Follmer v. Frommel

Putnam, J. This action is brought against defendants as co-partners on a note purporting to be made by the firm, the defendant Frommel only defending. The plaintiff alleges the copartnership of the defendants, and that they, on or about September 29, 1890, duly made, executed, and delivered to the plaintiff the note in suit. The defendant Frommel, in his answer, interposed a general denial. On the trial it was shown that the note, which was executed by the defendant McKinstry, was given for lumber sold September 29, 1890. The partnership was formed on October 1, 1890. The defendant then offered to show that said note was so given by McKinstry in the name of the firm for a past due indebtedness from McKinstry to plaintiff. This evidence was objected to on the ground that it was inadmissible under the general denial contained in the answer and excluded by the referee. If this proof had been received and made, it would clearly have constituted a defense to the action. The law applicable to such cases, as stated in Parsons on Contracts, is quoted with approval in Bank v. Underhill, 102 N. Y. 340, 7 N. E. Rep. 298, as follows: “Whenever a party receives from any partner in payment for a debt due from partner only, whether the debt be created at the time or before existing, or by way of settlement of or security for a debt or indebtedness, an obligation of the firm in any form, the presumption of the law is that the partner gives this and the creditor receives it in fraud of the partnership, and has consequently no demand upon them.” Hence, had the defendant made the proof offered, the presumption would have arisen that the note was given in fraud of the partnership, and unless the plaintiff could have answered that presumption he must have failed in the action. The question, then, arises whether the defendant was entitled to offer such evidence under the general denial contained in his answer. The allegation in the complaint is that on September 29, 1890, defendants, as copartners, made and delivered to plaintiff their note, etc. Defendant denies this allegation in the complaint. The plaintiff, then, was bound to show the execution and delivery of the note by the copartners. He shows this presumptively by showing the execution of the firm note by McKinstry, one of the partners. The note, being made by the partner in the firm name, is presumed, in the first instance, to have been made on account of the firm business. But this is only a presumption. The defendant may controvert such a presumption, and I think can do so under a general denial. The question before the referee was, was the note in suit executed by the firm? To award judgment for the plaintiff the referee must find that it was. The plaintiff must show by competent testimony that the paper was executed by the partnership. How does he show it? By showing the execution by one copartner in the name of the firm, which raises the presumption that it was a firm paper. But the reason that 319 one partner can bind the firm and make contracts in the name of the firm is that each partner is a general agent of the copartnership in firm business. But, as held in Farmers' & Mechanics' Bank v. Butchers' & Drovers' Bank, 16 N. Y. 125, and Bank v. Underhill, 102 N. Y. 340, 7 X. E. Rep. 293, while each partner is a general agent of the firm in partnership business, and can bind the firm by making notes in such business, he has no more authority than a mere stranger to make such a note for his own accommodation or for others. Therefore, when the plaintiff rested on the presumption that -The note executed by McKinstry in the name of the firm was a partnership note, and binding on the firm, the defendant Frommel, under a general denial, could show that McKinstry gave such note to pay his past due private debt in fraud of the firm, and that such note was void as to him. The evidence offered, if received and made, would have shown that McKinstry had no right to sign the firm name to the note in suit, and would have raised the presumption, being given for a private debt of McKinstry to plaintiff, that the latter knew the note was given in fraud of the firm and without authority. Hence the evidence offered was in direct contradiction of the evidence offered by the plaintiff that the note was a firm note. If McKinstry had been Frommel’s agent, and without authority had executed a contract or made a note in his name, defendant, being sued on such contract or note, under a general denial could have shown that he did not execute or make the contract in suit, and to establish such fact that the agent had no authority to make it in his name. See Hier v. Grant, 47 N. Y. 278. Under a general denial a defendant must be allowed to controvert by evidence anything plaintiff is bound to show to establish his cause of action. Plaintiff alleges that defendants, as copartners, made the note in suit. Defendant Frommel denies this. Plaintiff must prove that the firm made the note. Frommel can show under his denial that the firm did not make it, because McKinstry, as agent of the firm, had no right to sign the firm name to the note given for his individual debt. See Benton v. Hatch, 43 Hun, 146; Griffin v. Railroad Co., 101 N. Y. 354, 4 N. E. Rep. 740; Cary v. Telegraph Co., 20 Abb. N. C. 342, note; Williams v. Walbridge, 3 Wend. 415. It is suggested that defendant, having on the trial obtained an adjournment in order to procure from the special term an order to amend his answer setting up as a special defense that the note in suit was given by McKinstry in the firm name to pay his individual debt, and having obtained such order, and not having availed himself of it, should be es-topped from .claiming that the referee erred in excluding the evidence so offered under the general denial. I am unable to see how an estoppel can exist in this case. The defendant, on the trial, made a mistake as to the legal effect of his answer. But it is held that a party is never estopped by his admission or assertion of a legal conclusion. Brewster v. Striker, 2 N. Y. 19. But again, an estoppel in pais is where an act or omission of a party has influenced another to a line of conduct or to act in a way prejudicial to his interest, if the party doing such act or making such admission is not prevented from retracting. The cases cited by plaintiff will illustrate this proposition. In this case the defendant proposed to amend his answer, and obtained the order of the special term allowing him to do so on terms. He did not avail himself of the order, and afterwards appeared before the referee, and on the trial claimed under the general denial to show the facts excluded as above by the referee. The plaintiff has not acted or been influenced or injured by the proposal of defendant to amend his answer. It does not appear that the plaintiff, in consequence of defendant’s procuring the adjournment and obtaining the order to amend, has done any act that he would not have done had such an adjournment not been had or said order not been obtained. Hence it is not a case of an estoppel. These facts render it unnecessary to consider the question discussed by counsel whether, under the general denial, the defendant could properly show 320 a want of consideration for the note in suit and also the other questions discussed by the part.es. It is suggested by respondent that the first offer of defendant’s, even if proper under a general denial, did not propose to prove facts sufficient to constitute a defense, and hence the objections thereto were properly sustained by the referee. As I have endeavored to show, under doctrines well settled by the courts, had the evidence offered been given it would have raised the presumption that the defendant McICinstry gave and plaintiff received the note in suit in fraud of the partnership, and hence, as to the defendant, that said note was void. Hence, I think, the referee erred in sustaining the objections to the offer of defendant, and that the judgment should be reversed, the referee discharged, and a new trial granted, costs to abide the event.