Finley v. Lynn

Marshall, Ch. J. delivered the opinion of the court as follows, viz. * The plaintiff and defendant had been copartners in trade, and had carried on their business'; in two stores ; the one a jewelry store in the name of Lynn, to be conducted exclusively by, him; the other a hardware store in the name of Finley & Lynn, to be under the joint management of the partners. Previous to the commencement of their partnership, Lynn had contracted a debt to Lemuel Wells & Co. of New-York, for goods ordered for.« jeweliy store carried on by himself, which goods it was mutually agreed to transfer to the new concern, and the debt to Lemuel Wells. & Co. should become a debt chargeable on th^ social fund. In Fenruary, 1805, it was agreed to dissolve the co-partnership; and articles were entered into to take *248 effect on , the first day of March. . The terms' were,. “ that Adam Lynn shallwithdraw all the. property ■put into the joint stock by him, and that be shall have the goods in the jewelry store, and all the debts due to that store, as a compensation in lieu of thfe profits arising from the. whole business; and the said Finley agrees to take, on his own account, the goods in the hardware store, and the . goods which are ordered, in the spring, and to indemnify the said Adam Lynnfropa all claims or demands upon the said' .concern, or which may .arise for goods now ordered, and not yet ' arrived.” On the second oLMárch, a bond of indemnity'wafe> executed, the condition of which, after stating the dis-solution, proceeds thus : On which ' dissolution it was, among other things, agreed that the said Oliver P. Finley .should satisfy and pay all debts and con-' tracts due from, or entered into by, the said copartnership, or either of the said copartners, for of on account of or for the benefit of the said copartnership,- including., certain debts due from the said Adam Lynn for goods-by him ordered^ which have been received by the said copartnership, and also ail debts which may arise,from merchandise hereafter shipped to’the said Concern, in-consequence of any order's heretofore made.- Now the condition of the above obligaticin, is-such, that if the .said . Oliver P. Finley shall -.veil and truly satisfy and' discharge all the,debts <.nd contracts herein before described, so as to indemnify and save .harmless the said Adam Lynn from the payment of the same, andffrom ’ any suit or prosecution in law or equity for or on account, of the said debts and contracts, then this obligation to be void.” Some time- previous to the dissolution, an action-had been brought by Lemuel Wells & .Co. against-' A'dam Lynn for the • recovery .of this ' debt which was then depending. In December, 1806, Adam Lynn, for the first time,, claimed, under the bond of indemnity, the anaount of *249 the. debt to. Lemuel^ Wells & Co* and, payment being refused, instituted a suit on the bond. Supposing that no defence could be made at law, judgment was confessed, with a reservation of all equitable ob« jections to the payment. A bill, was then filed suggest» ing that the bond was executed by mistake, add in the confidence that it was in exact conformity with the articles, and praying that it might be restrained by the articles. Several extrinsic circtimsfances are also detailed and. relied upon as demonstrating that Lynft himself did not suppose, until so informed by counsel, that the bond comprehended this debt. An injunction was granted which, on the coming in of"the answer, was dissolved, and, on a final hearings the bill was dismissed. The answer denies all the allegations of the hill VrhicH go to the. mistake under which the bond was executed; insists that it conforms to the true meaning óf the articles and intent of the parties; and endeavours to explain those extrinsic circumstances on which th©' plaintiff relied. ■ . That a bond, executed in pursuance of articles, may be restrained by those articles, if the departure from them be clearly shown, is, not to be controverted. But in this case, jthe majority of the court is of .Opinion that no such departure is manifested with sufficient clearness to justify .the interposition of a court of equity. . By the articles of copartnership, the de t to Lemuel Wells & Co. was assumed by th.e firm, ©f Finley & Lynn, and was payable out of the partnership fond* It is true that, at law, it did not constitute á demand against the partnership, but the court is jnuch inclined to the opinion, that, had Lynn become insplvent, a suit in equity might have be'en sustained, on this claim, against Finley & Lynn. If it might in equity, though not in law, be a “ claim *250 or demand upon the concern,” there does not appear to be such a repugnancy between the bond and the articles as to induce the court to say that the bond,, which, so far its is shown in this, cause, was executed without imposition, and with a knowledge of its contents, binds the obligors further than they intended to be bound. The extrinsic circumstances relied on are certainly entitled to much consideration; but they, are not thought sufficiently decisive and unequivocal in their character to justify a court Of equity in restraining legal rights acquired under a solemn contract. Though this is the principal object of the bill, it may be understood to contemplate something further. . It prays for a settlement of all accounts, and for general relief. So far as the accounts between the. parties are closed by' the. articles of dissolution, no reason car' be assigned for opening thém. But if rights, growing out of those articles, require a settlement, the plaintiff is entitled to ap account. By a majority of the court it is conceived that if any profits had arisen on the jewelry store, independent of the goods oh hand and of the debts due to the store, the plaintiff is entitled to them.. It is not probable that there are such profits ; but it is very possible that there may be. Large sums of money may have been received, and might either be on hand when the dissolution took place, or have been diverted to various uses. If such be the fact, the majority of the court is of opinion that any fair construction of the articles gives those profits to the plaintiff. The contract is,, that. Adam Lynn shall have “ the goods in the jewelry store, and all the debts due to that store, as a compensation in lien of the profits arising from the whole business. ■' Now the profits of the jewelry store, if any, not existing in debts or goods, were certainly a part of the “ profits of the whole business,” and aré, •consequently ¿ yielded to the plaintiff. That this was the deliberate intention of the defend-. *251 ant, is avowed in his answer. A proposition for a dissolution was, he says, made by him in writing and accepted by the plaintiff. That proposition is, “ that the defendant should have the merchandise in the jewelry store, and the debts due to that, store, as a compensation in lieu of the profits of the whole bus? - ness; that the complainant should hold the merchant dise in the hardware store, and the debts due to it, end■ the profits of the trade Now the profits of the jewelry store are certainly a part of the ^ profits of the trade.” The plaintiff also claims a debt said to be due ftoxa the jewelry store to the hardware store. As all the debts due to the hardware store are obviously assigned to Finley, this debt becomes his property, unless his claim to it is relinquished by the undertaking to pay all debts due from the concern. The words of this undertaking are to be looked for in the condition of his bond. He is to- “ satisfy and pay all debts and contracts due from, or entered into by, the said copartnership, or either of the said copartners,, for or on account of or for the benefit of the said Copartnership.” The terms of this stipulation appear to the court to be applicable to claims upon the copartnership, and not to claims of a part of the company on the other part. He is to satisfy and pay all debts and contracts due fyom, or entered into by, the said copartnership, not to release the claim of one store upon the other. This is a claim which did not exist upon the copartnership, and which grows out of the articles of dissolution. Those articles assign'to the plaintiff ali the profits of the hardware store, as well as the debts due to it. They separate what was before united. They draw the distinction between the hardware and the jewelry store, and make the debt -due to the hardware store a part of the profits of that store. *252 The residue of the condition does not affect tjje question, and need not'be recited. It is, then, the opinion of a majority of the court that, if there was really a debt due from the jewelry store to the hardware store, Finley is entitled to that debt. This is a proper subject for an account. The plaintiff has probably not applied for this account in the court below, and it. does not. appear to be a principal object of his bill. This court, therefore, doubted whether it would be most proper to affirm the -decree dismissing the bill with the addition that it should be without prejudice to any future claim for profits, and for the debt due from one store to the other, or to open the decree and direct the account. The latter was deemed the more equitable course. The decree, therefore, is-to be reversed, and the cause remand* ed, with directions to take an account between the two .stores, and an account of the profits of the jewelry-store, if the same shall be required by the plaintiff. Todd, J. concurred in the opinion of the court that the debt of Wells & Co. was a debt to be paid by Finley, but he differed upon the other part of the case, being of opinion, that the complainant was not entitled to a relief which by his bill he had made a merit of Waiving. • Decree reversed, and the cause remanded, with directions to reinstate the injunction, and take an account, &c. Footnotes [*] Judge Johnson wan absent