Court Opinion

ID: 6243529
Source: CourtListenerOpinion
Date Created: 2022-02-17 20:51:22.548661+00
Date Added: 2024-06-11T08:58:16.533592
License: Public Domain

Opinion by
Mr. Justice McCollum,
When Haney retired from the firm of Learn, Snyder & Co., his copartners retained all its assets and assumed all its liabilities, and thenceforth the business was carried on in the firm name of Learn & Snyder. While Haney remained liable to the creditors of the old firm for the debts incurred by it, as between him and his copartners the primary liability was on them. For his interest in the firm he received the notes of Learn & Snyder, which he indorsed and delivered to Oliver McClintock & Co. in' payment for goods which he purchased from them on his own account. The firm of Learn & Snyder was dissolved by the death of Snyder about two months after it was formed, and Léam, as surviving partner made an assignment of its assets for the benefit of its creditors. Soon after the assignment W. D. Hamilton bought of McClintock & Co. the Learn & Snyder notes which Haney had transferred to them as above stated, paying one half the amount of the notes at the time of the purchase and giving his bond for the other half. The purchase involved an agreement by McClintock & Co. to use all due diligence to collect the notes from “ the assignee of Learn & Snyder and the estate of George Snyder dec’d.,” and to pay to Hamilton the proceeds of the same when collected. This action was brought by Hamilton to recover the loss he alleges he sustained by the failure of McClintock & Co. to comply with their agreement respecting the collection of the notes. It is very clear, and it is not disputed, that their agreement bound them to the observance of the utmost good faith and the exercise of all due diligence in the performance of the duty it imposed. The controlling question in the case is whether this duty was properly discharged by them. If it was the plaintiff had no cause for complaint, and if it was not he was entitled to recover from them the loss he sustained by reason of their nonperformance of it. The question was for the jury if the evidence was sufficient to warrant a finding that there was a want of good faith *32and due diligence on the part of McClintock & Co. in the collection of the notes.
It appears that an arrangement was effected between Learn and the creditors of Learn & Snyder by which the creditors agreed to accept from Learn 50 per cent of their respective claims in full thereof, “ payable twenty-five per cent, cash, October 30th, 1886, ten per cent in six months, and the balance, fifteen per cent in twelve months thereaftér to be secured by notes of Learn, with approved endorser.” McClintock & Co., representing that they were creditors of Learn & Snyder to the amount of 14,029.57, signed the composition agreement. This amount included the notes they held for Hamilton, and their own claim, but there was nothing in the agreement to show that any one had an interest in it except themselves. They say tliat Hamilton concurred in their view that an acceptance of 50 per cent in settlement of the claims was advisable, and that they collected and paid to him the full amount he was entitled to receive under the compromise. It is true that Hamilton received from them 50 per cent of the amount of his notes, less their commissions for collection, but he did not know when he received it, or when he concurred in their acceptance of it,, of any want of diligence or fidelity on their part in the performance of their duty under their agreement with him. This litigation was born of the discovery that while McClintock & Co. collected and accounted for 50 per cent on Hamilton’s share of the amount represented in the composition agreement as their claim against Learn & Snyder, they collected 100 per cent on their share of it. It was a discovery which was suggestive of unfaithfulness on their part because it showed that while they agreed with the other creditors to accept 50 per cent of their claim in satisfaction of it they had a secret agreement with Learn under which they were paid the full amount of it. It was specially indicative of bad faith towards Hamilton because it was a plain discrimination against his interest which it was their duty to protect. The concealment by them of their secret agreement with Learn may be regarded as intentional because it was obviously necessary in order to affect a compromise with the other creditors on the basis of 50 per cent of their claims. We think therefore that their conduct in regard to the settlement with Learn constitutes a sufficient answer to so much of their defense as is based on the theory that Hamilton’s acceptance of 50 per cent of his claim is a bar to this suit.
*33By the plain terms of the composition agreement McClintock & Co. were bound to accept 50 per cent of their claim of $4,029.57 in full satisfaction of it, and they have furnished no explanation of their secret agreement with Leaxn which justified them in making it and concealing it from the other creditors. They were paid from the same source and in the same manner as the other creditors were, and their attempt to show they were not so paid was a failure. It was not a satisfactory answer to their representation in the composition agreement, nor to their secret stipulation with Learn, to say that the most of their share of the claim they presented against Learn & Snyder was for goods sold before Haney’s retirement from the firm. They did not look to him for any portion of their claim and it was as clearly a debt of Learn & Snyder as any other claim embraced in the settlement was.
We think that in view of the circumstances to which we have referred it cannot be justly said that Hamilton waived his right to due diligence on the part of MeClintock & Co. in collecting the notes. As they concealed from him their agreement with Learn, his acceptance of 50 per cent of his claim cannot be regarded as a waiver of this right.
There was some evidence that Snyder was a tenant in common with Learn of several pieces of real estate out of which it is claimed the notes, in the exercise of due diligence, could have been collected. This evidence was for the jury.
We discover nothing in either of the specifications of error which calls for or would justify a reversal of the judgment. The answer to the defendants’ third point, if inaccurate, was harmless, because the only fraud alleged was the concealment from the plaintiff of the defendants’ secret agreement with Learn, and this concealment was shown or admitted by both parties.
Judgment affirmed.