Wolverine Cigar Co. v. Knoppow

McDonald, J. This is a suit to recover for merchandise sold and delivered. The plaintiffs were engaged in the business of selling cigars, tobacco, and candy at wholesale in the city of Detroit. The defendants owned and operated a drug store. They became partners in the drug business in June, 1923. At that time defendant Knoppow, who had previously conducted the business in his individual capacity, owed the plaintiffs $217.41. The partnership assumed this indebtedness and continued to do business with the plaintiffs. In May, 1924, it was dissolved. Defendant Drabkin' withdrew. Knoppow assumed all existing partnership obligations and continued to purchase merchandise from plaintiffs on credit until he went out of business on April 1, 1925, at which time there was owing to the plaintiffs $1,172.58. In this suit they seek to hold the partners jointly and severally liable for the entire indebtedness on the theory that they had no notice or knowledge of the partnership dissolution and of the agreement that Knoppow was to assume the indebtedness, and that they did not consent to *345 release Drabldn. The defendant Knoppow admits that 'he is liable for the amount claimed, but Drabldn contends that the indebtedness incurred before the dissolution of the partnership had been paid before the time of suit, and that he is not liable for that which afterward accrued because plaintiffs had knowledge of the dissolution and the partners’ agreement in relation tó their liability to creditors. The issue was tried by the court. without a jury. Findings of fact and conclusions of law were filed, on which judgment for $1,172.58 was entered against defendant Knoppow, and no cause of action as to Drabkin. The plaintiffs have brought error. The question is whether the defendant Drabkin was discharged from liability to the plaintiffs under the facts as presented in the record. The uniform partnership law, section 36, subd. 3, Act No. 72, Pub. Acts 1917 (2 Comp. Laws 1929, § 9876), provides: “Where a person agrees to assume the existing obligations of a dissolved partnership, the partners whose obligations have been assumed shall be discharged from any liability to any creditor of the partnership who, knowing of the agreement, consents to a material alteration in the nature or time of payment of such obligations.” Did the plaintiffs have knowledge of the dissolution and of the agreement that Knoppow had assumed the payment of existing partnership obligations ? The evidence strongly supports the finding of the court that they were seasonably notified by Mr. Drabkin and Morris Winstune, Knoppow’s bookkeeper. In addition to the testimony of these two witnesses, the course of dealing between the plaintiffs and Knoppow, after Drabkin’s retirement, is *346 rather conclusive on the question of their knowledge of the dissolution. While Drabkin was a member of the partnership, the plaintiffs billed all invoices for merchandise to “Knoppow and Drabkin,” and checks in payment were signed by both members of the firm. After the dissolution, all invoices were billed' to Knoppow, and payments were made in checks signed by him alone. In respect to plaintiffs ’ knowledge, there was ample evidence to support the court’s findings. Did the plaintiffs consent to a material alteration in the nature or time of payment of the obligations assumed by Knoppow? The record shows that during the time Drabkin was a member of the firm, payments were regularly made to the plaintiffs. These payments were by check and corresponded in amount with the invoices. They were credited to specific items of merchandise. Soon after Drabkin’s retirement, Knoppow ceased to make regular remittances, and such payments as were made were not credited by the plaintiffs to specific items of goods purchased by him, but were applied to his open account in reduction of the outstanding balance, in which was included the obligation of the partnership. From this it is apparent that the plaintiffs treated past and present indebtedness as obligations of Knoppow. After Drabkin withdrew from the firm, they made a material change in the nature and time of payment of the obligation assumed by Knoppow. The court correctly so found. In estimating Knoppow’s balance from time to time, the partnership indebtedness, which was not carried on the plaintiffs’ books as a separate item, was added as new purchases were made, and reduced as remittances were received. In other *347 words, the partnership obligation was intermingled with Knoppow’s general account. He made payments from time to time without directing as to how they should be applied. The plaintiffs could have applied them as they pleased. They applied them on the open account. From these facts the trial court held that the payments must be applied to the' debits in the order of time in which' they occurred, and that therefore the partnership debt had been fully paid when Knoppow ceased to do business with the plaintiffs. His holding is supported by the rule announced in Mauro v. Davie, 236 Mich. 309. The judgment is affirmed, with costs to the defendant Drabkin. Wiest, Clark, Potter, Sharpe, North, and Fead, JJ., concurred. Butzel, C. J., did not sit.