Court Opinion

ID: 6506113
Source: CourtListenerOpinion
Date Created: 2022-07-19 18:18:19.021374+00
Date Added: 2024-06-11T15:54:43.452236
License: Public Domain

WALKER, J.
— The general proposition, that one partner cannot sue another at law, to recover the due proportion of a partnership debt paid by the former, is not denied; but it is contended that the execution of the notes by the partners in their individual names deprives the debt of its character as a partnership liability, and converts it into an individual debt, as between the partners; and also that the agreement between the plaintiff" and defendant “to quit even” gave to the former the right to' maintain this action at law.
The cases cited upon the brief of appellant’s counsel do not sustain the argument, that the mere fact that the partners subscribe their separate names to notes, given for a partnership liability, withdraws them from the partnership, and makes them the joint and several debt of the partners between themselves as distinct and unconnected individuals. The cases in which a partnership matter has been regarded as withdrawn from the partnership, are those where one partner has made separately a *232promise to one or several of his associates. Such was the character of the transaction in Lyon v. Malone, 4 Porter, 497; Coffee v. Brian, 3 Bing. 54, (11 E. C. L. 25;) Jackson v. Stopherd, 2 Crom. & M. 361; Wilson v. Cutting, 10 Bing. 434, (25 E. C. L. 187;) and in the cases commented upon by the court in Lyon v. Malone, supra.
An agreement that the partners shall be liable to each other for contribution, otherwise than in their associate capacity, cannot be legitimately inferred from the fact of their signing their respective names to the notes. The security does not in any wise change the nature of the debt. The liability of the partners after the execution of the notes, as before, was joint and several, and it was precisely the same as if the note had been executed in the partnership name. The effect of an execution of the notes by the partners in the partnership name would have been to evidence the same liability, as if they had signed their respective names. When a partnership owes a debt, and all the partners sign a note for that debt, they give a security imposing upon the partners a liability not inconsistent with that which j>ertains to their relationship ;• and there is, therefore, in the act of giving such security, no evidence of a design to change the character of the debt.
The taking of the joint and several notes of the partners did not, of itself, have the effect of extinguishing the partnership liability; and one who had taken such a note for a partnership liability might, under the statute of bankruptcy, prove the debt against the partnership assets. — Owen on Bankruptcy, 289-290; Story on Partnership, 369; Collyer on Part. §§ 910, 911, 941.
XJpon their face the notes are the debts of the makers as individuals; but, when it is shown that they were given for a partnership liability, the presumption is overturned, and the makers, as between themselves, stand as partners. Such we understand to be the decision in Couch & Emmerson v. Bowman, 3 Humph. 209. The decision in Filley v. Phelps, 18 Conn. 294, is precisely in point, and lays down the principle, that a note jomt and several in form, given by the individuals who compose a partnership, is a preferred claim against the partnership assets.
*233Upon tbe reasoning and autboi’ities above stated, we think it a safe position, that tbe makers of tbe notes in question, as to their respective liabilities to contribute to tbe payment thereof, occupy as between themselves tbe relation of partners.
Tbe agi'eement of tbe plaintiff and defendant in this suit “to quit even” may have amounted to a settlement of tbe partnership accounts, as between tbe parties to it, up to that time. It may have tbe effect of a mutual acquittance by tbe parties as to all liabilities subsisting at tbe time. But it cannot absolve from responsibility for subsequently accruing items of partnership account. It does not give to each party a right to collect for bis exclusive benefit as much of tbe remaining assets as be might be able to get into bis bands; nor does it impose upon tbe party who may happen to pay a debt tbe burden of bearing it alone; nor does it destroy tbe relation of partners as to subsequent matters. If tbe parties to this suit bad formally and fully settled up every matter of partnership account existing at tbe particular time, it would not destroy the mutual liability to account as to all subsequent matters; and no greater effect can be conceded to tbe agreement set up in this case. If there be a liability to account as partners, as to all subsequent matters, it is clear that tbe proceeding to compel tbe account must be in chancery, and not at law. If an action at law could be maintained, there might be a suit at every occurrence of an item of account, and thus as many suits as there were subsequent items; and tbe plaintiff' in this suit, if be recover from tbe defendant, might be compelled, in some other suit for contribution by tbe defendant, to restore tbe sum recovered. When a settlement has been bad, and a balance struck, an action at law will lie for tbe recovery of tbe balance; but tbe rule does not extend to matters of partnership account afterwards accruing.
Tbe judgment of tbe court below is affirmed.