Wilson & Sons v. Waugh, Jack & Co.

Mr. Justice Green delivered the opinion of the court, October 25th 1882. In delivering the opinion of this court in the case of Reppert v. Colvin, 12 Wr. 248, Mr. Justice Read on p. 252 said: “The law is well settled that after the dissolution of a partnership the partners cease to have any power to make a contract in any way binding on each other. The dissolution puts an end to the authority, and operates as a revocation of all power to create new contracts. Of course a hew-promise of which the original debt is the only consideration, by a partner after the dissolution of the copartnership, will not take the debt out of the statute of limitations so as to make the copartners liable. The exception to this rule is when the partner takes the stock on hand and becomes the liquidating partner, as in the case of Houser v. Irvine, 3 W. & S. 345.” The authority of Smith in that case, says Chief Justice Gibson, “was to settle partnership debts and pay them out of the effects in his hands.” That this is the well understood law of this Commonwealth cannot be disputed. It has been expressed so many times that a repetition of the authorities is unnecessary. Generally there is but little difficulty in its application to the facts of a given case. In the present case however the facts are somewhat peculiar. The original debt was for a bill of merchandise sold by the plaintiffs to a firm composed of R. M. Waugh, M. J. Jack and E. H. Jack, and called Waugh, Jack & Co. The goods were sold during the year. 1873 and the debt became due on November 3d 1873. On December 11th 1873 the interest of R. M. Waugh in the firm was sold by the sheriff under an execution against him to one Harriett, who immediately [237] assigned it to M. J. Jack and E. H. Jack, and these persons thereafter conducted business at the same place under the firm name of Jack & Co. On February 17th 1871 a settlement took place between the plaintiffs and M. J. Jack, of the claim against the old firm of "Waugh, Jack & Co. The plaintiff, H. M. Wilson, testified that at that time he received a payment of §25.21 on the account, and it was proved, and not denied, that he took also a note of the new firm of Jack & Co. for $1,500 for the remainder of the claim. Wilson said he took it expecting it to be paid. As to the payment of $25.21 Wilson said he received it but did not know who was present at the settlement. Waugh said that no money was paid in his presence that he saw, and Jack said that he did not remember of any money being paid. No one testified that any money was paid in Waugh’s presence The court below charged that the partnership was dissolved by the sheriffs’ sale of Waugh’s interest in the firm in December 1873, that after the dissolution the remaining partners could not bind him by an acknowledgment of, or promise to pay, the debt, that there was no evidence of any promise by Waugh to pay it after it became due and if the jury so found they should render a verdict for the defendant Waugh. Was there any errorin this? It is certainly true that the firm was dissolved by the sale of Waugh’s interest: Story on Partnership §§ 311, 312,313; Parsons on Partnership, p. 100; Horton’s Appeal, 1 Harr. 67. In Est. of Davis & Desauque, 5 Whart. on p. 539, Rogers, J., said: “There are various ways of dissolving a partnership: effluxion of time; the death of one partner; the bankruptcy of one, which operates like death; or a dry, naked agreement that the partnership shall be dissolved.” In Levy v. Cadet, 17 S. & R. 126, and in many cases since, it was held that after the dissolution of a partnership, one partner cannot, by his acknowledgment, revive a partnership debt so as to deprive the other partner of the benefit of the Act of limitations. It is also true, however, that this rule is subject to the exception that one who is a liquidating partner may, after dissolution, bind his former partner by either an acknowledgment, or an express promise to pay, so as to take the debt out of the statute: Fulton v. Central Bank of Pittsburgh, 11 Norr. 112; Reppert v. Colvin, supra. Nor is it necessary that there should be an express and specific appointment of one as liquidating partner. His authority may be inferred Rom acts done in liquidation, with the knowledge and consent of his former partners: Ibid. In the present case there was no evidence that M. J. Jack was a liquidating partner by any express authority to that effect. There was no evidence that he ever settled any other claim than this one, against the old firm, or that he ever undertook or agreed to do so. In fact the firm of Jack & Co. also became insolvent a few months later, in [238] June following. When Jack settled this claim he did not give the paper of the old firm, but of Jack & Co. Hence no inference can be drawn that he intended thereby to keep alive the debt of the former firm. Indeed Jack testified that the note of Jack & Co. was given and accepted as absolute payment of the debt and that he took a receipt for the debt. Wilson denied having agreed to discharge Waugh but did not deny giving the receipt. But however that may be, it is clear that no inference can be drawn from such a settlement as this, that Waugh was assenting to any promise, engagement or acknowledgment of the debt as a continuing partnership obligation. Moreover, ho no longer had any ownership of the partnership goods and was not at liberty to dissent from the control and disposition of them by Jack & Co. Consequently no inference of assent to their possession and appropriation of them can be derived from the absence of any dissent on his part. He, of course, was liable for the debt duo the plaintiffs during six years from its maturity, but that was the extent of his involuntary responsibility. If M. J. Jack had at the settlement, given to the plaintiffs a note for the $1,500, in the name of the old firm of Waugh, Jack & Co. there would have been an inference that, so far as he was concerned, he intended to continue the obligation of the old firm, and therefore of Waugh as a member of it. In that event the question would fairly have arisen as to his power to make Waugh liable by such an instrument. But he did not do that, and hence so far as the giving of that note is concerned, the inference would be, not that he intended to preserve Waugh’s liability or that of the old firm, but to substitute for it a new and different liability, to wit, that of the new firm of Jack & Co., of which Waugh was not a member. The plaintiffs were under no obligation to accept such a note, and if they had refused it and insisted upon a note of the old firm it would have been apparent that they intended that the old firm should remain liable. But nothing of that kind took place. If again it had been proved that the alleged payment of $25.21 on account was made in Waugh’s presence and with his knowledge and consent, there would have been some, though not a conclusive, basis, for an inference that he assented to such a continuation of the liability of the old firm as would flow from a payment on account. But there was no such proof, and hence there is no authority for such an inference. As we have seen by the decided cases, the power of one partner to bind another, after dissolution, by either an express or implied promise, is exceptional. The facts which give rise to it must appear in any case where it is claimed to exist. If they do not appear it does not exist and the general rule of non-liability applies and controls. In the present case there was no [239] express authority to Jack to act as liquidating partner, there was no implied authority from his actually undertaking the settlement of the affairs of the firm because there was no proof of such an undertaking, there was no implied assent to any continuation of the debt by the giving of the note of Jack & Co. for it, and there was no assent express or implied to any payment on account of the debt, since there is no evidence that such payment was made in Waugh’s presence or with his knowledge or consent. In these circumstances there is absolutely nothing, upon which to found any legal obligation on the part of Waugh to pay the debt in suit within six years before suit brought and hence the plea of the statute of limitations was a good plea, and there was no error in the instructions given by the court. Judgment affirmed.