Court Opinion

ID: 3629964
Source: CourtListenerOpinion
Date Created: 2016-07-06 00:09:45.127319+00
Date Added: 2024-06-11T12:42:16.088522
License: Public Domain

The general rule that a factor receiving goods on consignment for sale is bound in selling them to follow the instructions of his principal, is not, in the absence of a special agreement, changed by the fact that the factor is under advances, and has a lien on the goods for their repayment. This was decided inMarfield v. Goodhue (3 N.Y. 62), where the question received careful consideration, and so far as it is inconsistent with the case of Brown v. McGran (14 Pet. 495), must be regarded as settling the law in this State contrary to the ruling in that case.
It is unnecessary now to consider whether the case of Brown
v. McGran can stand upon its special circumstances, consistently with the decision in Marfield v. Goodhue. It is sufficient to say that there are no facts which take the case now before us, out of the general rule declared in Marfield v.Goodhue. The contract between Underhill  Co. and Stewart 
Co., under which Stewart  Co. received the goods of Underhill 
Co., created the ordinary relation of principal and factor between the parties. The contract, it is true, provided that Stewart  Co. should make advances on the consignments, but this fact did not, in the absence of a special agreement, enlarge the authority of the factors, or entitle them to sell the goods in disregard of the instructions, unless Underhill *Page 598  Co., after reasonable notice, failed to repay advances made under the contract. Stewart  Co. upon such failure would be entitled, upon notice, to enforce their lien by a sale of the goods. (See Smart v. Sandars et al., 5 C.B. 895.) While the partnership of Underhill  Co. continued, it is plain that either partner had authority to give directions to Stewart  Co. in respect to the sale of the goods, and that the consignees would have been justified in acting thereon, provided they acted in good faith in dealing with the property. The right of one partner to sell the partnership property in the prosecution of the partnership business, and to dispose of the partnership assets for the payment of partnership debts springs from the principle that each partner is the general and accredited agent of the others in the business of the partnership, and the partnership is bound by the acts of either partner within the general scope of the agency, and third persons who acquire rights by the exercise of this general authority are not affected by limitations or restrictions contained in the partnership articles, or imposed by any subsequent agreement between the parties of which they had no notice. The authority of partners is not absolutely determined by dissolution of the partnership. One partner cannot, thereafter, bind the firm by new engagements not connected with the liquidation. But partners continue, after dissolution, joint tenants of the firm property. Each has an interest that the assets shall be collected, and that the partnership debts shall be paid, and the general authority which each possessed before the dissolution, to collect the debts, and dispose of the property of the partnership, continues for the purpose of winding up the concern. (3 Kent, 63.) The right of each partner, after dissolution, to act in matters connected with the winding up, cannot, we conceive, be divested by mere notice from one partner, so as to prevent transactions relating to the liquidation between third persons and the partner whose authority is attempted to be restricted by notice, from being effectual and binding, provided the dealing is not collusive or fraudulent. (Gillilan v. SunMutual Ins. Co., 41 N.Y. 376.) But it is, doubtless, competent for partners on a *Page 599 
dissolution, by agreement, to confide to one of the partners the exclusive control and management of the liquidation. And when such an agreement is made binding as between the partners, it will exclude the implied authority possessed by each partner, and prevent third persons, having notice of the arrangement, from dealing, in disregard of it, with the partners who have renounced their control of the partnership affairs. (Robbins v. Fuller,24 N.Y. 572.) But a bare authority conferred by the partners upon one of their number, which may be countermanded at any time, will not invalidate acts of either partner within the general power. In Napier v. McLeod (9 Wend. 120), two partners, on the dissolution of a firm, executed a power of attorney to the third partner, constituting him their attorney irrevocably, to demand and receive, on their behalf, all debts, dues and demands of the firm, and one of the two partners who executed the power subsequently executed to the defendant, who had notice thereof, a release of a debt owing by him to the firm, and it was held that the release was valid on the ground that the power did not operate as an assignment of any interest of the partners executing it, but was an authority merely, and, therefore, revocable. (See, also, Gram v. Cadwell, 5 Cow. 491; Porter
v. Taylor, 6 M.  S. 156.) A fortiori a mere assumption by one partner, on a dissolution, of an exclusive right to control the winding up, although the other partner may for a time acquiesce in the claim, will not preclude him from subsequently exercising the power of a liquidating partner.
The application of the doctrine stated, to the facts in this case, is an answer to the claim that Stewart  Co. sold the goods in violation of the instructions of Underhill  Co. The latter firm was dissolved in December, 1875. The evidence does not warrant the inference, or at least it did not require the finding, that the defendant Vanderbilt was, by any agreement between him and Underhill, constituted the exclusive agent for winding up the partnership. It does appear that, after the dissolution, Vanderbilt claimed the exclusive right to control the sale of the goods of Underhill  Co., and that *Page 600 
Stewart  Co. were cognizant of this claim, and soon after the dissolution he instructed Stewart  Co. not to sell the goods below a price named by him. Vanderbilt was the solvent partner in the firm, and Underhill had become a clerk in the employment of Stewart  Co. The claim of Vanderbilt that, under the circumstances, he should alone control the goods, was certainly not unnatural, but the claim to do so did not ipso facto
exclude the power of Underhill. Vanderbilt could change the limit of price first fixed by him, and Underhill could also revoke Vanderbilt's instructions, and authorize, as he did, a sale at a less price than that fixed by Vanderbilt. Underhill, although insolvent, had an interest to have the goods sold at the best price, and a right to exercise his judgment as to the time and terms of sale. It is to be observed that the question here is one of authority only. It is not claimed that Stewart  Co. were guilty of any fraud, or that they colluded with Underhill to sacrifice the goods. If this issue had been made, and there was any evidence tending to sustain it, the relation which Stewart 
Co. held to Underhill would be a significant circumstance, and give great weight to any evidence tending to show bad faith on the part of Stewart  Co. But in the absence of fraud, we are of opinion that Stewart  Co. were justified in acting upon the instructions of Underhill, and that the claim that they sold in violation of instructions cannot be sustained.
The issue of usury was also, we think, properly overruled. The agreement of July 1, 1874, was not usurious on its face. The giving of extra time to purchasers to increase the sales is the reason stated for the allowance of the additional discount. If extra time was given, the risk of Stewart  Co. on their guaranty was increased. If the benefit of extra time was taken by purchasers by way of discount, they had the benefit of the deduction. If in making up the account Stewart  Co. charged a discount, either when extra time was not given, or when no discount to purchasers had been allowed, the account was subject to correction. But we see in the case no proof that the agreement of July 1, 1874, had any connection with *Page 601 
a loan, or from which an inference can be drawn that it was a cover for interest on advances beyond the lawful rate.
We think that no error was committed on the trial, and that the judgment should be affirmed.
RAPALLO, EARL and FINCH, JJ., concur with MILLER, J.
FOLGER, Ch. J., and DANFORTH, J., concur with ANDREWS, J.
  Judgment reversed. *Page 602  *Page 603