Case Name: Russell Johnson and Roswell H. Johnson, Composing the Firm of Johnson Brothers, Appellants, v. Walter D. Haws and Others, Respondents
Court: New York Supreme Court, Appellate Division
Jurisdiction: New York
Decision Date: 1900-02
Citations: 47 A.D. 597
Docket Number: No. 1 and No. 2
Parties: Russell Johnson and Roswell H. Johnson, Composing the Firm of Johnson Brothers, Appellants, v. Walter D. Haws and Others, Respondents.
Judges: 
Reporter: Appellate Division Reports
Volume: 47
Pages: 597–604

Head Matter:
Russell Johnson and Roswell H. Johnson, Composing the Firm of Johnson Brothers, Appellants, v. Walter D. Haws and Others, Respondents.
(No. 1 and No. 2.)
Partnership — the liability of a pm'tner may be qualified by an agreement with his copartners.
Persons dealing with a partnership are warranted in assuming that each member of the firm is subject to the ordinary liability of a partner; but if they have notice of any private arrangement beween the partners, by which the liability of one partner is qualified; restricted or defeated, they are bound by such arrangement and cannot enforce any right in contravention thereof.
Ingraham, J., dissented.
Appeal by the plaintiffs, Russell Johnson and another, composing the firm of Johnson Brothers, from a judgment of the Supreme Court in favor of the defendants, entered in the office' of the clerk of the county of New York on the 18th day of March, 1899, upon the decision of the court, rendered after a trial at the New York Special Term, dismissing their complaint upon the merits as to the defendant Walter D. Haws, in two different actions.
Carlisle Norwood, for the appellants.
Vernon M. Davis, for the respondents.

Opinion:
Rumsey, J.:
The same question is presented in each of these actions upon the same facts. The plaintiffs claimed to charge the defendant Haws as a partner with Chatterton and others, for lumber sold to Chatterton and used for the joint adventure. Haws claimed that the effect of the contract was not to make him a partner, that the sale was made on the credit of Chatterton, and that the plaintiffs at the time of the sale had actual knowledge that Haws was not liable for the lumber bought to.carry out the enterprise.
The learned justice at the Special Term held that this contention of Haws was correct, and he found as a fact' not only that the goods were sold to the defendant Chatterton individually and solely-upon his credit; but that the plaintiffs had actual personal knowledge at or prior to the time of the sale of said materials to the effect that the written agreement provided, that Chatterton.was to furnish all material and lumber and pay-all expenses: of erecting the stand, and .that the defendant Haws was not to be liable therefor. He "found, as a conclusion of law, that Haws was not liable, and directed that the complaint be dismissed. .
The plaintiffs upon this appeal insist that the facts in' the case bring it within the rule, laid down in this court in the case of Johnson v. Alexander (61 N. Y. Supp. 351; 46 App. Div. 6), which was an action brought by these same plaintiffs for lumber delivered to other parties upon a contract almost precisely the same as that made between Chatterton "and Haws. So far as the facts in this case are the same as those made' to appear in the case of Johnson v. Alexander, we are bound to follow that ruling, and if there is no difference would be compelled to reverse these judgments. But in that case it did not appear that the plaintiffs had any knowledge of the terms of the agreement between the parties, or that the defendant Alexander, who confessedly shared in the profits, was not to be personally liable for the money expended in the adventure. But the fact of such knowledge appearing in this case creates a broad distinction in the application of the rule.
It is settled that while third persons dealing with a partnership are warranted in assuming that éach member of the firm is to be charged with the ordinary liability of a partner, as was held in Johnson v. Alexander (supra), yet, if they have notice of any private arrangement between the partners by which the liability of one partner is qualified, restricted or defeated, they would be bound by such arrangement and could not enforce any right in contravention of it. (17 Am. & Eng. Eney. of Law, 996, 997; Ensign v. Wands, 1 Johns. Cas. 171; Bailey v. Clark, 6 Pick. 372; Story Part. § 130.) The finding of the fact of the notice by the learned justice clearly brings this case within that rule. That' finding is fully sustained by the evidence.
It appeal's that, before the lumber was ordered, the agent of the plaintiffs had actual notice. of the contract, that it was in his possession, and that he had an opportunity to read it if he saw fit, The father of the defendant Haws testified that before the date of the contract one of-the plaintiffs called at his office to ask about the financial responsibility of Haws, and was then told that Haws, by the arrangement between himself and Chatterton, was not to assume any personal responsibility for what was bought. That there was a conversation between the two parties is conceded, and that, whatever it was, it took place at the time and at the place stated by Mr. Haws. The terms of the conversation were denied by Russell Johnson, the plaintiff, but the learned justice was justified in believing Mr. Haws and in finding that this notice was given as testified to by him.
The case is, therefore, not governed by the rule laid down in Johnson v. Alexander, but is within the well-settled exception noted above, and for that reason the judgments of the court below were correct and must be affirmed, with costs.
Van Brunt, P. J., Barrett and McLaughlin, JJ., concurred ; Ingraham, J., dissented.