Roberts v. Ripley

Storrs, J. There is no doubt that the legal title to the note is in Beckwith, who holds it as a bare trustee for Philip Ripley, the other defendant. It is unnecessary to consider whether the members composing the co-partnership of Ripley, Roberts <£• Co. would have been bound, by an endorsement of this note, made by one of the partners, after the dissolution, either by virtue of any implied power which he possessed, or by the stipulations in the articles of dissolution, or by any acts of the partners which may be claimed to amount to a ratification of such endorsement. It is found in this case, that one of the part — 550 — ners endorsed the note to Philip Ripley, another of the part- - ners, with the knowledge, consent, authority, and approbation of all the partners, and on their behalf. It is, therefore, as though each of them had endorsed it personally, .i That an endorsement of negotiable paper, by a firm, to one of its members, vests in him the legal title to such paper, admits of no question. Nevins v. Townsend & al., 6 Conn. Rep. 5. Moore v. Denslow & al. 14 Conn. Rep. 235. Pitcher v. Barrows & al. 17 Pick. 361. 363. Philip Ripley, therefore, was vested with the legal title to the note, by such endorsement to him, for a valuable consideration; and by him it was duly transferred to Beckwith, who has thus become the legal owner of it. Indeed,the bill in this case can be sustained, if at all, only on the idea that he has the legal title ; for the want of such title would constitute a complete legal defence, and there would be no occasion for asking the interposition of a court of equity by injunction. Such interposition is also unnecessary to protect the plaintiffs, on any other legal ground of defence which they may have against the note. The plaintiffs, however, set up various equitable grounds, on which they insist, that the defendants should be restrained from prosecuting said action. In the first place, they claim, that the said Philip, by the instrument of October 10,1839, which he executed to Edwin G. Ripley, (one of the plaintiffs,) transferred all his interest in the note in question to said Edwin, who thereby became equitably entitled thereto. The question whether the note was thus transferred, depends on the true construction of that instrument, in connexion with that of another instrument, relating to the same subject, executed at the same time, by the said Edwin to the said Philip. It is found, that, after the dissolution of the co-partnership, and before the execution of said instruments, partial divisions of the partnership property and effects were made, from time to time, between the partners ; and that in one of those divisions, the note in question, which belonged to the co-partnership at the time of its dissolution, was, by one of the partners, with the knowledge, approbation, and authority of all of them, on their behalf, endorsed and delivered to said Philip, and was by him received in part payment of the capital which he had advanced to the partnership, or of his part of the profits of the part551 nershrp, or both of them ; and that there was no agreement or understanding, by said partners, that they should not be - liable and obligated by said endorsement, in the same manner and to the same extent as endorsers of negotiable paper usually are by law. The perfect legal and equitable title of the note having thereby become vested in said Philip, the said instruments were afterwards executed under seal, by the said Philip and Edwin respectively, to the other; by one of which the said Philip did “ sell, assign, transfer, and set over (among other thiugs) to the said Edwin all his, the said Philip’s, right, title and interest in and to any and all property, both real and personal, including all notes, debts, contracts, claims and demands of every description whatsoever, in fa-vour of, or due or owing to, the late firm of Ripley, Roberts 4* Co. — and by the other of which instruments, the said Edwin, after reciting that he had “ purchased all the interest of said Philip in all claims, debts, and demands due and owing to the late firm of Ripley, Roberts <$f Cod’ covenants, that “ he will pay, or cause to be paid, any and all debts, claims and demands [then] owing by said late firm, which, as one of said firm, said Philip is or may be liable to pay on their account, and to save him harmless therefrom.” Were it not that the expressions used in the instrument from said Philip purport to convey to Edwin all notes, demands &c., “ in favour of’’ the late firm, there could be no pretence that the note in question would be embraced by such conveyance. If that expression were omitted, it would be clear beyond question, that the intention was, to convey to Edwin only the interest of Philip in the property then owned by, and the notes and debts then due to, the said firm; and that therefore, as the note in question had previously become the sole property of said Philip, and was then due and owing to him alone, it would not be embraced by the conveyance to said Edwin. That note, or any interest therein, would no more have passed by that conveyance, than if it had previouly been endorsed and transferred to a person not belonging to the firm, instead of the said Philip. It was not the property of, nor due to, the firm. It was owned by Philip individually, and in the same manner as his other separate property. And the expression “ in favour of,” used in the conveyance to Edwin, and which is strongly urged by the plaintiffs as vesting in him — 552 — the interest of Philip in this note, does not, in our opinion, vary this construction, or evince a different intention in the parties. The object and design of the instrument, obviously, was only to transfer the interest of Philip in the partnership property, including all debts then due to the firm ; and the phrase mentioned, even if taken literally, is not inconsistent with that intention, or at all expressive of a different one. If it means here, as it sometimes does, when applied to mercantile instruments, payable to, it is not true that the note was, when said conveyance was executed, payable to said firm :— it is drawn payable to Ripley, Roberts Co., or their order: it had been endorsed to said Philip, and was, consequently, at the time of the conveyance, payable to him, by its terms. If it was meant to indicate, as it would in common parlance, the person having the beneficial interest, that person was the said Philip. If it were necessary to pursue the subject, it might be added, that the instrument executed at the same time, by Edwin to Philip, and which, being between the same parties and relating to the same transaction, is to be looked to in their construction, recites, that Edwin “ had purchased all the interest of Philip in all claims, debts, and demands, due and owing to the late firm of Ripley, Roberts <f- Co.” — ■ i. e. at the time of said purchase ; — thus clearly showing the intention of the parties to be agreeable to the construction which has been put on said conveyance. This view is further confirmed also, not only by the nature of the arrangement indicated by the two instruments, which evidently was intended to put Edwin in the place of Philip, in regard to all the property and liabilities of the partnership, but by the averment in the bill, immediately preceding the recital of the conveyance to Edwin, that Edwin purchased of Philip, and that Philip, by said instrument, “ conveyed to him, his the said Philip’s, right, title and interest in or to the co-partnership property and effects of said then late firm of Ripley, Roberts Co.” The said Philip, therefore, notwithstanding said conveyance, continued to be the owner of the legal and equitable title to said note. That any mistake occurred in drawing up the instrument executed by said Philip, is not one of the grounds relied on in the bill. It is not either alleged or claimed. Were such the case, it should have been clearly averred, and made a distinct ground of relief. — 553 — The plaintiffs, in the next place, insist, that whatever claim the said Philip may have on said note against the partner-, ship, it is subject to the final settlement of the partnership accounts ; and that until those ascounts shall be adjusted, it is uncertain whether any thing will be due to said Philip (rom said firm ; and that therefore, it is inequitable that he should now be permitted to collect said note. It does not indeed, appear, that there has been any final adjustment or settlement of the concerns of the partnership ; and if there has not, Philip Bipley may, on such settlement, be found to be indebted to said partnership, or a creditor, for less than the amount due on this note. It is also true, that this note may form an item in the final settlement of the partnership accounts ; and that the payment of it may vary the relative situation of the partners, on such settlement. The mere possibility of these results is not, however, sufficient to induce a court of equity to interpose by injunction. It is unnecessary to consider what state of facts growing out of such an adjustment, would be sufficient to warrant such interposition. If in fact any such state of facts exists, it is necessary that it should be explicitly averred, by the plaintiffs, and thus made the ground of the remedy they seek. It is for them to show affirmatively the existence of such circumstances as in equity ought to restrain the defendants from prosecuting the action at law on the note in question ; and until they are so shown, the court should not interfere. In other words, it is for the plaintiffs to make out a case for equitable relief. The court surely cannot presume, either that on a final settlement of the partnership concerns, the state of the accounts will be such as to extinguish the amount due on this note, or render it inequitable to collect it. If there is any presumption in this case, it is quite the other way. The fact, that such progress had been made in the closing of the partnership business as that the partners had made among themselves several partial distributions of the partnership property, and that the note in question was transferred by them to the said Philip, in one of those distributions, towards what was due him from the partnership fund, most strongly evinces, that, at that time, he would be a creditor of the partnership to the amount due on the note, after its whole affairs should be adjusted and settled, and indeed is inconsistent with any other — 554 — supposition. That such was the apparent condition of their , at that time, is evident. There is no averment or claim, that there was any error on that subject, or that such is not the state of their affairs now. Under these circumstances, there is no reason why the collection of the note should be suspended, in order to await the period when the settlement of the partnership concerns shall be brought in form to a close. Nor was such the intention or understanding of the parties. The note was transferred to, and received by, Philip Ripley, in part payment of the indebtedness to him from the partnership. It was as though the amount due on it had been paid to him in cash. If that had been done, it would not be claimed, that he could be compelled, on the facts appearing in this case, to refund it. The endorsement of the note created an immediate obligation on the endorsers to pay it, if it was dishonoured by the makers, and the proper steps taken by the holder ; which was done in this case. It is found, that there was no agreement between the partners to vary that obligation. The endorsers are, therefore, under the same liability as if it had been negotiated to one who was not a partner. To arrest the suit on the note would, therefore, violate the express contract between the parties. The same course of reasoning, which is urged by the plaintiffs on this point, was resorted to, but without success, in Nevins v. Townsend, 6 Conn. Rep. 5. which bears a strong analogy, and in which the reasoning of the court has a forcible application, to the present case, if it does not in effect decide it. It is, in the last place, insisted, by the plaintiffs, that as Philip Ripley has transferred all his interest in the co-partnership property, which is the fund liable to him for the satisfaction of this note, it cannot equitably be enforced as against that fund. The interest of Philip Ripley in that fund was only what he would be entitled to in it, after the partnership debts should be paid ; and that, consequently, was all that he conveyed to Edwin G. Ripley. The note in question was one of the debts due by the partnership ; and that circumstance, we are to presume, was considered by the parties, when the contract shown by the two instruments of October 10, 1839, was entered into; and diminished, to the extent of Philip’s proportion of the amount due on it, the — 555 — consideration paid by Edwin to Philip. In addition to this, m ■ r „ , , Edwin, by his agreement of that date, covenants with that he will pay and save the said Philip harmless from all claims, debts and demands, then owing by said firm, which, as one of said firm, he is, or may be, liable to pay on their account; and the conveyance by Philip of his interest in the debts due to the partnership formed the very consideration of this agreement on the part of said Edwin. To permit Edwin to retain the interest of Philip in the partnership property, and to throw on Philip the loss of a debt due by the partnership, would, therefore, be not only palpably unjust, but against the spirit, if not the letter, of the contract entered into between the parties. The note stands on the same ground, in this respect, as if it had been negotiated to a stranger. The superior court should be advised, that the bill ought to be dismissed. in this opinion the other Judges concurred. New trial not to be granted