Van Eps v. Dillaye

By the Court, Allen, J. The defendants, Hayden and Williams, were either not served with process, and in that case are not bound, or in any way affected, by the verdict and judgment, unless they claim to own property jointly with Dillaye, or else, having been served with process, they have failed to appear, and suffered default, and thereby admitted the right of the plaintiff to recover. And in either case they can not object to the sufficiency of the evidence of their liability; and it was sufficient for the plaintiff to show that Dillaye, who alone appears and defends, was a member of the firm of Dillaye, Hayden & Co. and as such, liable to the plaintiff in this action. (Whitney v. Sterling, 14 John. 215. Halliday v. McDougall, 22 Wend. 264.) The existence of the copartnership between the defendants was abundantly proved as against Dillaye ; 1st, by his acts and dealings with the plaintiff; and 2dly, by his admissions under oath when examined as a witness in another cause to which he was not a party. Had the action then been upon the notes originally given to the plaintiff, and there had been no intermediate dealings between the parties, the right of the plaintiff to recover would have been indisputable. But it is insisted that the notes, to recover which this suit is brought, were given by Dillaye after the dissolution of the firm of Dillaye, Hayden & Co., and without authority of his former copartners, and that therefore there [250] is no joint liability on the part of the defendants. It is a well settled rule that after the dissolution of a copartnership one member of the firm can not bind his former partners by any new contract, even by the renewal of a partnership note, or by an endorsement of negotiable paper held by the firm. (National Bank v. Norton, 1 Hill, 572.) But this principle will only affect contracts made after dissolution, with one who had not before had dealings with the firm, or having had dealings with them, had had actual notice of the dissolution. The acts of one partner, though after dissolution, will bind his copartners in respect to all persons who have previously dealt with them as a firm, except those to whom actual notice of the dissolution has been given. (National Bank v. Norton, supra. Vernon v. Manhattan Co. 17 Wend. 524. 6 John. 144.) In this case, there is no evidence that the plaintiff, or his agent, had any notice whatever, at any time before the trial, that the copartnership of Dillaye, Hayden & Co. had ceased to exist, or had been dissolved. And in the absence of proof of such notice, and in the absence of any thing upon the face of the contract, as in Mitchell v. Ostrom, (2 Hill, 520,) to show that Dillaye had no authority to bind the other defendants by the notes now in suit, it might well be held that Dillaye was estopped from denying the joint liability of himself and those whom he undertook to bind ; and the case be disposed of upon this ground, (Hawks v. Manger, 2 Hill, 200.) It is, however, claimed by the defendant Dillaye, that the plaintiff agreed to, and did, take his individual note and draft not conditionally, but absolutely iif payment of the firm notes, which were given up. But the evidence is that they were taken upon the express assurance that the bill was drawn against funds in the hands of the drawee, and would be accepted and paid, and that the note would be paid at the time and in the manner then agreed upon. The drawees refused to accept or pay the draft, and Dillaye did not pay the note. ' The partnership debt was not then in fact paid. The securities taken by the plaintiff had proved utterly unavailing, and the firm had parted with and lost nothing. It does not appear that any member of the firm, except Dillaye, ever [251] knew of the transaction. Then if the plaintiff had agreed to accept these individual liabilities of Dillaye, in payment of the notes of the firm, he had done so under a mistake, and there was a good reason why he should be placed in the same situation in which he was before the dealing with Dillaye; and this doubtless the firm had a right to do. There can be no doubt, I think, that the original debt of the firm and the surrender of the individual obligations of Dillaye would have proved a good consideration for a new note, and if given by one member of the firm while the copartnership was in existence, or by the members individually after the dissolution, it could not have been impeached in either case for want of consideration, or in the first case for the reason that it was given for the individual debt of one of the partners; and if so, the notes for which this suit is brought are valid notes; for the plaintiff had no notice of the dissolution, and the copartnership between the defendants, in respect to him, must be considered as continuing up to the time of the giving of those notes. In Mitchell v. Ostroni, (supra,) the note was signed “ late firm of M. I. E. & Co.,” and by such signature, the court held that only the party signing it was bound, and that he should have been sued alone. In Arnold v. Camp, (12 John. 409,) the creditor had, after the dissolution of the co-partnership, and with notice of such dissolution, taken the note of one of the members of the firm under circumstances in respect to which the court say “ the facts not only fairly but necessarily lead to the conclusion that the individual note of Doney was intended and agreed to be considered as payment of the partnership note,” and the creditor afterwards induced the individual partner to give back the firm note, and the defence was interposed not by the partner who had treated with the creditor and assumed the payment of the partnership debt, and afterwards undertook to charge his former partners, but by one of the other partners, so that the whole case turned upon the question whether or not the note of one partner had been taken as payment of the partnership debt; and was disposed of upon that ground. In that event, Doney had no right to bind the firm by a new contract with the plaintiff, he having notice of the dissolution, [252] which the plaintiff in this case had not. The case of Waydell v. Luer, (3 Denio, 410,) was decided upon the same principle.. The plaintiff is, in my opinion, entitled to a judgment upon the verdict, upon the ground that the notes given by Dillaye in 1844, and upon which this suit is brought, must be considered and held, as against Dillaye, to be the notes of the firm, and that for all the purposes of this action, the joint liability of the defendants is sufiiciently established. This is upon the assumption that by the giving of the individual draft and note of Dillaye and their acceptance by the plaintiff the partnership debt was paid and discharged as is claimed by the defendant. I do not, however, think the evidence shows this to be the fact. It must be considered as settled by the adjudications in this state that the notes of the debtor, or of a third person, will not he considered as any thing more than the conditional payment of an existing debt, unless it is proved that they were agreed to be taken absolutely as payment of such debt. (Story on Pr. Notes, § 404. Arnold v. Camp, supra.) The question in such cases is always whether the creditor agreed to and did accept the notes, either of the debtor or of the third person, as payment of the original debt. If he did not, the original debt is not discharged, and the remedy upon it is only suspended until the maturity of the notes received. (Waydell v. Luer, 3 Denio, 410, and the cases cited by Lott, Senator.) I can not, upon the evidence, arrive at the conclusion that the plaintiff intended to, or did agree to accept the individual obligation of Dillaye as payment of the partnership debt; and the act of Dillaye himself, who now insists upon the alledged payment, entirely repels every presumption arising from the other circumstances in the case. The plaintiff's agent was induced to believe that the note and draft given by Dillaye would be paid in a particular manner, and he took them and gave up the partnership notes, relying upon the assurance of Dillaye to that effect; and after the dishonor of the draft and the non-payment of the note Dillaye himself undertook to reinstate the plaintiff in the same situation in which he had been before, and to give him the liability of all the members of the firm, in the same form in which [253] he held it before this transaction; thus showing most clearly, that Mr. Dillaye did not understand that the plaintiff had taken his notes as payment of the partnership debt. For we can not suppose at the suggestion and for the benefit of Mr. Dillaye, who alone defends, that he contemplated a fraud upon his partners. At all events, he can not well insist that the partnership debt is paid by his own notes which have been surrendered to him in consideration that the firm should continue liable for the debt. The plaintiff is entitled to judgment on the verdict. Judgment for the plaintiff.