the creditors of the said William Warner, John Torbert, and Lewis Summer], trading under the firm of Lewis Summerl & Co., in equal proportions, &c., as shall, within sixty days after the date of these premises, fully and absolutely release the said Lewis Summerl & Co. from their respective debts.”
The defendant then gave in evidence an instrument, dated November 18th, 1825, and executed by the “ creditors of William Warner, John Torbert, and Lewis Summerl, cotton manufacturers on the Brandywine, under the name and firm of Lewis Summer! & Co.,” which, after reciting the indebtedness of Lewis Summerl & Co., and their assignment “ for the benefit of such of their creditors as shall sign and execute a release of their respective debts, at or before the expiration of sixty days from its date,” of “ all their copartnership, estate, real and personal, and outstanding debts of every description,” — “ released and forever discharged the said William Warner, John Torbert, and Lewis Summerl, composing the firm of Lewis Summerl & Co. &c., on the Brandywine, in the state of Delaware, their heirs, executors, and administrators respectively, of and from all, and all manner of action and actions, cause and causes of action, suits, debts, dues, duties, sum and sums of money, accounts, reckonings, bills, specialities, covenants, agreements, contracts, promises, executions, claims and demands whatsoever or wheresoever, in law or equity, which we, or either of us, or our copartners now have, or may or can have, claim or demand, for or by reason of our several and respective debts or demands— against them, or either of them, associated as aforesaid, for, upon, or by reason of any matter, cause, or thing whatsoever, to the day of the date hereof, in their capacity as co-partners aforesaid” &c.; among which creditors was the Bank of Wilmington and Brandy-wine, the plaintiffs in this action; the name of John Wales, their president, being thereunto subscribed, and the seal of said bank affixed.
The defendant further gave in evidence an exhibit of the settlement of the estate of Summerl & Co., in which it appeared that the assignees of said Summerl & Co. declared a dividend out of the fund assigned by Summerl & Co., in favour of the bank, on the notes of William Almond & Co., held by the bank, as well as on notes of Warner and Torbert to Lewis Summerl & Co., and by them endorsed, also held by the bank; and a receipt signed by William Seal, then president of said bank, dated March 3d, 1830, for $1211 74, received of said assignees of Summerl & Co., “ in full of the final dividend,” being the aggregate of dividends on claims against Almond & Co. and Summerl & Co.; and here closed his case.
The plaintiff then gave in evidence, as rebutting testimony, four promissory notes, the property of said plaintiffs, drawn by Warner and Torbert in favour of Lewis Summerl & Co., and by them endorsed in favour of the plaintiffs, being the claim on which a dividend was received by said bank, out of the estate of L. Summerl & Co.; and then closed his case.
Whereupon the court charged the jury, in substance, as follows:
“ The note on which this action is brought, was given by the firm of William Almond & Co. It has not been paid; and the defendant is liable in this action, if he has not been discharged by the plaintiff. The dissolution of the firm of William Almond & Co. took place on or about the 1st of April, 1823; when all the copartners, except William Almond, entered into another copartnership, under the firm of Lewis Summerl & Co., and covenanted with Almond to pay the note in question.
The defendant alleges, that the bank to whom that note was given, the plaintiff in the action, at the time of the dissolution of the copartnership of William Almond & Co., agreed with the makers of this note, to look for its payment to the firm of Lewis Summerl & Co., and to release William Almond, from all liability on it; tand that this agreement was a prevailing reason with William Almond, for agreeing to the dissolution of the firm of William Almond & Co.
It is objected by the plaintiff, ‘that the facts given in evidence are not proof of a substitution by the plaintiff, of the new firm for the old.’ It is the opinion of the court, that they are evidence upon ■which the jury would be justified in finding a verdict for the defendant. The case is with the defendant.”
To which charge, the plaintiff’s counsel tendered his bill of exceptions, which was sealed by the judge; and thereupon prosecuted this writ of error.
The following errors were assigned :
“ 1. The court erred in charging the jury that the facts were evidence upon which the jury would be justified in finding a verdict for the defendants.
2. The court erred in charging the jury that the case was with the defendants.
3. The court erred in taking the case from the jury.”
Mr. C. Gilpin and Mr. Sharsioood, for the plaintiff in error:
1. A release to three continuing members of an old firm, who have entered into a new co-partnership, does not discharge the withdrawing partner. Gow on Partnership, 78. /Clement v. Brush, (3 John C. C. 180.) , Lyman v. Clark, (9 Mass. Pep. 235.) The case of Heath v. Percival, (1 Strange, 403,) strongly resembles this; and the decision is in point.
2. There is no evidence of any intention to substitute the new firm for the old. The bank had a claim on the new partnership for other notes. The receipt may be explained, on the ground of a collateral undertaking, or guarantee. The application by Almond to open the judgment in the court below, was on'the technical ground, that the release of joint obligor discharges all. It is well settled, that the acts of partners, as between themselves, cannot vary their liability to creditors. Forrest v. Wain, (4 Yeates, 337.) Whiting v. Farrund, (1 Conn. Rep. 60.) Gow, 342. Collyer on pp. 327. The bank had no inducement in this case to discharge Almond; and the instrument not being under seal, it is defective from want of consideration. Barker v. Blake, (11 Mass. Rep. 16.) Mortimer v. Caldwell, (Kirby, 53.) Smith v. Rogers, (17 John. Rep. 341.) Blew v. Wyatt, (5 Carr. P. 399, 24 Eng. C. L. Rep. 378.) Latapie v. Pecholier, (2 Wash. C. C. Rep. 180.) Collyer, 324. Nothing but satisfaction, or a release of Almond, can bar this action.
3. The court ought to have left the facts to the jury. Instead of which, they took the facts for granted, and drew inferences which the^jury only were competent to do. Jones v. Wildes, (8 Serg. óp R. 150.) Bank of Washington v. Triplett, (1 Peters’ Rep. (Sup. Ct.) 25.)
The Court declined hearing Mr. Oivens, who was to argue for the defendant in error.

Opinion:
The opinion of the court was delivered by
Gibson, C. J.
The bank was not an original party to the arrangement between the members of the old firm ; and it was not, therefore, originally bound by it. But did it not become a party by taking a dividend, which it.could not have claimed, except on the basis of the arrangement'? The assignment of the new firm transferred, but its partnership effects, and these, too, in trust to satisfy its own debts; and a creditor of the old firm was consequently not entitled, in that character, to the benefit of the trust. Yet the bank actually came in; and, consequently, as a creditor of the new firm, by its assumption of the old debts, and subject to the conditions of the assumption. A principal one of these, as they appear in the bond of indemnity, was payment of the old debts, and exoneration of the retiring partner by the new firm. For the performance of that, as well as every other part of the arrangement, they were firmly bound; and it is not to be supposed they would have consented to let the bank in, on an equality with their proper creditors, and on terms that would have left them exposed to an action by their former partner. It is the equity of the new firm, which, comes between the defendant and the bank, and brings to his rescue that principle which forbids the enforcement of certain agreements, as a fraud upon third persons. By treating the note as a debt of the new firm, the bank recognized the terms of its assumption, and agreed to look, in accordance with them, to it only. This election to abide by the terms of the assumption, is the master key of the case; for, -without it, the release, which discharged the members of the new firm from no more than its own debts, could .not be brought to bear on the present cause of action; which would otherwise not be a debt, within the terms of the trust. On the principle indicated, the debt would be gone as to the defendant, by force of the arrangement, without aid from the release. The case of Heath v. Percival, (Stra. 403,) has been relied on for the contrary; but its circumstances show it to have been essentially different. One -of the two partners, at the winding up of the concern, had taken on himself the burthen of discharging the joint bonds ; and a bond creditor, having applied to him for payment, received a promise of more interest: subsequent to which, the assuming partner became a bankrupt, and the obligee having taken a dividend under the commission, the latter brought a bill against the executor of the other partner, for a discovery of assets and payment of the residue. On these facts, it was held that the agreement was res inter alios acta; which, as it could not prejudice the other partner, who might have discharged himself by payment of principal and interest at the original rate, ought not to benefit him. A better reason might perhaps have been found, in the fact that a collateral agreement, such as that, was entirely consistent with a retention of the original debtors, who could be discharged but by substituting the promise of the assuming partner, in place of the bond. In our case, substitution was the basis of the superstructure. In that, the application to the assuming obligor, and consequent agreement for increased interest, neither sanctioned or disaffirmed the arrangement between the partners. What, then, in addition, was the effect of taking a dividend under the commission, without reference to the terms of the arrangement I Certainly not to discharge the other obligor, who had advantage, instead of prejudice, from it. But most certainly the result would have been different, if the debt had been made proveable under the commission, exclusively, by the arrangement and assumption of the bankrupt; for being the consideration of a benefit, the creditor would have been bound by the conditions of it. The absence of that feature essentially differs the case from the one at bar, in which the bank came in on the footing of a creditor of the new firm, exclusively, by virtue of an agreement between the defendant and the partners of that firm; and it is bound to carry out every part of the arrangement which made it so. In Heath v. Percival, the debt was not discharged, except as to the bankrupt; here, if the note were so far the proper debt of the new firm, as to entitle it to a dividend under the assignment of that firm, it was also its proper debt so far as to bring it within the range of the release, which, though operating directly but to discharge the members of that firm, and even these but from its partnership debts, operated incidentally to discharge the defendant also; inasmuch as they would else have been answerable to him on their contract of indemnity. If the bank might have recourse to the defendant, as for a debt of the old firm, why not to the other drawers, who have been released from nothing but the debts of the new firm ? Every one would acknowledge the injustice of that, since the bank has been admitted to the benefit of treating the note as a debt of the new firm ; and if they are discharged from their original liability, the defendant stands discharged, also, on the principle which makes the release of one joint debtor, the release of all. In every direction, therefore, the course of the bank is beset with difficulties', which spring from the obligation of the bank to give full effect to its release, in the only way it can do so — by giving full effect to the arrangement which produced it.
Judgment affirmed.