Huntington v. Potter

By the Court, Johnson, J. I am unable to see how the conclusion of law, that the defendant Fellows “cannot be deemed to have acted in good faith,” in settling the demand with Potter and taking a release, can be sustained, upon the facts found by the referee. The fact is distinctly found that at the time of such settlement and release, Fellows had no knowledge of the assignment to the plaintiff. It is found that he knew of the dissolution of the partnership to which the demand was originally due; and from this fact, as plainly appears from the report, the referee held that such legal conclusion followed. In this, however, the referee was clearly mistaken. It is well settled upon abundant authority, that each member of a partnership, after dissolution, has the samé right and authority to collect, compound and release the debts of the firm, existing at the time of such dissolution, that he had before. (King v. Smith, 4 C. & P. 106. 19 E. C. L. 299. 3 Kent’s Com. 48, 49. Salmon v. Davis, 4 Binn. 375. Murray v. Mumford, 6 Cowen, 441. Napier v. McLeod, 9 Wend. 120.) The power to create obligations against the firm, by one member, ceases with the dissolution, as between the partners themselves, and as respects all persons who have notice of the dissolution, or who have had no dealings with the partnership previously. But such dissolution does not affect the authority of each partner to receive debts, and to discharge [304] existing obligations in favor of the partnership, while any thing remains to be done in winding up all its affairs. For this purpose the partnership, and all the powers of each partner during its existence", are deemed to continue after dissolution. (Van Keuren v. Parmelee, 2 Comst. 523. Story on Part. § 115.) As the law gives any debtors of a partnership the right to settle with either member of the firm and take a release after dissolution, the same as before, surely it will not impute bad faith to such debtor in making such settlement, from the fact that he had knowledge of the dissolution. Neither the fact of the dissolution nor the debtor’s knowledge of it is a circumstance which affects, in the least, his right thus to settle and take his release. The presumption is, that every man acts in good faith in exercising a right which the law secures to him, until the contrary is proved. Notice of the dissolution, merely, was not enough to put Fellows upon inquiry in respect to a previous assignment of his debt by his creditors. It was a fact which had no legitimate bearing upon the question of assignment, and did not in legal contemplation lead to any such inquiry. In the case of Gram v. Cadwell, (5 Cowen, 489,) the debt- or released had notice of the agreement, which operated as an assignment of the partnership effects to the other partner; and this notice distinguishes the case, in this aspect, from that of Napier v. McLeod, supra. The case at bar, upon the facts as found by the referee, presents the naked case of a debtor settling with his creditors and taking a discharge, valid in law as between them, without any notice of the plaintiff’s prior rights. It seems to me, upon well settled principles, the discharge is conclusive upon the plaintiff. As a general and well established rule, the assignee of a demand is not protected against the subsequent dealings of his assignor with the debtor, where the latter acts in good faith. This proposition does not need fortifying, at this day, by the citation of authority. Indeed the referee [305] virtually so held. The error into which he fell, manifestly was, in supposing that a settlement and release, between a debtor and a member of a firm after dissolution, stood upon grounds somewhat different, as respects a prior assignee of the firm, from a settlement and release before dissolution, though after assignment. [Monroe General Term, September 3, 1860. Smith, Knox and Johnson, Justices.] But, as the law makes no difference in this respect, the plaintiff must be held to stand like any other assignee whose rights have been defeated by the dealings of the assignors, with a debtor who has no notice of the assignment. The judgment must therefore be reversed and a new trial granted, with costs to abide the event.