Case Name: Brown v. Davis
Court: New York Superior Court
Jurisdiction: New York
Decision Date: 1857-03-28
Citations: 6 Duer 549
Docket Number: 
Parties: Brown v. Davis.
Judges: 
Reporter: Reports of cases argued and determined in the Superior Court of the city of New York
Volume: 13
Pages: 549–564

Head Matter:
Brown v. Davis.
Prior and up to the 23d of September 1,1850, the firm of Evans, Davis and Lownd, owed plaintiff $14,069.38, for moneys advanced to it, and for which he held their notes. That firm dissolved that day, and Evans and Davis formed a new firm with Dodge, under the name of Davis, Evans and Dodge. Plaintiff gave up the notes of the old firm and took two new notes of $7500 each, dated September 23, 1850, payable “ on demand after date,” one of which was signed by Evans, and the other by Dav.is, of the firm of Evans, Davis and Lownd.
Plaintiff signed the partnership agreement of Davis, Evans and Dodge; that stated, that the amonnt of $15,000 due to the plaintiff from the old firm “is to remain in the new concern during the continuance of the copartnership,” he receiving interest at the rate of seven per cent, per annum. Under same date, Davis, Evans and Dodge and the plaintiff, signed a paper stating they had received from plaintiff $15,000, “ being the amount contributed by him as special partner to the concern of Davis, Evans and Dodge.” Davis, Evans and plaintiff, signed another paper of the same date, stating that they had formed a limited partnership under the name of Davis, Evans and Dodge, the nature of its business, the residence of the partners, that plaintiff is the special partner, and as such has contributed $15,000 in cash, and that Davis, Evans and Dodge, were the general partners. Enough was not done to create a limited partnership. The new firm failed and was dissolved within a year, and before this suit was brought, owing some $30,000 more than it could pay. This suit is brought on the note for $7500 given by Davis to plaintiff when the new firm was formed. On that note, and also on the other note for a like sum, given by Evans, there is indorsed: “ This note is given as security to Levi Brown, (the plaintiff,) for one half of the $15,000 advanced to Davis, Evans and Dodge. Egbert Davis.”
Held, 1. The plaintiff never discharged Davis and Evans from liability for the amount the firm of Davis, Evans and Lownd owed him, but took the note of each for half of that sum.
2. Though that sum was continued, in the assets which represented it, as a loan to the film of Davis, Evans and Dodge, it was not placed, as between themselves, at the risk of its business, h'or lent on an agreement to look solely to the new firm for payment.
3. The note in suit became due, on demand of payment, made after the new firm had actually dissolved, and plaintiff could sue on the note without having first sued and exhausted his remedies by action against the new firm.
4. The evidence given is insufficient to establish an intent of Davis, Evans and Dodge, and of the plaintiff, by the arrangement in respect to a limited partnership, to defraud the public, or that they knew their acts were invalid, or that they were done with an improper motive.
6. The plaintiff is entitled to a judgment on the verdict. Permitting such a recovery will not withdraw from the legal or equitable process of the courts any property which should be appropriated to the creditors of the new firm, though held tó be composed of Davis, Evans and Dodge, and the plaintiff, as general partners. A judgment by such creditors against the four, and appropriate ulterior proceedings, will reach all the individual property of each, as well as all the effects of the new firm.
(Before Oakley, Ch. J., Bosworth and Hoffman, J.J.)
March 28, 1857.
This action was tried before Chief-Justice Oaldey, and a jury, in November, 1856. A verdict was ordered for the plaintiff for the amount claimed, subject to the opinion of the court, whether the action could be maintained upon the facts which the evidence given established, and the case was directed at the trial to be heard in the first instance at the General Term. The plaintiff moves for judgment on the verdict. The case presented to the General Term was in the words following, to wit:
“ This was an action on the following promissory note:
“$7,500. “New York, September 23d, 1850.
“ On demand, after date, I promise to pay to the order of Levi Brown seven thousand five hundred dollars. Value received.
“Robert Davis.”
Endorsed.—“ This note is given as security to Levi Brown for one half of the fifteen thousand dollars advanced to Davis, Evans & Dodge. “ Robert Davis.”
The complaint was in the usual form.
The answer was as follows:
“ Robert Davis, the defendant in this action, for answer to the complaint of Levi Brown, plaintiff, says: That he admits making the promissory note in the said complaint mentioned; that he denies the said promissory note became due and payable; that he denies that the plaintiff is the lawful owner and holder of the said promissory note; that he denies that he is indebted unto the plaintiff on the said promissory note in the sum of seven thousand five hundred dollars, with interest thereon from the 23d day of September, 1850; and, for a further defence, this defendant says, that the said promissory note was made and delivered to the plaintiff without any consideration whatever having been paid for the same, and was given to the plaintiff with another promissory note, as a memorandum, for the purpose of showing that the plaintiff had paid into the firm of Davis, Evans & Dodge, of which said firm the plaintiff and defendant were copartners, his, the plaintiff’s share of capital in trade, agreed to be put into the said firm by the plaintiff, and for no other purpose whatever.
“ Wherefore, the defendant demands that the said complaint be dismissed, and that he may recover of the plaintiff his costs of suit. “L. D. Fredericks, att’y for def’t.”
The cause came on for trial on the 25th day of November, 1856, before Chief-Justice Oakley, and a jury.
The plaintiff read in evidence the note declared on, and the indorsement thereon, and rested his case.
The defendant called several witnesses, from whose evidence, and that of a witness of the plaintiff, called in reply, the following facts appeared:
That for about two years previous to the 23d of September, 1850, a partnership had existed between Francis B. Evans, the defendant Davis, and Charles Lownd, in the business of the manufacture and sale of files, in the city of New York. To this firm the plaintiff had advanced money from time to time by way of loan, so that on the said 23d of September, 1850, they were indebted to him for such advances in the sum of $14,069.38, for which he held their notes. On that day the firm was dissolved by mutual consent, and a new partnership was formed to continue the business, from and after the dissolution, by the defendant, said Evans, and David S. Dodge, under the style of Davis, Evans & Dodge. The agreement of partnership was in writing, bearing date the 23d of September, 1850, and with the receipts and stipulations indorsed thereon, was given in evidence, and is hereto annexed, marked “A.” To this agreement the plaintiff was* also a party, and appended his signature, as thereby appears. And, with the assent of the plaintiff, an advertisement of the formation of the partnership was published by the firm, which is given in evidence, and is hereto annexed, marked “ B.” It further appeared that, in pursuance of the articles of agreement, the plaintiff, on the same day, and at the time of their execution, transferred to the new firm the loan he had made to the old one, by executing his receipt (indorsed on the articles) to the old firm for the amount due him, $14,069.38, and taking the receipts of the new firm (also indorsed on the articles) for $15,000. It did not distinctly appear how the difference was made up, but no part of the $15,000 was paid or advanced by the plaintiff, or received by the new firm, in cash or otherwise, than as above stated. The plaintiff was thereupon credited on the books of the new firm with the sum of $15,000 cash.
And the plaintiff thereupon received from the defendant the note in suit, and from said Evans another note for the same amount, and of the same tenor at the time of the execution of said articles, both given for the advance of $15,000 made by the plaintiff, as above stated, and for the purpose of securing its repayment. And at the same time gave up the notes which he held against the old firm.
It further appeared that the old firm, at the time of its dissolution, though still conducting business, was in reality insolvent. That the new firm failed for a large amount, about one year after-wards, being insolvent, to the extent of $30,000. And that no part of plaintiff’s advance, or the interest thereon, or of either of said notes, had ever been repaid him, except three small items of cash charged him in the books of the firm, amounting to about $100.
Upon these facts the Chief-Justice directed a verdict for the plaintiff for the amount due on the note and interest, subject to the opinion of the court upon the question whether the action could be maintained upon the foregoing facts, and directed the case to be heard in the first instance at the General Term, with leave to either party to turn the case into a bill of exceptions.
And the jury accordingly returned a verdict for the plaintiff for $10,740.38, subject to the opinion of the court on the questions reserved.
EXHIBIT A.
This memorandum of agreements made this twenty-third day of September, 1850, by and between Robert Davis and Francis B. Evans of the first part, and David S. Dodge of the second part, witnesseth:
That the said party of the first part, having been engaged in the business of manufacturing and vending files, under the name of the American File Works, and being the sole and exclusive owners of a certain file machine, invented by John Crum, which is styled “ An invention for the cutting of files,” entered by caveat in the patent office of the United States, at Washington city, by said John Crum, on or about June 11th, 1850, and the same having been assigned subsequently by said John Crum to the snid Robert Davis and Francis B. Evans, propose to the party of the second part, for the consideration hereinafter named, to form a copartnership for the purpose of continuing and extending the said business of manufacturing and vending files of every kind and description, and more especially for the greater facilities afforded to said copartnership for the sole and exclusive use of said patent file machine in the United States, for carrying on extensively said manufactures in all the various branches; and to sell one-third interest in the general business as now and heretofore carried on, as per exhibit in their books this day as a basis; it being understood and agreed that the amount of fifteen thousand dollars, which appears by said exhibit to be due to Levi Brown, is to remain in the new concern, during the continuance of the copartnership, by the consent of said Levi Brown, which is annexed to these articles of agreement; he, said Levi Brown, receiving interest for the same at the rate of seven per cent, per annum.
The said parties of the first part also agree to sell to the party of the second part, an undivided third part of said “invention for the cutting of files,” or patent right, and assign the same for record, on the books of the patent office at Washington; it being understood that such patents as may be obtained in foreign countries shall inure to the exclusive benefit of the party of the first part, but not to be used in any way to the injury of the American business.
The patent in the United States to be used only for the joint benefit of the copartnership.
The party of the second part agrees to furnish capital to the new concern as follows:
Ten thousand dollars at the signing and sealing of these articles of agreement. Five thousand dollars during the year one thou sand eight hundred and fifty. Five thousand dollars during the year one thousand eight hundred and fifty-one. Also, for the further accommodation of the new concern, to furnish the name of William E. Dodge as confidential indorser, as may be necessary from time to time, to the amount of twenty thousand dollars. And, also, for the undivided one-third interest in said patent, the party of the second part agrees to pay the party of the first part for their exclusive benefit, ten thousand dollars at the signing and sealing of this agreement. And, also, twenty-five per cent, of his net profits annually, till said sum so deducted shall amount to the like sum of ten thousand dollars. It is understood that any difference in amount of capital furnished by either shall be adjusted by interest. It is also understood, that any' agreement made between the party of the first part and John Crum, shall inure to the new concern, and any improvements which may he made to the present patent machine, or to any other part of the manufacture of files, shall also pass to their benefit, it being understood, that if any new patents are taken out, they shall be also owned by the new concern in the same proportion as the original for the United States; but if any foreign patents are obtained, they shall be at the expense, and for the benefit of the party of the first part, they also paying the just proportion of any expense incurred in perfecting the same.
This copartnership shall continue for the term of ten years, unless sooner dissolved by death or mutual consent. In case of the death of either partner, his capital shall remain in "the business, and his estate shall receive twenty per cent, of the profits, unless his representatives shall prefer to sell his interest. The business shall be conducted under the name of Davis, Evans & Dodge. Neither partner shall use the name of the firm to the benefit of himself or others, without the foreknowledge and consent of each of the other partners. Neither partner shall draw from the concern more than sufficient for his own or his family expenses without the consent of the other partners. It is also mutually agreed between the parties, that in case any difficulty shall arise during the prosecution of the business, or in the final settlement of the same, Francis B. Evans and David S. Dodge, shall each choose a competent and disinterested person, and the persons so chosen shall choose a third to whom all matters shall be submitted, and their decision shall be final, and forever binding on the parties.
To the faithful performance of these obligations we hereunto affix our names and seals, this day and year above written.
Robert Davis, [l. s.]
Francis B. Evans, [l. s.]
Witness: Nath’l Davis, Jr. David S. Dodge, [l. s.]
Levi Brown. [l. s.]
Received, New York, September 23d, 1850, from Evans, Davis & Co., by the hands of Robert Davis and Francis B. Evans, fourteen thousand sixty-nine dollars and thirty-eight cents, in full.
Levi Brown.
We have this day received the sum of fifteen thousand dollars from Levi Brown, being the amount contributed by him as a special partner to the said concern of Davis, Evans & Dodge.
New York, September 23d, 1850. Robert Davis,
Francis B. Evans,
David S. Dodge,
Levi Brown.
The true meaning of the foregoing agreement is this, viz.: That Levi Brown, the special partner, is to receive at the rate of seven per cent, semi-annually, on the $15,000 advanced by him, and of the net profits of the business, Robert Davis, Francis B. Evans, and David S. Dodge are each to receive an equal amount, or thirty-three and one-third per cent. Robert Davis,
Francis B. Evans,
David S. Dodge,
Levi Brown.
exhibit B.
The copartnership heretofore existing under the firm of Evans, Davis & Co., is this day dissolved by mutual consent. Francis B. Evans and Robert Davis are alone authorized to use the name of the firm in liquidation. Francis B. Evans,
Dated September 23d, 1850. Robert Davis,
Charles Lownd.
Limited Partnership.—The undersigned have, pursuant to the provisions of the Revised Statutes of the State of New York, formed a limited partnership, under the name or firm of Davis, Evans & Dodge; that the general nature of the business to be transacted is the buying, selling, and manufacturing of files, under the name of the American File Works. Levi Brown, whose place of residence is in the city of Brooklyn, is the special partner, and Robert Davis, whose place of residence is in the city of New York, Francis B. Evans, whose place of residence is in the city of Brooklyn, and David S. Dodge, whose place of residence is in the city of New York, are general partners; and that the said Levi Brown has contributed, as such special partner, to the common stock fifteen thousand dollars in cash. The said partnership is to commence on the twenty-third day of September, 1850, and will terminate on the twenty-third day of September, 1860. Dated this twenty-third day of September, one thousand eight hundred and' fifty, at the city of New York. Robert Davis,
Francis B. Evans,
Levi Brown.
New York, September 23d, 1850.
The subscribers will continue the manufacture of files at the American File Works, at Ramapo, and are making extensive preparations to introduce their American Patent Files.
Davis, Evans & Dodge,
No. 212 Pearl-street, New York.
M J. Phelps, for plaintiff,
made and argued the following points:
I. The consideration of the note in suit, was one-half the loan of $15,000 made by the plaintiff to the defendant and his partners. This sum was advanced in cash to the former firm, and their notes taken therefor, and was transferred to the new firm by agreement, the first notes being taken up, and this note, with another of the same tenor, given in their stead. This fully appears from the case, and is also shown by the indorsement on the note, which is conclusive between the parties as to the consideration.
H. The contract between the parties did not make the plaintiff a partner, either special or general, in the firm of Davis, Evans & Dodge. He had no interest in the profits or loss. His advance to the firm was a mere loan, to be repaid with legal interest.
^ III. The notes given the plaintiff for this loan, by Evans and the defendant, in place of those he held against the old firm, were, therefore, in any view, perfectly valid in their inception, and founded upon a sufficient consideration.
PV". The subsequent advertisement by the parties, under a mistake as to the legal effect of the transaction, that the plaintiff had become a special partner, did not invalidate these notes. Whether it operated to make the plaintiff liable to creditors as a general partner, or whether a judgment upon this note would be permitted, in equity, to take precedence of a creditor’s judgment, who had trusted the creditors on the faith of the advertisement, are very different questions. The case shows no such illegal intent as would preclude legal remedies, and, among themselves, the rights "of the parties must depend upon the real contract between them. Under that contract, the validity of the notes is unquestionable. Certainly the mere publication of a mistaken advertisement, which did no harm so far as appears, and was not intended to do any, could not divest the plaintiff of his right to recover for money previously and honestly loaned.
"V". Even if the plaintiff could be regarded as a special partner, he would still be entitled to recover in this action. 1. Because no defence growing out of this fact is set up in the answer. The defence disclosed by the pleadings is entirely different. In no case can a defendant plead one defence, and rely at the trial upon another; and least of all where the defence is technical and without merit. 2. If the facts were properly pleaded, they amount to no defence, as between the parties, whatever might be their effect between the firm and its creditors. A note given by a general to a special partner, for the capital contributed by the latter, might be void as to creditors, or might make the partnership a general one; but, if given in good faith, would be valid between the parties. (Beers v. Reynolds, 12 Barb. 288; affirmed, 1 Kernan, 97.) No principle of law forbids such a contract; nor is it in conflict with any provision of the partnership act. On the contrary, the statute evidently contemplates agreements of this kind, and carefully provides against creditors being prejudiced thereby in the event of insolvency. (Revised Statutes, p. 767, § 23.) This clause has been held to apply to the claim of the special partner against his insolvent firm for his capital, (Bower v. Argall, 24 Wendell, 496.)
A. R. Ryett and L. R. Frederick, for defendant,
made and argued the following points:—
I. The note, as alleged, was given as security to the plaintiff, for one half of $15,000 claimed by him to have been advanced to Davis, Evans & Dodge. The plaintiff proved that this was the consideration of the note. The proof showed that no such money was advanced by Brown to Davis, Evans & Dodge by the plaintiff, but the alleged advance of $15,000 was by receipting a debt due to the plaintiff from another firm, of which the defendant was a member, and taking a receipt from Davis, Evans & Dodge for $15,000; the money, in neither receipt, having been paid or received. The firm of Davis, Evans & Co. were insolvent at the time, and the plaintiff was credited on the books of the new firm with $15,000, whereas he had not advanced any money whatever to them. There was, therefore, no consideration for the note.
II. The note was an illegal contract, and against public policy, and its consideration was also illegal. The plaintiff published to the world that he had contributed this $15,000 as capital stock to the firm of Davis, Evans & Dodge, without contributing one cent. And in the partnership articles he stipulated to receive seven per cent, on this fictitious advance or capital, whichever it was—and took this note as security, from Davis, for money never advanced, and which he so published to the world was capital, thus drawing away from the funds of the new firm $1050 a year, instead of aiding them by $15,000 capital. Indeed the new firm instead of having $15,000 capital added by plaintiff was, by the arrangement, $15,000 in debt to the plaintiff, making a difference to the creditors of $30,000, and making the new firm assume a debt to the plaintiff, without any consideration, to the diminution of its actual assets to that extent, instead of an increase of them, $15,000. The firm failed for $30,000, and it was no wonder. This arrangement was a fraud upon the Act, a fraud upon the public, and illegal, (1 R. S. 764, and §§ 1 to 24,) if not actually a misdemeanor, and no action can be sustained upon any contract founded on such an arrangement. (Perkins v. Savage, 15 Wend. 412; Mackie v. Cairns, 5 Cowen, 547; Graves v. Delaplaine, 14 Johns. R. 146; Burt v. Place, 6 Cowen, 43; Payne v. Eden, 3 Cai. R. 213; Prince v. Lee, 4 Johns. 419; Nellis v. Clark, 4 Hill, 424; Mell v. Young, 23 Wend. 315; Crooker v. Crane, 21 Wend. 211; Bell v. Quin, 2 Sand. 146.)
ITT. The $15,000 was in fact advanced as capital, and at the risk of the business, and the true construction of the indorsement on the note is, that the note is to secure payment to him of his capital, if not lost in the business.
IY. The action is not brought on the old loan to Davis, Evans & Co., nor on the old notes to them, which were given up; whether the old loan or the old notes were paid, or whether an action might be sustained on the old loan or old notes against the old firm is not a question here. The suit is on a note of Davis. If the suit be brought on the old loan or old notes, it cannot be against Davis alone, but against'all the members of the old firm.
Y. This note and indorsement was a contract of suretyship. No action would have lain against the firm of Davis, Evans & Dodge, for the recovery of this $15,000, indeed it cannot be pretended such an action could lie. How, then, can an action be maintained upon a collateral contract, when no action can be maintained upon the principal contract ? (Leavitt v. Palmer, 3 Comst. 19.)
YI. The judgment should be for the defendant.

Opinion:
By the Court. Oakley, Ch. J.
This action is brought to recover the amount of a promissory note made by the defendant, dated the 23d of September, 1850, by which he promised to pay on demand, after date, to the order of the plaintiff $7500, value received.
For two years prior to the date of the note, Evans, Davis and Lownd had been partners. That firm, the name of which was Evans, Davis & Co., owed the plaintiff $14,069.38, for money ad-' vanced to it; that firm dissolved, and the plaintiff surrendered its notes, and took new notes, one of them being the note.in question, and another note, in all respects like it, made by Evans.
Upon these facts alone, the only change of liability is this:— The plaintiff relinquished the liability of the firm and the notes made by it, and took for the same claim the individual- notes of two members of that firm, viz.: the note of each for half of the amount of the whole claim. Before these 'notes were given, Davis, as one of the firm of Evans, Davis & Co., was liable for the whole debt. That liability has been converted, as to him, into his individual liability for $7500.
Ip there any thing in the other facts of the case 'which impairs this liability ?
On the date of this note, Davis & Evans, as parties of the first part, entered into a written agreement with David S. Dodge, as party of the second part, to form a partnership between themselves, under the name of Davis, Evans & Dodge, to continue for the term of ten years. The agreement thus signed, makes them the only parties constituting the firm, and the only persons who were to participate in its profits. The plaintiff, instead of compelling the old firm to pay the money he had lent it, and thus diminish its assets accordingly, agreed to continue the loan, treating it as one made to the new firm, and he was made a creditor of the new firm on its books, to a corresponding amount, Brown agreed that this sum might remain in the new firm " during the continuance of the said copartnership," " he receiving interest for the same at the rate of seven per cent, per annum." The new firm failed within a year after it was formed, and thenceforth ceased to exist, and has paid no part of the principal nor any interest.
Dodge was to contribute, as capital, $20,000, in three instalments. The theory of the agreement seems to be, that this sum was treated as equivalent to a third interest in the business as it stood, because, without declaring in terms of what the capital of Evans & Davis should• consist, it declares that "it is understood that any difference in the amount of capital furnished by either shall be adjusted by interest."
There is no agreement on the part of Brown to look exclusively to the new firm, as his debtor for the $15,000. He continued the liability of Dax is & Evans, by taking the note of each for $7500. That liability he now seeks to enforce. The indorsement on the back of the note, in connection with the written papers signed by the plaintiff, might be a defence to a suit on the note, if the firm of Evans, Davis & Dodge was continuing. But that firm ceased to exist long before this suit was brought, and was owing some $30,000 more than it could pay. Brown now seeks to collect his note. Looking at its terms only, it is due; looking at the agreement, as to the time the new firm should have the $15,000, and the fact that such firm has ceased to exist, it is due.
A party is never bound to prosecute the principal debtor, as a condition precedent to his right to sue the surety, unless such suit is required by the terms of his contract, or necessarily implied from the terms used. (Morris v. Wadsworth, 17 Wend. 103.)
It is quite clear, at all events, as between the plaintiff and de fendant, that this $15,000 was not to be at the risk of the success of the new firm. By the terms of the partnership agreement, to'" which the plaintiff assented by signing it, the $15,000 " was to remain in the new concern during- the continuance of the partnership," and the defendant gave this note to secure to the plaintiff actual payment of one half of that sum. If he put it at risk, as between himself and the firm, he did so only on the terms of having the note of the defendant for half of the amount, and of Evans for the other half. The plaintiff was to have only interest and no profits. The three members of the firm were to have all the profits, and consequently were to bear all the losses.
We think the note is upheld by sufficient consideration, and was due when the action was brought. There is no suggestion that it was not due, if the claim as between the plaintiff and the firm was due. The claim of the plaintiff against the firm was due when the firm ceased to exist as such.
But it is alleged that the note was an illegal contract, and against public policy, and, therefore, no recovery upon it should be permitted. We do not think the facts proved justify the conclusion of any actual fraudulent intent, on the part of the plaintiff. He had, in fact, advanced to the old firm about $15,000. It was represented by enough of the assets of the new firm to pay it. It was to be continued in the new firm. There is not the slightest reason to suppose that either he or Mr. Dodge supposed there was any ground to doubt the success of the new firm. There is none to suppose that Evans & Davis did, unless it is to be inferred from the fact that the firm failed within a year after it was formed, and that an actual subsequent investigation disclosed that the old firm was insolvent at the time the new one was formed.
Brown was probably gratified with the idea of being advertised. as a special partner, who had put in $15,000 cash; but there is nothing to j ustify the idea, that it was any part of his purpose to contribute to a credit, with the expectation or belief that it would be the cause of loss to those who might deal with the new firm.
Giving effect to the contract of the parties, as between themselves, will not necessarily tend, -of itself, to produce a fraud on the public. It will neither diminish the means which they otherwise might reach, nor impair the remedies to which they otherwise might resort, to collect their demands.
All that was done and advertised did not create a limited partnership, under the statute. Brown may be liable, as a general partner, to all who have dealt with the firm. (1 R. S. 765, § 8.)
But holding Evans & Davis individually liable upon their notes to the plaintiff, will not withdraw from the legal or equitable process of the courts any property that could be reached by a judgment against the general partners, so called, and subsequent proceedings founded upon it. A judgment against the firm, and appropriate ulterior proceedings, will reach all the individual property of each, as well as all the effects of the firm.
This case is unlike an action by one of several creditors, upon a note given to him by a debtor, for an amount beyond his proportion of the amount which each creditor of such debtor had agreed to take, of his claim or demand, and discharges the debtor, in cases where the composition agreement is made upon the representation that all have agreed to come in on equal terms. To allow a recovery in such a case, would operate as a fraud on those who released their own claims for a stipulated percentage on the faith that the creditor, who secretly stipulated for payment of the whole of his claim, had also released his claim on receiving the like percentage.
If the assets of the firm, and the individual property of each, are sufficient to satisfy the creditors of the firm, they will obtain payment. If insufficient, several judgments in favor of one of the firm against two of its members will not diminish their means or chances of obtaining payment.
If the fact had been found by the jury, upon sufficient evidence, or if we ought to hold, as a matter of law, upon the facts found, that it was the design of the parties, by this arrangement, to defraud the public, the court might very properly refuse to enforce any claim of either against the other, founded on such an arrangement. But the plaintiff wras not to have, in any event, more than a debt justly his due, and which, for aught that appears, the partners in the old firm were able to pay. This debt, and interest upon it, were all the advantages for which he stipulated. He had no motive, and there is nothing to justify the belief, that he was a party to an actual intent to defraud the public.
The certificate published contains false statements, and as a necessary consequence, the plaintiff may be liable for engagements of the firm, and yet he may not have contemplated, and probably did not contemplate, such a contingency, as that the firm should be without means sufficient to pay its debts, as at all likely to occur.
We think the plaintiff should have judgment on the verdict.