Granger v. McGilvra

Catón, C. J. We do not doubt that the court erred in entering a decree against Granger for the full amount due from him to the firm of Wilkinson & McGilvra. Even without the notice given by complainant to Granger, not to pay Wilkinson without consulting him, Granger had no right to make such payment for the exclusive benefit of Wilkinson, and to the prejudice of the rights of McGilvra. Granger settled the demand with Wilkinson, by giving his note for a part of the amount to a creditor of Wilkinson, in satisfaction of Wilkinson’s individual liability, and by his. note to Wilkinson individually, for the balance agreed upon. This was in fraud of the rights of the other partner, and as to his portion of the demand it should be treated as no payment. But as to Wilkinson’s half, we are of opinion that it should be treated as a payment. The bill does not pretend that Wilkinson is not able to respond to the decree for the amount claimed to be due from him to the complainant, without resorting to Wilkinson’s half of the balance due from Granger, but on the contrary, it states the value of Wilkinson’s property over incumbrances, to be more than sufficient to pay the amount claimed to be due from him. But the structure of the bill is such as to show that the complainant only expected or wished to set aside the settlement as to complainant’s half or interest in the judgments. It avers that unless the settlement be set aside as to the complainant, he will be in danger of losing his half of the balance due on the judgments, and prays that as to him the settlement may be set aside. But even if the bill and proof had shown that Wilkinson was insolvent, as well as overdrawn with the firm, that would not deprive him of the authority as a member of the firm to settle the firm debts, although forbidden by the other partner to do so. The power of each member of a firm to settle its 'debts continues equal to the partners after dissolution, unless restrained or limited by positive agreement, or by an order of the court. One partner cannot deprive the other of this power by notifying the creditors not to pay him. Else each partner could thus destroy the authority of the other, and no debtor of the firm could safely pay his whole debt to any one, but must pay half to. each, in order to protect himself. Wilkinson, then, still had the same right to receive payment from Granger which the complainant had, and had the payment been such as one partner was authorized to receive for the firm, it would have been binding upon the firm, unless, perhaps, Granger had known that it was the intention of Wilkinson to misapply the money and defraud the other partner; and in this case, so far as Granger did pay Wilkinson in cash, we must hold it a good payment, and binding on both partners. The balance of the payment, being in part in the payment of an individual debt of Wilkinson, and part in a note payable to him individually, is not such a payment as can bind the other partner, whose right should not be prejudiced by it. But as to Wilkinson’s interest in the judgments, we are unable to understand why he should not be satisfied, when he has received the whole of what was due1 from Granger and appropriated all to his own use. If Granger was amenable to him, and paid him as he did and took the risk of meeting further responsibility to the other partner, we can see no good reason why the whole settlement should be set aside and Wilkinson allowed to collect his half over again of Granger. This we do not think required by the case nor justified by the law. We think the fifty dollars paid in cash, by Granger to Wilkinson, should be credited to him as a good payment to the firm; and that he should also be credited with one-half of the balance due the firm on the judgments, as Wilkinson’s proportion thereof. If, upon a final settlement of the concern by the receiver, he has funds in his hands which would otherwise go to Wilkinson, he should pay those funds to the complainant, to the amount remaining due upon the judgments, and if the receiver shall not have enough of Wilkinson’s ! funds in his hands to satisfy the balance due to the complainant, then such funds should be applied so far as they will go, and that the complainant have execution for the balance -against Granger. The decree of the Superior Court is reversed and the suit remanded, with directions to enter a decree according to the principles here stated. Decree reversed.