Smith v. Stone & Mullikin

Stephen, J., delivered the opinion of the court. This action of assumpsit was brought upon a promissory note, executed by Stone and Mullikin, to Lane and Smith, in the course of the trial of which, two bills of exception were taken to the opinion's of the court below. The defendants to support the issue of non assumpsit by them pleaded, gave in evidence to the jury, a deed of trust executed by them, by which they conveyed certain real estate and all their partnership property of every description, to certain trustees for the benefit of such of their creditors* as should within a limited tizne, give them a final discharge from the payment of their respective claims. In conformity with the provisions of this deed of trust, several of the creditors of Stone and Mullikin executed a deed of release* and among the number it was executed by John Smith* one of the partners of Lane and Smith, by the name of the firm of “ Lane and Smith.” To the admissibility of this release as evidence in the cause, the plaintiff by his counsel objected, upon the ground, “ that it was not the deed of the plaintiff, or of the firm of James S. Lane and Smith, or of any person, constituting one of that firm.”1 Which objection was overruled by the court, and the deed of release held sufficient to be given in evidence to the jury. As a general position it is incontrovertibly true, that ozie partner cannot bind another by deed ; but this well settled principle of law,' was not applicable to the case then before the court. It was not the effect, or operation bf the instrument of writing, to charge the partnership with a debt; but [321] it was nothing more than a release, or discharge of a debtor to the partnership. See 3 Johns. Rep. 70, where chief justice Kent, in delivering the opinion of the court, holds the following language; “ it is a general principle of law, that where two have a joint personal interest, the release of one bars the other, and I cannot perceive that the case of co-partners in trade forms an exception to the general rule. Each partner is competent to sell the effects, or to compound, or discharge the partnership demands. He is to be considered as an authorised agent of the firm, for all such purposes. Each has an entire control over the personal estate.” See also 2d Wheat. Selw. 311, where it is said, cc there is an exception to the general rule, that a partner cannot bind his co-partners by deed. A release under seal by one partner in the name of the firm, of a debt due the partnership, is binding on all the partners.” The court below were therefore unquestionably correct in the opinion given by them, to which the first exception was taken. Nor do we think, that they erred in the opinion delivered by them, which is contained in the second exception. The plaintiff offered to prove by one of the creditors of the defendants, that he had executed the release before it was signed by John Smith, and that Stone, one of the defendants, had represented to him, that the creditors generally, had consented to sign the said release, and that the witness had executed it under that impression; and further offered to prove by said witness and another witness, that one of the creditors had refused to execute the release, and the defendants, in order to induce him to sign it, had secretly agreed to pay him, and actually did pay the said creditor, without the knowledge of the other creditors, seventy-five per centum of his whole claim, which the plaintiff contended was a fraud upon ; the other creditors, and rendered the release void, and. inoperative as to him. TV Inch testimony the court refused to be given to the jury. [322] pit is presumed that the ground upon which the counsel supposed the release to be invalidated, was, that a deceit had been practised upon the other creditors, by the payment of this extra sum to the refusing creditor. But we do not think such a position tenable under the circumstances of this particular case. There was no understanding that all the creditors were to sign the deed of release upon certain conditions, and to receive nothing beyond their proportions of the trust fund, or that the deed should be void. If such had been the stipulation of the contracting parties, any underhand agreement to pay more, would have been a breach of faith, and a palpable violation of the principles of morality, and fair dealing^ Small vs. Brashley, 2 Vern. 602. In such a case, a creditor would have a right to say, that he had been imposed upon; that the release had been obtained per fraudem, and was therefore void. But in the case now before this court, there is no one feature of fraud, or deception. There was no understanding between the parties, that all the creditors were to receive only a certain sum, by way of composition, for their respective demands; or that their respective releases should be void. On the contrary, the agreement was absolute and unconditional, that the defendants should be discharged, upon the creditors, who should sign the deed of release, receiving their respective proportions of the trust fund^'indeed, the evidence offered only tended to prove, that the defendants had represented to the witness, that the creditors generally had consented to sign the release, and that he had executed it under that impression. We therefore think, that no deception was practised upon the plaintiff in this case, and that the judgment of the court below ought to be affirmed, j JUDGMENT AFFIRMED.