Court Opinion

ID: 3647500
Source: CourtListenerOpinion
Date Created: 2016-07-06 06:03:14.948955+00
Date Added: 2024-06-11T12:09:03.557325
License: Public Domain

Samuel F. Patterson and William H. Martin were partners and carried on the mercantile business in Wilkesborough, and, in September, 1839, they borrowed from Benjamin S. Martin, a brother of (35)  William H., the sum of $300, for which they gave their promissory note. In January, 1840, Patterson and Martin dissolved, and the latter undertook to pay all the debts of the firm, and Mitchell and the other plaintiff became bound with him in a bond to Patterson for the performance of the undertaking. In January, 1841, William H. Martin and Benjamin S. Martin entered into articles of copartnership in a store in Wilkesboro', to be conducted by William H., under the name of William H. Martin  Co., and in a tavern in the same place, *Page 35 
to be conducted by Benjamin S., under the name of Benjamin S. Martin  Co., and each of them was to put in stock to the amount of $3,000; that of William H. to be in merchandise and that of Benjamin S. to be in money, each paying interest on any deficiency of his stock and sharing the profits and losses equally. The business continued until 1844, when the firm and each of the partners failed, and they both afterwards took the oath of insolvency, leaving a large amount of the debts of the firm unpaid. Before doing so, however, Benjamin H. Martin endorsed the note to his father, John Martin, in 1845, and the latter endorsed it, in trust for himself, to the defendant Dobson, who brought an action on it, against Patterson and the three Martins, and recovered judgment in 1847.
The bill was then filed against Dobson, the Martins and Pattersons, and alleges, that Benjamin S. Martin knew, that, by the contract between Patterson and William H. Martin, the latter was bound to pay the note of $300, and all the other debts of Patterson and Martin, and that the plaintiffs were his sureties therefor, and that with that knowledge, in 1841, he passed the said note, then over due, and the sum was named, as so much capital stock paid in by Benjamin S. The bill thereupon charges, that, inasmuch as William H. was to pay the debt, the same was thereby extinguished, and was so considered between those persons during the whole duration of the partnership; and   (36) that, afterwards, by a combination between the three Martins, with a view of reviving the note and raising the money from Patterson, and ultimately charging the plaintiffs upon their bond of indemnity to Patterson, the note was endorsed as aforesaid to John Martin in trust for his two sons or one of them, or without any valuable consideration, and then by him endorsed to Dobson, as before mentioned. The prayer is, that it may be decreed, that the debt was extinguished before the assignment of the note to John Martin, and that Paterson may be restrained from paying the judgment at law, and Dobson be perpetually enjoined from enforcing the payment thereof.
William H. and Benjamin S. Martin deny positively, that the note was paid in or received as a part of the stock of the latter in their partnership, or was in any manner paid or extinguished, or so conceived by them; and they say, that Benjamin S. Martin paid in his whole stock in cash raised by him from other sources; and John Martin denies, that he has any knowledge or belief to the contrary. They all state further, that the note was endorsed to John by Benjamin, in consideration of money to a much larger amount, paid by him, John, as the surety of Benjamin S. or of the firms of Benjamin S. and William H. Martin.
Upon the evidence, the conclusion of the Court upon the points, on which the parties are at issue, would, probably, be, that the note of Patterson and Martin, though not indorsed to William H. Martin  Co. was transferred to the firm, as a part of the stock of Benjamin S. Martin, and, moreover, that the sums, which John Martin (37)  appears to have paid as the surety of his sons, was in fact paid by the sale of property, which legally belonged to the sons, so as to prevent that from constituting a valuable consideration for the note. If the cause, therefore, depended on those points, the decree would, probably, be for the plaintiffs, especially as the argument of bad faith, in making the assignment to the father without consideration, is much fortified by the subsequent devices of suing in the name of Dobson, and making the persons, for whose benefit the suit was brought, parties defendant with Patterson. But the decree must be against the plaintiffs, because, upon their own showing, the case is against them in point of law. The bill does not allege, that the note was paid by Patterson and Martin, or either of them, to Benjamin S. Martin. On the contrary, it states that he paid into the firm, as a subsisting note, in part of his stock; nor does it allege, that payment was made to the firm by the makers, nor set forth any facts from which actual satisfaction of the note to the firm by William H. Martin or afterwards can be inferred. It is not stated, even that he paid in his own share of the stock, much less that he is now or ever was in advance of the firm. As far as appears, then, the debt is still justly due to the firm, and is much needed for the creditors, to whom, the bill states, this insolvent firm is indebted in a large amount. The bill, indeed, does not put the right to relief upon the equitable ground, that the debt had been once satisfied by payment, and therefore, that it was against conscience to raise the money a second time; but it rests upon a supposed extinguishment of the debt, by reason that William H. Martin had obliged himself to pay this debt, and he was one of the persons, as a member of the firm, to whom it was to be paid. Now that is a doctrine of the common law, and might have put the firm to difficulty, as to an action on the note, if it had been endorsed. A Court of Equity, however, proceeds upon (38)  no such principle of extinguishment, but the contrary one of relieving against it generally, when produced by the law; and hence, equity entertains suits between partners and charges each with what he justly owes, without regard to the form of security or its validity or invalidity at law. In this case, indeed, there was no extinguishment, as has been determined in the action at law; for the note was not endorsed to the firm, but stood in the name of the payee, Benjamin S. Martin, in trust for the firm, as we are now considering the question. The other partner, William H., could not extinguish it *Page 37 
without the consent of his companion; since, it would be taking the effects of the firm, to satisfy his personal engagements to Patterson. But it is not pretended that he attempted to do. Consequently, Patterson and Martin became equitably the debtors to William H. Martin Co., upon this note, and ought to have been charged on their books as such, and the rights of the partner, Benjamin S. and the creditors of the firm, require that Patterson and Martin should now pay it, as it has not been done hitherto. If, indeed, the two brothers had agreed that the old note should be cancelled or considered paid, and that William H. Martin, by himself, should be the debtor to the firm for the amount and Patterson discharged, it would be different. But there is no evidence at all of such an agreement, nor is it charged distinctly, or otherwise than as legally to be inferred from the fact, that William H. Martin had bound himself to Patterson to pay this debt, an inference, already shown to be inadmissible. It is true, it may be said, that John Martin claims the note for himself, though he is not entitled to it, but holds it in trust for the firm, and, therefore, that William H. Martin has an interest in it, and to that extent the plaintiff ought to be believed. But the bill is not framed with that view; for the interest of each partner can only be ascertained by taking an account of the partnership, and ascertaining the surplus, for division, after the payment of all debts — a thing that does not exist, according to the statements   (39) of the bill. The Court is obliged, therefore, to dismiss the bill. and, though reluctantly, with costs.
PER CURIAM.                                          Bill dismissed.