Court Opinion

ID: 6312583
Source: CourtListenerOpinion
Date Created: 2022-02-18 20:17:33.163232+00
Date Added: 2024-06-11T08:59:07.743387
License: Public Domain

The opinion of the Court was delivered by
Gibson, C. J.
Smith and Irvine dissolved their partnership in February 1832; Smith taking the stock on hand, and becoming the liquidating partner. In the following May, Smith and Houser settled the account between the partnership and the latter, consisting of three promissory notes drawn by the firm on the one hand, and a book account of goods sold by it on the other; and Smith gave a promissory note in the name of the firm for the balance. This suit is brought for the debt thus consolidated, and the plaintiff has counted, not only on the note given to secure it, but also on each of the notes included in the settlement. All these notes were demandable six years before the institution of the suit; and did the case rest here, the action would be barred by the statute. But it came out in the course of the evidence, that Smith had paid f300 on the note for the consolidated debt within the six years; and the question is, whether that was such an acknowledgment of the partnership debt as will raise a promise by the firm.
It may be affirmed that a partnership, though dissolved for future operations, remains in force for closing the concern; and that the liquidating partner retains his former power to bind the firm in things within the scope of the business committed to him. The proper limitation to the exercise of it is, that it be restrained to acts necessary to be done for the beneficial transaction of it. Such is the ruling principle in the case of Davis Sf Desauque, (5 Whart. 530), in which it was held that a liquidating partner may renew a note drawn by the firm, and even borrow money on its credit to pay its debts, in order to prevent a sacrifice of its effects. And this is entirely consistent with Levy v. Cadet, (17 Serg. & Rawle 126), in which a partner who had suffered judgment to go against himself after the firm had made a general assignment, was not allowed to revive the debt by confessing its existence during a trial with the other partner who had pleaded to issue. The reason of the distinction between the two cases is obvious. The theory of the law on this head, as held by the courts of Pennsylvania, is not that the old promise is revived, but that the subsequent confession of the debt is evidence of a new one; and he who has no authority to act for another, cannot bind him by acknowledging that he is indebted, or by expressly promising for him that he shall pay. Now by the dissolution of a partnership, the power which each had to bind the others is at an end, except for the purpose already indicated — to finish what remains to be *348done in order to close its concerns. In Levy v. Cadet, therefore, the one partner was not allowed to bind the other by creating a promise for him, because the partnership was ended by the declared insolvency of the firm, and the winding up of its business had been transferred to trustees. His confession of the debt was not the consequence of an act done in the liquidation of it, for his authority over it had expired for that and every other purpose. But what was the authority of Smith in this instance ? It was to settle the partnership debts, and pay them out of the effects in his hands. Having that authority, payment by him singly must be attended with the consequences of payment by both. Though made by one, it was, in contemplation of law, the act of both; and it is consequently evidence of a promise by both.
The subsequent payment was made on the foot of the note given by Smith after the dissolution; and hence the jury were directed that as this security, though given for what was once a partnership debt, was, in contemplation of law, his separate note, his acknowledgment of it as a debt exclusively his own, would not be evidence of a promise to charge his partner. But it was not exclusively his own, and there lies the fallacy. To say nothing of the governing principle in the case of Davis & Desauque, already quoted to show that he had authority to renew the partnership notes, he had indisputable power to settle its accounts; and as it has been often ruled that a promissory note may be given in evidence to support a count for an insimul computassent, it would be strange if an action might not be maintained on it as an instrument when drawn by a liquidating partner in the name of the firm. It is immaterial, therefore, whether the giving of the last note cancelled the preceding ones. The giving of a note for an antecedent debt, is not payment of it unless it was received with that intent; but whatever the intent in this instance, the payment in part in discharge of the partnership debt, by whatever instrument secured, was evidence of a promise by the firm, which, having been made within the six years that preceded the commencement of the suit, was not within the statute.
Judgment reversed, and venire de novo awarded.