Court Opinion

ID: 3629963
Source: CourtListenerOpinion
Date Created: 2016-07-06 00:09:45.119621+00
Date Added: 2024-06-11T14:07:39.951918
License: Public Domain

[EDITORS' NOTE:  THIS PAGE CONTAINS HEADNOTES. HEADNOTES ARE NOT AN OFFICIAL PRODUCT OF THE COURT, THEREFORE THEY ARE NOT DISPLAYED.] *Page 593 
It is a well-settled rule, that while a factor to whom goods are sent for sale, without instructions as to the terms of the sale, is at liberty to sell at such time and upon such terms as he may deem proper in the exercise of a sound discretion, yet he is bound to obey the subsequent instructions of his principal as to the sale, although he has made advances, unless the principal, after reasonable notice, fail to pay such advances. (Marfield
v. Goodhue, 3 N.Y. 62.) So long as the firm of Underhill  Co. was doing business, either member of that firm was authorized to give instructions as to the terms of sale of the goods by Stewart Co., the factors, and they had a right to follow such directions. But upon a dissolution *Page 594 
of the firm it was competent for the copartners to constitute one of their number a special agent for winding up its affairs, and when this was done, parties who, with notice of the arrangement, deal, in matters connected with the liquidation, with the partners not thus intrusted, are subject to the equitable rights of the other partners. (Robbins v. Fuller, 24 N.Y. 572.) If the arrangement made comes to the knowledge of the parties dealing with the firm, it is sufficient to put them on guard; and if they act in disregard of such knowledge, they must be held responsible for consequences which ensue. In the case at bar, the proof shows that upon the dissolution of the copartnership of Underhill  Co., by arrangement Vanderbilt assumed the payments of all the debts, took charge of the liquidation, and the defendant Underhill had nothing to do with or to say about the affairs of the late firm. The plaintiffs, through their agent, were advised by Vanderbilt as to the situation, and informed by Vanderbilt that he controlled the affairs of the firm, that he had assumed the debts and the whole responsibility of settling up the concern from the time of its dissolution, and would see about the sale of the goods; and he directed that they should not be sold for less than one dollar a yard. Notwithstanding the notice and instructions given, the plaintiffs, without any notice to Vanderbilt, after consultation with Underhill, proceeded and sold the goods for a less amount than was directed by Vanderbilt. We think that this was done without lawful authority, and that the request to find to the effect "that plaintiffs had notice of the dissolution of defendants' firm, and that Vanderbilt was the agent for winding up its affairs, and that after such notice they recognized and dealt with him as such special agent," was material and should have been granted by the referee. The power conferred by Underhill upon Vanderbilt deprived him of all right to interfere. It cannot be questioned that Underhill had parted with all right to control the settlement of the copartnership debts, and Vanderbilt assumed all the responsibility and was liable to pay the debts. He, therefore, had a right to direct what should be done, and his power was more than a bare authority, liable to be revoked *Page 595 
by his copartner, and which did not invalidate the acts of either. Underhill, therefore, had no right to interfere, and Stewart  Co., having notice of the exact relations of the copartners, were not justified in consulting with Underhill, who was then in their employment, or in following his advice or direction. We are referred to no reported case which upholds the doctrine that under such circumstances the consignee is relieved from the responsibility which he is under to the partner entitled to control the settlement of the copartnership affairs. None of those relied upon are in point, as is apparent from an examination of the cases referred to.
In Napier v. McLeod (9 Wend. 120), a deed or instrument in writing was executed, upon the dissolution of a copartnership, by two of the members to the third, authorizing him to receive and collect the outstanding debts, etc., and generally to conclude the unfinished business of the firm, and constituted the latter "their true and lawful attorney, irrevocably," for the purposes mentioned, with power to give acquittances, etc. It was held that this power of attorney did not operate as an assignment of the interest of the two members of the firm, and did not render inoperative a release subsequently executed by one of the other members of the firm to one of its debtors. SAVAGE, Ch. J., says: "I apprehend the mere expression that the power is irrevocable does not make it so; if no interest is conveyed, and nothing but a bare authority, uncoupled with an interest, is granted, the power which creates can destroy; and he who gives a naked authority can revoke it." It is also said that Napier was constituted attorney for the firm, and "in their names and the name of the firm and in their behalf, to ask, demand," etc., thus laying some stress upon the phraseology employed. It will be noticed that in this case, a construction was placed upon the instrument executed; and it was held that it was not for the use of Napier, or for his exclusive benefit, and that he was only to demand and receive the debts in the name of and in the behalf of the firm, and the rights of the partners were not changed. In the case at bar Vanderbilt had full control, and no interest whatever remained in the other *Page 596 
partner. The agreement amounted to an absolute transfer of Underhill's interest, and he had no right to give any directions as to the settlement of the affairs of the company. It is also to be noticed that Stewart  Co. had full knowledge and notice that Vanderbilt had assumed the debts, and of the actual status of the partners toward each other in reference to the settlement of their affairs. In the case of Gram v. Cadwell (5 Cow. 489), it was held that where there was a special agreement between partners, on dissolution, in regard to the settlement of their affairs, by which one of them was to continue business, assume all debts, and that the money paid by the outgoing partner should be paid back by the other within a limited time, that a separate interest was created in the remaining partner; and a subsequent release of a debt by the outgoing partner, to a creditor having notice of the agreement, was void. This case sustains the doctrine that where the partner has thus parted with his interest, and the creditor has notice of such fact, he has no control over the copartnership affairs, and does not and the position of the plaintiffs. Porter v. Taylor (6 M.  S. 156) merely holds that payment to one partner, after a person has been appointed to collect the debts, is good, and does not affect the question considered.
None of the cases, therefore, hold that under circumstances like those here presented, the partner who has surrendered the right to control, as was done by Underhill, can interfere with the partnership affairs by giving directions in regard to them, or that a party who has been advised of the actual state of the case, and has full knowledge of the facts, is justified in following such directions if given.
The fair construction of the evidence is that Vanderbilt had the entire responsibility of paying the debts and closing up the partnership, and claimed to exercise this right in reference to the goods in question, and Stewart  Co. were fully aware of such claim. They were notified not to dispose of the goods for less than a price he put upon them. They knew that Vanderbilt was solvent, and upon notice able to pay any deficiency, and that Underhill, who had become their clerk, was insolvent, *Page 597 
and they assumed to act upon consultation with Underhill alone. In view of these facts, we think they had no right to act without notice to Vanderbilt, at least of their intention, and by doing so, Vanderbilt's rights as a partner might be seriously affected. It is not a question of mere authority alone, but involves an absolute right of a solvent partner, who had assumed to pay the debts, to supervise and manage the affairs, in accordance with an arrangement made between his copartner and himself for the joint benefit of both. The finding refused was clearly important, and might seriously affect the disposition of the case by the referee; and for the error stated, the judgment must be reversed and a new trial granted, with costs to abide the event.