Abercrombie v. Spalding

Holmes, J. There is no doubt that advances by a partner to his firm, other than contributions of capital, are accounted for [35] by the firm on the footing of debts, although postponed of course to the claims of other creditors. Miller’s River National Bank v. Jefferson, 138 Mass. 111, 112. Lindl. Part. (5th ed.) 402. See Whitcomb v. Converse, 119 Mass. 38, 43. There is no doubt that such liabilities of the firm often are described as debts in commercial language, or that, in construing a commercial agreement, the question is what the words fairly mean, not whether they are used with strict legal propriety. We assume that an agreement by a continuing with a retiring partner to pay all the debts of the firm might appear from the context and the circumstances to apply to a debt in the general commercial sense due from the firm to the retiring partner, as was held in Hobart v. Howard, 9 Mass. 304. We assume that the same might be true even where, as here, the retiring partner surrenders all his interest in the assets, and that under some circumstances such a conveyance might be interpreted to mean a conveyance of his interest only in what would be divided as capital in a strict sense. Hamer v. Giles, 11 Ch. D. 942. Austin v. Jackson, 11 Ch. D. 942, n. Lindl. Part. (5th ed.) 320. In the case at bar, in favor of the plaintiff’s contention, there is the fact that the partner’s covenant refers to “all the debts and liabilities ” of the firm shown on the annexed exhibit, “ or on the books of the firm.” On the other hand, this agreement was of the same date as the guaranty in suit, seemingly on the same paper, and presumably both contracts were parts of a single transaction. The defendants were the principal creditors of the firm. At the same time they were entitled to a less sum than that claimed by the plaintiff as due to him. It does not appear that they had any other inducement to execute the guaranty than the fact that they were creditors, so that it is highly improbable that they or the plaintiff supposed that they were guaranteeing a debt which would be postponed to their own. The plaintiff’s claim was not shown on the exhibit. The language of the partner’s covenant was that he would “adjust, compromise, and settle” the debts referred to, — words obviously chosen with reference to other creditors than the covenantee. The agreement was made in contemplation of a possible settlement of the partnership affairs in insolvency, in which event the agreement was to be void. This fact alone [36] makes the plaintiff’s construction improbable. The plaintiff releases to his partner all his interest in the assets. Lesure v. Norris, 11 Cush. 328, 330. Finally, at the time of executing the document, the plaintiff, on demand, divided a sum "which he had collected of customers, — conduct not to be expected if he then was understood to have an outstanding claim. Dealing only with the particular instrument before us, we are of opinion that the defendants are not liable. See Lambert v. Griffith, 50 Mich. 286; Patterson v. Martin, 6 Ired. 111; 2 Bates Part. § 629. Judgment for defendants.