Linderman v. Disbrow

DixoN, O. J. There was no evidence given to prove or tending to prove the counterclaims, called first, second and third, set up in the answer, which were for work, labor and services performed, money laid out and expended, and the hire of agents and warehouses and payment of wages and rents, by the defendant individually, and to and for the individual use and benefit of the plaintiff, and at his individual request. All the services rendered, moneys expended and wages and rents paid, were on account and for the use and benefit of the partnership, or proposed one, between the plaintiff and defendant and Mr. Lewis, which partnership, the plaintiff claims and the defend ant admits in his testimony, was dissolved or abandoned by mutual agreement of the parties about the time active business under it was to commence, and before it can be fully said to have had an actual legal existence. The case stands, therefore, upon the defense first stated in the answer; and the question arising is, whether a partnership claim of the kind there described can be pleaded by way of counterclaim or set-off to the demand of the plaintiff in an action like this. A., B. and C. are or have been copartners, and A. owes B. individually a sum of money, for which B. sues him. Can A. plead in de [471] fense tbe partnership, averring that upon settlement and distribution of the assets between the partners, it will be found that B. is indebted to him, or to him and C., in an amount exceeding the amount demanded in the action; • and can he ask a settlement of the partnership affairs in such action, and that the same be decreed, and the rights and liabilities of the respective partners as between themselves ascertained and adjudged, and that the property and effects of the partnership be distributed and divided, and for those purposes that the other partner, C., may be brought in and made a party to the action, in order that in the end his alleged counterclaim, when worked out and its amount determined, may be allowed against or deducted from the demand of the plaintiff in the action, B.? If the intimation contained in Sprout v. Crowley, 30 Wis., 187, be correct and be adhered to, then a partnership demand of the kind could not, under ordinary circumstances, or except as sustained and made available on peculiar grounds in equity, be treated or regarded as the proper subject of set-off or as a counterclaim under the statute. It was there said to be “ quite clear that in the absence of fraud, or of an express agreement, or of any other circumstances which would render a particular case exceptional, the law is, that one partner has no claim against his copartner individually, on account of partnership transactions, although a final settlement of the affairs of the firm would show a balance in favor of the former. Until such final settlement, the general rule is that the firm, and not the individual partner, is the debtor ; and in such case it cannot be said correctly that there is a debt due from one partner to the other.” Reference was made to the case of Ives v. Miller, 19 Barb., 196, where the question is fully and ably discussed and numerous authorities referred to, and where it was held that an unsettled partnership claim of the description here pleaded was not a counterclaim against the plaintiff, nor the proper subject of a set-off. We are quite satisfied of the correctness of the conclusion, and that it rules out the defense here set up and sought to be made [472] and proved upon tbe trial. No fraud, insolvency or other special facts are alleged or claimed, to take tbe case out of tbe general rule, or call into action tbe equity powers of tbe court. So far as it is claimed that tbe agreement in question, or contract upon which this action is brought, grew out of or was connected with tbe partnership transactions, such claim is completely negatived by the verdict of the jury. The question was fully and fairly submitted to their determination, whether tbe property which tbe 'plaintiff claimed to have sold to tbe defendant, and to recover tbe price of which tbe action was brought, was at tbe time of sale or bad ever been tbe property of the partnership ; and they were instructed, if they so found, that their verdict must be for the defendant. Tbe court said: 1 Again, if you find from tbe evidence that tbe property for • which the action is brought was sent on by tbe plaintiff, and furnished by him, with tbe intention that it should be used in the partnership business and become partnership property, and tbe same was so received by tbe defendant, then tbe plaintiff cannot recover, and your verdict must be for the defendant, if you find from the evidence that the partnership affairs were unsettled at tbe time they claim this sale was made; but if you find from the evidence that the property in question belonged to the plaintiff, and bad not become and was not the partnership property, then tbe plaintiff is entitled to recover, and your verdict must be for him.” Tbe jury must, therefore, have found in favor of tbe plaintiff and against tbe defendant upon tbe question so submitted to them, which submission, it is insisted by counsel for the plaintiff, was more favorable to the defendant than tbe law authorized or required. Counsel argue, and, as we think, not without strong reason, that if the property in question bad once been partnership property, yet if, by agreement of the partners, it had come back to and bad become tbe sole or individual property of the plaintiff, then the plaintiff could have sold it to the defendant and recovered for it under the circumstances of this case, notwithstanding the [473] still continuing existence of some unsettled partnership affairs, transactions or accounts. These observations dispose of all the exceptions in the case, save that to the denying of the motion for a nonsuit made upon the ground that no demand of the farmers’ notes had been proved. They show that there was no error in the exclusion of evidence offered by the defendant, nor in refusing the special request to instruct asked by him. They show also that there was no error in overruling the motion for a new trial, unless it was with respect to the failure to prove a formal demand of the farmers’ notes. Upon this last point we agree with counsel for the plaintiff, that no demand of the notes was under the cir cumstanees necessary. The defendant had been requested to pay for the property long before suit was brought, and after the time when, by the terms of the agreement, the farmers’ notes were to have become due, and had peremptorily refused to make any payment whatever. He did not put his refusal on the ground that he was to pay in notes which he was then ready to deliver; but it amounted to a denial of his liability, or that he was in any manner indebted to the plaintiff, as the jury have found he was. It is obvious that under those circumstan ces a formal demand of the notes would have been useless. It would have been refused upon the same ground that the defendant refused to pay any part of the claim; and to turn the plaintiff out of court now for want of such a demand, would be in very truth to sacrifice substance and justice to the very most idle of forms and technicalities. By the Court.— The judgment is affirmed.