author: Robertson, Ch. J. Jones, J.

text:
    Mahlon Mattison and another, in behalf of themselves and all others, &c. plaintiffs and appellants, vs. William P. Demarest et al. defendants and respondents.
    1. The apparent withdrawal of a member of a solvent firm therefrom, and his nominal sale of his interest in its assets to a new firm of the same name, composed of the remaining partners, will not relieve such retiring member from liability for the debts of the new firm, where he secretly retains his interest in the partnership, and shares in its profits, and is only to claim such transaction as a sale, in case of the insolvency of the new firm. An assignment by the latter, for the benefit of their creditors, preferring such retiring partner for the amount of the supposed price of such sale, would be void for preferring the claim of a partner and a fictitious debt. Per .Tones, J.
    2. The acceptances of a new firm, given in payment of the interest of a retiring partner in a previous firm of the same name, in the assets of the latter, sold bona fide to the former, constitute a valid legal claim against such new firm, and may be legally preferred by them afterwards in an asssignmept for the benefit of their creditors, notwithstanding such new firm is composed of the remaining members of the old firm only.
    3. So held in the case of a dissolution of a limited partnership which had been formed in 1858, and the formation of a new general partnership under the same name by the general partners of the former, in 1861, when such new firm bought of the special partner his interest in the assets of the firm for the same amount as the capital contributed by him to such first partnership, and gave him the acceptances of the .new firm therefor, and in sixteen months afterwards, executed an assignment for the benefit of their creditors, preferring such acceptances,
    4. Held also that such assignment was not void as against creditors of the new firm, because such purchase was made of, and notes given to, the special partner in 1861, in the expectation that such new firm would ultimately fail, and with the understanding that in such case, such acceptances should be preferred in an assignment, by such new firm, of their assets.
    6. Held also that although the ultimate failure of such new firm might be expected by both parties at the time of giving such acceptances, as inevitable, an agreement to postpone such failure by the use of the money and assistance of the credit of the retiring partner in the business of the new firm, until the debts of the first firm were paid, was not in itself fraudulent as to any one. Nor would the mere payment or security of the debt due to the retiring partner be fraudulent as to the creditors of such new. firm, notwithstanding such expectation.
    6. Held, further, that even assuming such arrangement to have been a fraud upon those who trusted the new firm, it was not the kind of fraud which made an assignment void under the statute against fraudulent transfers of property.
    7. The mere omission of a debt from a schedule of creditors annexed to an assignment for the benefit of creditors will not vitiate the assignment per se, especially where the debt is included in a general description,
    (Before Bobektson, Ch. X, and McCunn and Jones, JJ.)
    Heard March 13, 1866;
    decided- 1866.
    This action was brought to set aside an assessment executed by the -defendants, Demarest and Middleton, composing the firm of “ Demarest & Middleton,” to the defendant, Powers, for the benefit of the creditors of such firm, wherein the defendant, Smith, is preferred. The plaintiffs were judgment creditors of such firm, and brought this action in behalf of themselves and all others similarly situated who might elect to come in and contribute to its expenses.
    In August, 1858, the defendants, Demarest, Middleton and Smith, formed a limited partnership, as dealers in leather and findings, under the name of “ Demarest & Middleton.” The first two were general partners, and the third a special partner, contributing tiiQ sum of ten thousand dollars, as capital. The necessary documents to legalize such partnership were filed. It continued until July, 1861, when it was agreed to be dissolved. The defendants, Demarest and Middleton, then formed a new general partnership, to carry on a similar business under the same name.. The new firm purchased of the defendant,' Smith, his interest in the assets of the old' firm, and gave him therefor their drafts, signed by the defendant, Demarest, with - the firm name, for twelve hundred and fifty dollars each, payable, with interest, at various periods, from fifteen to one hundred and twenty days after sight. Such partnership continued until October, 1862, when its members executed an assignment of all their property to the defendant, Powers, in trust, to pay their creditors, who were divided into three classes, in a certain order. The first included the defendant, Smith, (whose debt was described to be for “ cash loaned/’) and others, (whose debts amounted to four thousand dollars,) and the last, all partnership debts.
    In December, 1862, the plaintiff's recovered judgment in this court against the defendants, Demarest and Middleton, for nearly three hundred dollars, ($295.50,) on which execution was duly issued, and returned unsatisfied. Such judgment, as well as some others recovered by other creditors against the same defendants, (amounting to nearly' fourteen thousand dollars,) were obtained upon debts contracted before the making of such assignment.
    The complaint, in this action, set forth the recovery of such judgment by the plaintiffs, and the return of the execution unsatisfied, but did not state absolutely the time when the debt was contracted, upon which it was recovered, but only its priority to such assignment. It also stated the execution of the assignment to the defendant, Powers, of which a copy was annexed, and the filing of an inventory by him in > November, 1862, by which the value of the assigned property appeared to be about twenty thousand dollars, and the amount of debts to be over seventy-two thousand dollars.
    The' complaint then proceeded to charge that such assignment was made by the assignors and accepted by the assignees, with intent to hinder and defraud the creditors of the former. That such assignors and the defendant, Smith, claimed to have formed the limited partnership before mentioned, and dissolved it, when it was insolvent, as a device to save such contribution to the capital by Smith, as special partner, and protect him against any liability in such business. That such acceptances were given to further such scheme, and not “ for cash loaned,” as stated in such assignment. That the defendants, Demarest and Middleton, fraudulently omitted from the list of debts in the inventory filed, a certain one due to a firm in England, (John and Samuel Thorp,) for the sum of eight hundred dollars, and that the defendants, Demarest and Middleton, did not deliver over all their property to the assignee.
    The complaint also, after setting out the formation of the general partnership of Demarest & Middleton, charged that such partnership assumed, without any consideration, the liabilities of the prior limited partnership, amounting to forty thousand dollars, which they paid out of the avails of property acquired by such new firm, for which a large portion of the debts due from the latter, at the time of such assignment, were contracted, That it was fraudulently arranged between the members of such limited partnership, when they pretended to dissolve it, to form a new firm, whose liability should be substituted for that of such limited partnership for the debts of the latter.; and that such new firm should continue long enough in business to pay the debt thus assumed, and give an appearance of good faith to.the transaction; that the defendant, Smith, i( should assist it with his money and credit” for that purpose, and that after fully paying or securing him, “ it should ultimately fail, as it was known it must,” and that from such arrangement arose the assignment and the preference in it of the debts due to Smith.
    The complaint further averred, that the principal part of the property transferred by such assignment was acquired by the defendants, Demarest and Middleton, after the alleged dissolution of such limited partnership. That the defendant, Powers, had been mainly controlled in the discharge of his duties by the defendant Smith; was selected as assignee by him, and that the terms .of such assignment were dictated by him in pursuance of such fraudulent agreement. That the defendant Powers had collected ten thousand dollars in money out of such assigned assets, eight thousand whereof he had paid to the defendant Smith. That he had in his possession two thousand dollars in money belonging to such trust fund, and nine thousand dollars worth of personal property assigned.
    The complaint further averred, that the defendant, Smith, recovered a judgment upon the acceptances, before mentioned, against the defendants, Middleton and Demarest, prior to any others; that judgments exceeding twenty-two thousand five hundred dollars had been recovered against the same parties, who owed other creditors about fourteen thousand dollars. All of which creditors Intended to come into this action and be made parties.
    The relief demanded by the complaint was as follows : To vacate such assignment, and declare it to have been fraudulently made as against the plaintiffs, and all judgment creditors of Demarest and Middleton, who came in as such in this action. Also to have an account by the defendant Powers of all the property of such firm in his hands; and make him personally responsible to the extent of all moneys received by him under such assignment.' Also to compel the restoration by the defendant Smith, of the eight thousand dollars paid him, and make him personally responsible for the full value of all the assigned property. Also to set aside the judgment in his favor, or postpone it as a lien to the claims of the plaintiffs ; and to compel a transfer by the defendants Powers and Smith of any assigned property remaining in their hands to a receiver. Also to enjoin the defendant Powers from acting, and appoint a receiver. The answer of the defendants Powers and Smith, controverted the charges of fraud contained in the complaint, and the facts alleged specifically therein, to sustain the same. The answer of the defendant Smith alleged, further, that printed notices of the dissolution of the limited partnership, and the formation of the new general partnership mentioned in the complaint, were served on the plaintiffs in July, 1861, and that the debt for which the plaintiffs recovered judgment was contracted in May, 1862, payable in six months thereafter. It also averred that such defendant received the drafts mentioned in the complaint, for the sum originally contributed by him to the capital of such limited partnership. It does not appear by the case, whether the defendants Demarest and Middleton were ever served with a summons, or appeared in the action.
    . The issues made in this action were tried before a justice of this court, without a jury. The facts found by the decision of the court were: (1.) That the plaintiffs recovered the judgment mentioned in the complaint, upon a debt contracted before the 20th of October, 1862, and issued an execution which was returned unsatisfied, as therein stated. (2.) That the defendants Demarest and Middleton executed the assignment, a copy whereof was annexed to the complaint, and the defendant Powers took into his possession property so assigned. (3.) That the defendants Demarest, Middleton and Smith formed the limited partnership stated in the pleadings ; (to the capital whereof the defendant Smith contributed and paid the sum of ten thousand dollars ;) and dissolved the same in July, 1861, by the withdrawal of Smith and the sale of his interest in the partnership to the other partners for f>10,000; for which he took the draft mentioned in the pleadings, and preferred in the assignment, on .which dissolution the defendants Demarest and Middleton formed the new general partnership mentioned in the pleadings, which continued until October, 1862. (4.) That the defendants Demarest and Middleton fully and fairly made over their property, under such assignment to the defendant Powers, who took possession of the same. (5.) That the defendant Powers was not selected as assignee by the .defendant Smith, nor did the latter dictate the terms of such assignment, nor was there either any fraudulent combination on the part of the defendant Powers with any of the other defendants, or any control over him in the discharge of his duties as assignee, by the defendant Smith. (6.) That the sum secured by such before mentioned acceptances was a valid and subsisting debt due and owing from the defendants Demarest and Middleton to the defendant Smith at the time of the execution, by them, of the before mentioned assignment, and that such assignment was not made with intent to hinder, delay or defraud either the plaintiffs or any other creditors of the assignors.
    Judgment was given of dismissal of the complaint, in favor of the defendants Powers and Smith, and against the plaintiffs, from which this appeal was taken. No disposition was made of thQ defendants Demarest and Middleton, as parties to the action, by any judgment.

      J. Graham, for the plaintiffs, appellants.

      O. B. Smith, for the defendants, respondents.
   Robertson, Ch. J.

It is not claimed, in this case, that the making or conducting of the limited partnership entered into by the defendants, Demarest, Middleton and Smith, formed originally a part of any fraudulent scheme to defraud the plaintiff, of which the assignment assailed in this action was the completion. Nor does the complaint deny that the proper legal steps were taken to dissolve such partnership, or that, upon its dissolution, the general partners assumed a liability to the defendant Smith, for the sum of $10,000, either as a restoration of the capital contributed by him, or the consideration for the purchase of his interest in the assets of such firm. Nor is it pretended either that such" sum was not originally paid in by Smith, or that the transaction between him and the general partners, in which their drafts for such sum were given, would not have been perfectly fair, provided no general partnership had been formed. Nor that the defendant Smith was a party to any transaction to prejudice those who were creditors of the limited partnership at the time of its supposed dissolution. Although, even if he had been, no one but such creditors could complain of it. (Lachaise v. Marks, 4 E. D. Smith, 610.) Nor do I understand that the plaintiffs go so far as Seriously to contend that, so far as they were concerned, the limited partnership, in consequence of a failure to dissolve it, or from any other cause, so continued in law to the time of incurring the liability to them for which they obtained judgment, as to make it a debt of the limited and not the general partnership, and even down to the time of executing the assignment in controversy, so as to make it void as to any assets assigned as being the property of such continued limited partnership. On the contrary, the creation of the new partnership, the substitution of the liability of the new firm for that of the limited partnership, for the debts of the latter, and the continuance of such firm in business long enough to pay the debt 'so assuihed, and give the transaction an appearance of good faith, and its ultimate failure, after, paying or securing the defendant Smith, are made, in the complaint, part of a scheme to defraud somebody, although it is not stated who that was. The principal part of the property, however, transferred by such assignment, is also alleged, in such complaint, to have been acquired by the defendants Demarest and Middleton after the time of the supposed dissolution, and it is made a matter of complaint therein that a very large proportion of the debts, owing- (query, by whom ?) at the time of the assignment, 'was contracted for property acquired “ in the firm name,” the avails of which were applied to pay the debts of what the defendants claim- to have been a distinct and different business. These allegations would have been all immaterial if the plaintiff's were, (as they do not claim in their complaint themselves to have been,) creditors of a limited partnership, who had executed an assignment, void by reason of its preference of creditors, and securing a special partner.

Any liability of the defendant Smith to the plaintiffs; as a general partner or otherwise, for the debt on which they have obtained judgment, ¡(if he has made himself so,) is immaterial, -both because the plaintiffs -have waived such liability, by taking a judgment against Demarest and Middleton alone, and such fact has no possible bearing upon the question of fraudulent intent or illegality of the assignment. That instrument would not be fraudulent, as against creditors merely, because the defendants Smith, Demarest and Middleton, combined to procure from the plaintiffs, or any other person, property wherewith to obtain the means of discharging liabilities of the limited partnership, and securing to the defendant Smith the payment of the amount for which he relinquished his interest in the assets of such partnership. Such a combination might, under some circumstances, afford good grounds for making Smith personally liable for the value of such property, or have enabled the plaintiffs to maintain an action for its restoration. But the title to such property is vested in the assignee by the action for the price, while any claim against the defendant Smith is merged in the judgment against the other two. Besides, the plaintiffs have waived all objections to such assignment, upon any grounds peculiar to themselves, by commencing this action on behalf of themselves and. all other judgment creditors ; not even setting out what the nature of the debt was for which they obtained judgment.

It is insisted, however, that the assignment in question is void, by reason of the preference of the claim of the defendant Smith. Not because it was simulated, or was not justly due, since that was not asserted in the complaint, or sustained by any evidence, but because Demarest and Middleton, being general partners, and already liable for the debts of the limited partnership, agreed with Smith to substitute for such debts the liability of the' new general partnership then formed by them, keeping up the business of such new firm only long enough to pay such debts, and acquire an appearance of good faith, but with the understanding or expectation that it must and should ultimately fail, after having fully paid or secured Smith, and executed the assignment in question, in pursuance of such plan.

It is very plain that Demarest and Middleton would not, even if they succeeded in such plan of substituting the responsibility of a new general partnership for that of the limited one, change or shift any personal liability of their own thereby. They could only relieve, by such substitution, the assets of the former firm from the liability to be applied specifically to the payment of its debts, and distributed equally among its creditors, (Innes v. Lansing, 7 Paige, 583,) and, of course, not until those very creditors acceded to such substitution. For any fraud in accomplishing that, only such creditors would have a right to complain. The defendant Smith could derive no advantage from such substitution, after he had relinquished all his interest in the assets of the old firm, as there is no allegation in the pleadings, or pretense, of any conduct or omission of his which would render him liable, as a general partner, for any debts of the limited partnership, even if the plaintiffs were its creditors. The expected ultimate, failure of such new firm is alleged, in the complaint, to have been known to the parties to be an inevitable necessity. Any arrangement, therefore, to produce it would be useless. An agreement to postpone such failure until the debts of the old firm were paid, by the assistance of the money and credit of the defendant Smith, was certainly not fraudulent by itsélf, nor would the mere payment or security of the debt due to him be, as he was equally entitled thereto with any other creditor. There is no allegation in the complaint, or evidence; of any understanding, that the defendants Demarest and Middleton should employ any fraudulent means to bring about the change of liability. The whole arrangement, therefore, to which the term “fraudulent” is applied in the complaint," consisted' of an agreement to procure previous creditors to relinquish their specific claims to the assets of the prior firm, to pay off such creditors by means legally obtained from their new business, and to secure the defendant before a failure happened, which was considered inevitable.

But, even assuming that the whole of such arrangement was fraudulent, as regarded some one, to wit, such as trusted the new firm, that was not the kind of fraud which would make such assignment void under the statute of frauds. That statute (2 R. S. 137, § 1,) only makes vicious assignments void against the parties hindered, delayed, or defrauded. There is no allegation or pretense that the plaintiffs were so, by any fraud, except a change of liabilities. Besides, the only vice which it declares avoids them, is an intent to hinder and defraud persons of suits, damages, forfeitures, debts or demands. The mere preference of a lawful debt is held not to do so. If the preference had been given in consequence even ■ of an additional illegal act agreed to be done by a lawful bona fide creditor, provided it was not one tending to hinder or defraud other creditors, it would not, I apprehend, render such instrument void under the statute of frauds, although, possibly, it might defeat the right of such creditor to claim the benefit of such assignment. The only illegality which avoids such an assignment, under that statute, is that which makes, or endeavors to make, it the instrument of defeating or delaying the collection of debts by due course of law.

The evidence in the case, however, of any fact tending to make out fraud of any kind, was very conflicting. And, although there is no express finding upon any question of fraud or fraudulent intent, except against a fraudulent combination or agreement, at any time, on the part of the defendant Powers with any of the other defendants in regard to such assignment, it must be presumed, if necessary in order to sustain the judgment, that the opinion of the court was adverse to the plaintiffs upon the proof of fraud, and such finding is not to be disturbed on appeal. (Ball v. Loomis, 29 N. Y. Rep. 412.)

An attempt was made on the trial to establish that the debt to the defendant Smith, secured in the assignment, was due from the defendant Middleton alone. But the acceptances given for it were signed by Demarest with the firm’s name • they were given for Smith’s interest in the assets of the old firm, which were brought into the new, as its capital. Besides, the testimony as to its being the separate debt of Middleton was contradicted. There is no ground for interfering with the judgment on that ground. It was assumed in the argument on behalf of the plaintiff, that all the steps for the legal dissolution of the limited partnership were not completed until September, 1861, apparently on the ground that the defendant Smith admitted in his answer that the proofs of publication of the notice of dissolution were not filed until- that time, but that was not rendered necessary by the statute, provided such notice had been duly filed, recorded and published. (1 R. S. 767, § 24, 5th ed.) The date at the foot of the published notice (September, 1865,) was evidently a clerical error, and there is no direct evidence what the last day was on which such notice of dissolution was published; most probably it was at the end of July, 1861. It does not appear that any business was transacted by, or on behalf ofj such limited partnership, after the filing of such notice, and therefore Smith could not become a general partner as to any one. Eo force of legal fiction can convert creditors of the general partnership of Demarest and Middleton, consisting of them alone, into creditors of the prior limited partnership, so as to prevent the former from making a preferential assignment.

The omission from the inventory of the debt due to Messrs. Thorp, must be presumed to have been done innocently; indeed, there is no evidence of fraud, except the omission itself, and the statute does not avoid an assignment for such omission. It was not omitted from the assignment, since that does not profess to give the names of all creditors, while it provides in general terms for the payment of all the debts of the firm. The covenant in the assignment, by the assignee, to execute the trusts “ to the best of his skill, knowledge and ability,” if below the legal standard of his duty, is merely supererogatory and harmless. He is bound, notwithstanding, by such standard, and there is no exemption of- him therefrom in the assignment.

The question put to the defendant Middleton, as to the object of the defendant Smith in becoming a special partner, was not only immaterial to any issue in the action, hut was in an improper form. He could only testify as to some act or expression of Smith, showing his object, and not give his own general inference. Besides, no foundation was laid by showing that he had the necessary knowledge of such object. The general partnership agreement was properly admitted in evidence on the certificate of the notary public. The statute of 1833, (ch. 271, § 9,) gives to every instrument (except certain ones) proved or acknowledged in the manner provided for taking proof or acknowledgment of conveyances of real estate,'the same effect as if it were such a conveyance. And a conveyance certified to have been proved by a subscribing witness, before a proper officer, may be read in evidence. (1 R. S. 759, §§ 16, 17, 1st ed.)

I do not find any errors in the admission or exclusion of testimony, or the principles of law applied. The judgment must, therefore, be affirmed, with costs.

McCunn, J, concurred.

Jones, J.

From the frame of the complaint, and the allegations therein contained, I am of opinion that the validity of the assignment is attacked on fpur grounds only.

1st. A fraudulent and intentional omission from the list of creditors, and from the inventory filed under the act of April 13, 1860, of a debt due an English creditor.

2d. That the property of the judgment debtors has not been fully and fairly made over under the assignment, and has not been fully and fairly specified in the inventory filed as aforesaid, and has not been all. surrendered to, or taken possession of, by the assignee.

3d. That the assignee was selected by the defendant Smith ; that the terms and provisions of the assignment were dictated by said Smith; and that the assignee ha,s been mainly controlled in the discharge of his duties by said Smith.

4th. That the defendant Smith was preferred in the assignment, for a fictitious debt, averring that he had been engaged in business with the defendants Demarest and Middleton, and had put in as his capital $10,000; that such business was disastrous, and the assets, of the business, including the $10,000, were insufficient to pay the debts. That in this position of affairs an arrangement was made whereby the firm was to pay to Smith this $10,000, although not indebted to him therefor. That the scheme was that Smith should retire from the business, and sell out his worthless interest to the other two for $10,000, and those two should continue the business as a firm, and give their notes to Smith for the $10,000. That this was done, and the notes given, and that these notes constitute the claim for which he is preferred.

As to the first ground of objection, it is clear that the debt in question is omitted from the schedule of creditors and the inventory. Such omission, unless fraudulently done, will not vitiate an assignment, especially where the debt is included in the general language of the assignment itself. In this case, there is no evidence that the omission was fraudulent.

As to the second objection, the judge who tried the action has found against it as a matter of fact, and his finding is supported by the evidence.

As to the third objection, the same remarks apply as are applicable to the second.

As to the fourth objection, the gist of it is that the debt to Smith was a fictitious one. If it was a good, valid and existing debt, the objection falls to the ground. The judge below found that the debt was a good, valid and existing one. I see no reason for disturbing this finding. One member of a solvent firm may retire from the firm, and sell out his interest to the remaining partners, and the sum agreed to be paid for his interest will constitute a fair and valid debt against the remaining partners, provided the transaction is in good faith. I think the evidence sustains the conclusion, to which' the judge, in finding the debt to be fair and honest, must have come, that the special partnership was solvent at the time of the sale of Smith’s interest, and that such sale and his retirement were bona fide.

Of course, if the vendor, notwithstanding the form of a sale is still secretly to retain his interest in the firm, share the profits thereof, if any, and only to rely on the sale in case of insolvency, then the sale would be merely colorable, and such vendor would remain liable as a partner, and an assignment preferring his claim for the amount of the sale would be invalid, both as preferring a fictitious debt and as preferring the debt of a partner. The judge below, in finding that the debt was fair and honest has necessarily found that the sale in question was not of such colorable character, and I think the evidence sufficient to sustain the finding.

There are many allegations in the complaint, and much proof of a scheme to defraud creditors, subsequent to the sale by, and retirement of Smith, by obtaining goods on credit, with the design of paying the debts for which Smith was liable, and also the notes given to him with the proceeds of such goods, and after such payment, of failing, leaving no, or but little assets to pay such subsequent creditors. This scheme of fraud might perhaps enable the subsequent creditors to replevy their goods, or to arrest the parties concerned in it, or to sue Smith for the price of their goods ; but it does not affect the validity of the assignment.

There is one view, however, in which this scheme would have a bearing on this case, and that is as tending to show that the sale by Smith was not bona fide. The judge, in finding that sale to be bona fide, necessarily finds against any facts tending to show that it was not bona fide, and I cannot say that his finding is against the weight of evidence.

The plaintiff, however, contends that the assignment is void on the following grounds :

1st. That the limited partnership not having been validly formed, Smith became a general partner, and .that such general partnership was never validly dissolved, and consequently preferring him, was preferring a debt of the partnership.

2d. That the limited partnership was validly formed, but by reason of certain informalities in the proceedings for its dissolution, Smith became a general partner, with the same result as stated in the first proposition.

With respect to these two propositions, they rest on the basis that where a partnership exists between two or more, such partnership cannot inter sese prefer one of the partners' for a debt due him by the firm ; and it is contended that Smith having become a general partner remains such until a dissolution, and that the partnership has never been dissolved.

A general partnership may be dissolved by mutual consent of the co-partnership. It is not necessary that there should be any writing or formality about it, nor is notice to the world or to dealers necessary. If notice is not given, all the partners still remain liable as partners for an indebtedness subsequently contracted by one of them. This liability, however, does not constitute them partners inter sese. The existence of such liability has no bearing on the right and power of one partner of a solvent firm to retire bona fide from the firm, and on such retirement, to sell his interest to the remaining partners, and take their notes in payment, which will constitute a valid claim against the remaining partners, and can be legally preferred by them in an assignment made by them.

Considering the connection between Smith, Demarest and Middleton to be that of a general partnership, I am at a loss to perceive why under the evidence it was not properly dissolved.

The proceedings taken to dissolve it under the statute relative to limited partnerships can, if it never was a limited partnership, have no effect. They were merely supererogatory. The dissolution was consummated by the act of Smith retiring with the consent of the other partners, selling his interest to the new firm and receiving his pay.

The idea is shadowed forth, however, that the limited part-ship was validly formed, that consequently under the statute the sale of Smith’s interest turned it into a general partnership, and that the result of this is that the same act which created the general partnership cannot be said to dissolve it, and that having become a general partnership it cannot be dissolved as a limited one under the statute relative to such partnership.

I think the idea is erroneous.

The 12th section provides that Every alteration which shall be made * * * * in the capital or shares contributed, held or owned by any of the special partners and the death of any partner, whether general or special, shall be deemed a dissolution of the partnership unless ® * ® * and every such partnership which shall be carried on after such alteration shall have been made or such death shall have occurred shall be deemed a general partnership in respect to all business transacted after such alteration or death, except * * ® ®.”

By this section such alteration or such death ipso facto dissolves the limited partnership, and, if the business is thereafter carried on, the partnership becomes a general one as to such business.

After it becomes a general partnership, the provisions of the act which are intended to prescribe the powers and duties of, and to place restraints on, a limited partnership cease to be applicable, and it becomes possessed of all the powers, rights, privileges and incidents, and subject to all the duties and liabilities of a general partnership, formed in the ordinary way. It follows that the members of a general partnership created by the statute can in the same manner as a general partnership formed in the ordinary way, at any time, dissolve the partnership by mutual consent without notice to its dealers or the world ; the only effect of not giving notice being as has been hereinbefore stated.

This then being the right and power of partners in a general partnership, I see no reason why when the matters, which •dissolve the limited and raise a general partnership under the statute, consist of an agreement between the partners whereby one withdraws entirely from business connection with the others and sells out his interest to them, and of acts done in carrying out such agreement, those very matters should not operate eo instanti the raising of the general partnership to dissolve it. '

The effect of this doctrine is to make general partners only those members of the special partnership who continue to be interested in the business, after an act which, under the statute, amounts to a dissolution of the special partnership, with a liability on the withdrawing members to be charged as if they were general partners, at the instance of such persons who, being former dealers with the firm, have had no actual notice of the withdrawal, and of such persons who, not having been former dealers, have had no constructive notice.

Under this construction of section 12, conceding that under the facts of this case a general partnership was created under the act, yet it was immediately dissolved by the withdrawal of Smith and the organization of a new firm ; and the purchase by that new firm, at the time of the dissolution, of Smith's ■ interest was valid and the obligations given by the new firm for the purchase money constituted a valid and just debt.

If, notwithstanding the dissolution of a limited partnership under section 12, the limited partnership still continues for some purposes, yet it may be put an end to for all purposes by the filing and publication of a notice under section 24.

From the tenor of this section it seems to me that partners in a limited partnership may at any time dissolve it inter sese, but that the notice must be filed and published and the term for the publication have been completed before the dissolution takes effect as to third persons. The fact that there was a dissolution inter sese prior to the filing of the notice, does not vitiate the effect of such notice. On the contrary there must be such a dissolution before notice, if it can be given. It results from this that only those who become creditors prior to the expiration of the term of publication can claim that the firm still retains its impress of a limited-partnership and is subject to the provisions of the act, and those creditors, only, can attack the acts of the partners as being contrary to such provisions.

In the present case, if notwithstanding the acts of the partners, the limited partnership continued for any purpose, yet, by the filing and publication of the notice, it wholly ceased for all purposes at least as early as September 7,1861.

The plaintiffs not having become creditors prior to September 7, 1861, cannot attack any of the acts of the partners as being contrary to the provisions of the act relative to limited partnerships.

What rights a person who became a creditor prior to September 7, 1861, would, under the circumstances of this case have, is not a matter for discussion or decision in this case.

The plaintiff’s counsel makes this further point, that the dissolution of the limited partnership and the ultimate assignment by the general partnership were intended to prefer Smith and secure him his 010,000, as special partner, at the expense of creditors, and that consequently they are inimical to the-provisions of the Revised Statutes relative to limited partnerships.

There are two answers to this: 1st. The plaintiffs never became creditors of the limited partnership, and therefore cannot invoke in their favor the provisions of the statute. 2d, As matter of fact, the dissolution of the limited partnership was not intended to prefer and secure Smith his 010,000 at the expense of creditors of that partnership.

With reference to the 1st, 2d and 8th points of the plaintiffs, I fully concur in the views expressed by Chief Justice Robertson.

I am of opinion that the judgment should be affirmed, with costs.


source: Caselaw Access Project

author: McCunn, J.

license: Public Domain

text:
    James Fraser et al. plaintiffs, vs. Henry Harbeck et al. defendants.
    1. A contract for the sale of a certain number of Buenos Ayres dry hides " to arrive by vessel, or vessels, within 'sixty days from date,” is not confined to those arriving by the vendor’s vessels, only, but includes any hides of the kind described arriving Within the time limited, by any vessels.
    2. And the purchaser, upon proving that hides of the description and number specified had arrived in vessels from Buenos Ayres, within the sixty days, and were for sale in open market in New York, is entitled to recover damages for a breach of the agreement,
    (Before McCunn and Jones, JJ.)
    Heard March 6,1868;
    decided February 15, 1867.

      Owen, Gray & Owen, for the plaintiffs.

      Platt, Gerard & Buclcley, for the defendants.
   By the Coubt,

McCunn, J.

The action was brought on the following contract:

Sold to Messrs. Thomas Fraser Bro. & Co. for acc. of Messrs. Harbeck & Halsey, 3000 Buenos Ayres dry hides, to arrive by vessel, or vessels, within sixty days from date. Hides to average not less than 21-| pounds, at 28-|- cents per lb. cash, usual selection; culls two-third price; hides to be of usual good quality, Palin & Hunt, Brokers.

Hew York, January 30th, 1864.”

The plaintiffs proved that within the sixty days named in the contract, more than 3000 hides, of the weight and description specified, arrived in vessels from Buenos Ayres, and were for sale in open market in Hew York. They also proved their damages, and their readiness to pay for the hides.

The defendants answered, and endeavored to prove that the hides, which arrived within the time specified in the contract, did not arrive to them, and that the contract was, therefore, at an end,

So that the. sole question in the case is, whether the words in the contract to arrive by vessel, or vessels, within sixty days from date,” meant to arrive by the defendants’ vessels, or meant to arrive by any vessel, or vessels, in our market.

I am clearly of opinion, that the true construction of the contract wa's, hides to arrive by any vessel, or vessels, and that the court was correct in directing a verdict for the plaintiffs.

The only condition in the contract is, that the hides, of the quantity and description named, should arrive within sixty days. This condition was performed. There is no color for adding the further condition, that the hides which might so arrive, should be consigned to or be the property of the defendants. Such a condition would leave it entirely optional with a vendor whether he would perform or not; if the price declined below the contract price, he would become the owner of the goods so arriving, and tender them under the contract; if they advanced in price, he would let the contract fail.

In a contract for the sale and delivery, in future, of a specified article, identified as being in a particular ship, the words “ to arrive,” or “ on arrival,” have been held to mean, provided the vessel arrive; or provided it arrive within the time fixed; or provided it arrive with goods on board of the quantity and description called ■ for. (Shields v. Pettie, 4 Comst. 122. Johnson v. Macdonald, 9 M. & W. 600.) But in no case has a contract been construed to mean “ provided the vendor be the owner of the goods so arriving.”

In the following cases, the court expressly refused to imply such a condition: Fischel v. Scott, 15 Com. B. 80 E. C. L. Rep. 69. Hale v. Rawson, 4 Com. B. N. S. 93 E. L. C. Rep. 85.

If the defendants, in this case, made with the plaintiffs a reckless contract, that is no reason why they should not be strictly held to the consequences.

The sale in question- was not of a definite identified parcel, but of a quantity deliverable, taken indiscriminately, out of any importation for two months ; and the contract should be construed as an undertaking, on the part of the defendants, that the hides should arrive. Such was held to be the rule of law in the case of Havemeyer v. Cunningham, (35 Barb. 515.)

But even if the case last cited does not fully apply to the facts in this case, there is no reason why we should not read and construe this contract as all other similar contracts should be read and disposed of, by taking a broad and comprehensive view of the facts, and this should be done without any reference to prior adjudications.

The contract herein says, that the plaintiffs bought from the defendants “ hides to arrive by vessel, or vessels, within sixty days from the date thereof.” It does not say in the defendants’ vessels, or to their order, but hides to arrive in vessel, or vessels, meaning, as I hold, to arrive by any vessel, or vessels, to this market. If the contracting parties meant the defendants’ vessels, or to their specific order, they could easily have said so ; and in the absence of their so doing, it is fair and just to' presume they did not mean their own vessels, but meant any hides of the description specified in the contract to arrive within the time limited by any vessel, or vessels. It strikes me, this is the plain common sense view, as well as the correct view in law.

I am clearly of opinion, that judgment should be rendered in favor of the defendants upon the verdict.


author: G-arvih, J.

text:
    The Hope Mutual Life Insurance Company, plaintiffs and respondents, vs. Dennis Perkins, defendant and appellant.
    1. The maker of a contract, in the form of a promissory note, by which he agreed to pay to an insurance company a certain sum of money, or such assessments on the same as the trustees of such company should find it necessary to make to pay their losses, according to the terms of his subscription to a guaranty fund of such company, by which the subscribers to such fund agreed to contribute thereto'for the indemnity of persons insured by such company, as a security, in addition to expected profits, by their promissory notes, to be held by the company for the sole purpose of paying losses, and be resorted to for any deficiency by a pro rata assessment, is liable to such company for the amount of such note; where it was authorized by its charter to receive notes and other securities in advance for premiums of persons intending to receive its policies, and negotiate the same only for the purpose of paying claims against it, and the persons giving such notes or securities were, by another statute, entitled to receive six per cent thereon, in addition to any other profits ; and the maker of such note had received profits thereon, and been credited with the interest on it, for premiums, all other funds of the company having been exhausted, and the company became insolvent.
    2. Even if such note had not, by its terms and that of the agreement for the guaranty fund, been one strictly answering the description of those mentioned in the charter, it sufficiently approached their nature, and being, upon sufficient consideration by the mutual obligation of the parties to such agreement, wss so far a part of a valid agreement to carry out the purposes of the incorporation of such company, as to entitle it as trustee for all who should contract with it on the 'faith of such fund, to sue in its own name, and recover the amount due on such note; in order to pay its losses.
    3. There is no substantial difference between such a note and those authorized by the charter. The power of negotiating the notes was equivalent to that of calling upon the makers for payment, and was merely an indirect mode of doing the same thing.
    (Before Robertson, Oh. J., Monem. and Garvin, JJ.)
    Heard May 18,1866;
    decided February 15,1867.

      - This was an action brought by the plaintiffs, an incorporated insurance company, against the defendant, upon his promissory note for $2500, payable to the plaintiffs, or their order, in twelve months after date, or sooner if required, or such assessments on the same as the trustees of such company should require to pay losses, according to the terms of his subscription to the guaranty fund, to be presently described.
    The plaintiffs were incorporated by the general assembly of the state of Connecticut, with the powers of such companies, at the May session, 1846, located at Stamford, and organized and put in operation about the 1st of September, 1846, in conformity with the provisions of its charter. The defendant was elected and acted as one of its trustees. The plaintiffs commenced business as a mutual life insurance company, both at Stamford, in Connecticut, and in the city of New York. The eighth section of the charter provides that the company may, during the first two years after the passage of the act, receive notes and other securities in advance for premiums of persons intending to receive its policies, and negotiate the same only for the purpose of paying claims against it in the course of its dealings, upon such terms and conditions as may be provided for by the by-laws of the company. By section 13 of Private Laws of Connecticut (vol. 3, pp. 684, 685,) it is provided that persons giving such securities may be allowed therefor, not exceeding six per cent, in addition to any other profits they may be entitled to as members of the company.
    • In March, 1847, the board of trustees passsed a resolution declaring it was desirable to raise a guaranty fund of from $15,000 to $50,000, upon such terms and conditions as were not at variance with the charter, &c. and authorized the executive officers to receive subscriptions for the same, and with the advice of the supervisory committee to accept such as they should approve, and providing that no policies should issue until such subscriptions were obtained, with other securities approved and actually received, to the amount of $15,000. Such a subscription was made and subscribed, in which it was provided that the sum subscribed by each was to be put in- a note; that the plaintiffs should hold such note for the sole purpose of paying losses accruing upon policies of the company after the other funds in their hands had been first applied; notes to he assessed for amount required ; and subscribers to be entitled to an allowance of six per cent per annum, so long as said company should hold the same. When the company should have acquired a surplus of $25,000 out of the profits of the business, then the indemnity to cease, and the notes be returned to the makers thereof, the subscribers to be allowed, in lieu of a return, to take up the amount of their notes in premiums, if so disposed. The defendant subscribed $2500, and other persons with him subscribed other sums, amounting in all to about $25,000, by citizens of New York and Stamford, Connecticut. The defendant gave his note for the sum subscribed by him, dated May 1, 1847, and delivered it to the plaintiffs, promising to pay to the plaintiffs’ order, in twelve months after date, or sooner if required, $2500, or such assessments on the same as the trustees should find it necessary to impose, to pay losses, agreeably to the terms of his subscription, to the guaranty fund, dated April 19, 1847, for value received. The other subscribers executed and delivered their notes, and the notes of the defendant and others were held by the company as a fund or security for any deficiency arising upon losses on policies issued by the plaintiffs, after all other funds of said company should havefbeen exhausted.
    These notes were so held until the insolvency of the company, in 1854, when they were transferred to the receiver.
    The existence of this fund, for the greater security of parties insuring with it, was announced in the newspapers, one in the city of New York, and one in the state of Connecticut; reported to the legislature of the state of Connecticut, and advertized in pamphlets in 1847 and 1849. The defendant received a per centage on this note, and had the interest credited to him for premium upon his policy ; thus recognizing the note.
    The board of trustees, at a regular quarterly meeting, on the 2d of May, 1853, assessed the full amount of all the premium notes.

      On the 22d of May, 1854, it was found that the company was entirely insolvent; that all the assets and resources of the company had been exhausted, except the guaranty fund ; that for acknowledged losses upon policies, the company owed over $14,000 ; for losses not adjusted, over $8000. The trustees levied an assessment of seventy-five cents on the dollar upon the notes, to meet the losses on policies of insurance and interest. A receiver was duly appointed, of all the effects of said company, with power to sue for, and collect the notes and claims of said company, and entered upon the performance of his duty, gave the defendant notice of the assessment, and demanded payment, and the defendant refused to pay. Other facts appear, in the opinion of the court, upon the trial of the issues in this case.
    The jury, under the direction of the court, found a verdict for the plaintiffs, and judgment was entered thereon, from which the defendant appealed.

      A. H. Dana, for the appellant.

      Cephas Brainard, for the respondent.
   By the Court,

G-arvih, J.

The defendant seeks to reverse the judgment in this case, for several reasons ; among others, that the note was void, because not authorized by the charter. The 8th section of the charter certainly authorizes the giving of notes for the better security of its dealers, and points out to whom such notes may be given, in addition to the object and design, by those intending to receive its policies, of which this defendant was one. The company was certainly duly organized, and thus became capable of acting as a party to such an arrangement. If, then, the company were a corporation, they had the ordinary power to carry into effect the purposes and objects of their creation, without any qualification — as such company, in order to induce the community to take policies with them, they started with the design of making the corporation strong in funds and credit; thus intending to establish relations of confidence with their dealers, and holding out inducements such as would attract to them a large class of persons whose only object in life assurance is to make provision for those they cannot otherwise provide for; permanency' and ability to pay being the chief reasons for preference of one company over, another. No company can do business without establishing a character for pecuniary ability to respond for losses. This defendant was a trustee of the company, took part in its action, was one of the assured ; was cognizant of its doings and action, received the interest upon his note, had the same allowed upon the premium due upon his policy, and, so far as appears in this case, assumed the liability purporting to be created upon the face of the note and subscription. It is quite clear, if this had been a note absolute upon its face, payable without any conditions, the defendant would have been liable, provided it was given for premiums. This the charter authorizes in terms ; the design being to create a fund out of which any losses should be paid. The 13th section provides, that upon such notes, or securities, persons giving such notes may be allowed not exceeding six per cent in addition to any other profits they may be entitled to' as members of the company ; showing clearly in these two sections, that the legislature contemplated the' making of notes by those named, and intending to receive policies in the company. All this preceded the issuing of any policies, was within the limitation of time fixed in the 8th section, and was preliminary to incurring policied liability. The charter provides that these notes may be negotiated for the purpose of paying claims against the company. The defendants’ note restricts his liability to any deficiency arising upon losses upon policies issued by the plaintiffs after all other funds of said company have been exhausted> The charter provides for negotiating these notes for paying claims against the company, in general terms. The note restricts the payment to losses upon policies after exhausting all other funds of the company. The note, never-. theless, provides for paying claims. Losses upon policies are claims, and are none the less so because they remain after all other funds of the company have been exhausted. In this respect, therefore, it cannot be said that the note was unauthorized by the charter. The defendant cannot complain, so long as his obligation falls within the terms of the charter, and is applied only to the uses and purposes authorized by the enactment. Again, the presumption is, after the publication in the reports of the company to the legislature, and the organization, means and securities of the company in public newspapers, and inviting business, that the assured relied upon these notes as a fund upon which a call might be made in any event, and out of which the beneficiaries of the assured might obtain payment of the amount of the policies. The defendant went into this business with his eyes open, was to receive interest upon his money at the rate of six per cent per annum, in addition to hife share of the profits. This was the motive which prompted his action, and because the company has failed, he cannot now say, I have been unsuccessful in my enterprise, and, therefore, repudiate my obligation." This would be fraud upon the beneficiaries of the assured, and work great injustice at the expense of common honesty and good faith. This, we think, is settled by the principles laid down in the case of White v. Haight, (16 N. Y. Rep. 310,) where a section like the 8th section of this company’s charter is referred to at length and commented upon by Judge Denio. This same question, and in substance the same section, was directly up and adjudicated in the case of Deraismes v. The Merchants’ Ins. Co., (1 Gomst. 371,) wherein it was held that a note so given is valid by force of the statute authorizing it to be taken. It cannot be successfully urged that this note was without consideration, it having been given by statutory authority, for the purpose of increasing the capital, and encouraging others to do business' therein. Such a note, given to an insurance company, and for such a purpose, has been declared valid. (Brown v. Crooke, 4 N. Y. Rep. 51.) It is true, this was for the benefit of a third party, but this makes no difference, (Lawrence v. Fox, 20 N. Y. Rep. 268,) and such a note may be enforced by such third party, although not privy to it, and without notice thereof until after- it was made. Again ; if a consideration was necessary, to maintain a statutory note, it is to he found in the concurrence of others in giving similar notes by arrangement with the defendant at the time the subscription was made for the purpose of giving credit to the company, the contemplated advantages of insurance to such a company, and receiving interest upon the notes at a certain rate, in addition to any other profits he might be entitled to as a member of the company. (1 N. Y. Rep. 371.)

We must, therefore, hold that this note was authorized by the charter, and given upon a sufficient consideration, and therefore valid in the hands of the plaintiffs, who were authorized to receive and hold it for the uses and purposes expressed in the charter, and was a legitimate use of the power conferred upon the company by the charter. t

Again ; it is contended on the part of the defendant, that by the terms of the note, it was to be returned to the defendant and cease to be an indemnity, whenever the company should have acquired a surplus of capital out of the profits of the business to the amount of $25,000 ; and it is contended that it is shown to have done so on the 1st May, 1850, and thus the defendant was exonerated from liability upon the note in question. Was he so exonerated ? The company reported, on the first of May, 1850, in their statement of the condition of the company to the legislature, their net proceeds at $25,479.29. This consisted of cash on hand $5813.84, premium notes $14,149.41, and dues from agents $5,515.89 ; and in the same report give losses notified, part of which are awaiting proofs $11,000 ; less amount not recognized $6500, leaving $4500 of losses to be paid. It is not pretended that this shows the company at this period free from all obligations against them, with a surplus capital made out of the profits of their business. Unearned-premiums cannot be said to be profits. .If there had been $25,000 of money in the treasury, with no losses upon policies to be paid, or other expenses to be taken'from the fund, it might have been then a question for consideration, but for aught that appears in this case, the company might at the time this report was made, have been liable to pay the whole $11,000 of losses ; and until that question was settled they could not properly say, and we cannot hold for the purpose of exonerating the defendant from his obligation, that the company at any time before its insolvency, had acquired a surplus of $25,000 out of the profits of their business, but the deductions of the $4500 from the net proceeds puts the amount below what would be necessary to exonerate the defendant under the provision in the subscription, and this last amount seems to be conceded. We, therefore, think this view of the case cannot be sustained.

It is further urged that the defendant is not liable on his note, until all other funds of the company have been exhausted.

This is one of the provisions of the subscription. It is in proof, and not disputed, that the company is insolvent; that its property and effects had passed into the hands of a receiver ; that all the visible property of the company had been sold on execution. It also appeared that the company then had no other means, except the premium notes, and guaranty notes, and the proofs show that the premium notes were worthless and not available; consisting of small sums, from $3 to $50, the makers of which were scattered through six different states ; from their location, and difficulty of collecting at such distances of such small amounts, nothing could be realized from them. As to the securities furnished by Caznau & Edwards, it is quite clear the arrangement was imperfect and not consummated, the securities not being satisfactory to the trustees, and ultimately went back into their hands without ever having been held by the company, as their property. There was an abundance of uncontradicted evidence, to establish that all other funds of the company had been exhausted, except the guaranty notes. The evidence in the case, so far as any question of fact was concerned, was uncontradicted, and there was no question of fact for the jury. The objections and exceptions taken by the defendant should be overruled, and the order and judgment herein affirmed, with costs.


author: Robertson, Oh. J.

text:
    Wm. Newell, plaintiff and respondent, vs. Ezra Wheeler et al. defendants and appellants.
    1. The usual mode allowed by law for correcting the errors of inferior courts is by appeal; and it is only in courts of last resort, where there is no other remedy for an oversight or mistake, that re-arguments are permitted, unless in extraordinary cases, and then only upon the failure to present or notice an important legal question, or a recent statute or decision.
    2. Any court, but that of last resort, should not, except upon some acknowledgment of error, tolerate a re-argument, which may delay a decision of the cause, without any benefit gained, except a possibility of a change of opinion. No re-argument should be ordered merely for a present 'apparent preponderance of evidence on one side, where the evidence is conflicting, and a previous general term has decided against such preponderance. A new trial, or an appeal, is the proper remedy for such error.
    3. A motion for the re-argument of a motion for a new trial on exceptions will not be entertained where such motion is made not upon the ground of any oversight or mistake upon a question of law, but of a misunderstanding by the court of facts in evidence in the case, which has inclined it to think that certain questions of fact ought to have been submitted to the jury, and with their submission the question of damages also; and also upon the ground that if there was any error in the damages, the court could and should have corrected it by the evidence, by giving the plaintiff an opportunity of remitting the excess,
    (Before Robebtsox, Ch. J., and Moxem. and Gakviií, JJ.)
    Heard May 14,1866;
    decided June 30, 1866.
    This was a motion on the part of the plaintiff for a re-argument of a former motion for a new trial made by the defendants, upon exceptions taken at the trial and directed to be heard in the first instance at the general term, on which an order had been made granting a new trial. It was made upon three grounds : First. That the court, in its opinion, delivered in granting such motion for a new trial, had assumed facts disproved by the record, and misstated them in such opinion. Second. That the rule of damages laid down in such opinion was based upon such erroneously assumed facts; and Lastly. That the court having all the facts before it, should have corrected any excess of damages, where there was only a question of amount, instead of granting a new trial.

      The action was brought to recover damages for the nonperformance by the defendants of certain undertakings alleged to have been entered into by them, in March, 1858, by a certain instrument in writing then signed by all the parties. Such instrument related to the use by the defendants of a certain coffee cleaning and polishing machine, for which the plaintiff had in November previous taken out letters patent. The defendants Wheeler, Lacey and Roundey were at the time of signing such instruments partners in business and dealers ' in coffee, under the name of Wheeler, Lacey & Go.

    Such instrument, after reciting the grant to the plaintiff of the letters patent for such machine, and a desire of the defendants to become interested, granted an indefinite interest therein upon certain conditions which followed. These were, First. That a certain sum ($5000) having been paid, and certain different specified sums being to be paid for every bag of merchantable coffee or skimmings, that passed through the process, conducted by such machine, the defendants were to keep and render to the plaintiff accurate monthly accounts of the bags of coffee submitted to such process, and pay him on the first of every month the sums so to be paid to him. But if the defendants failed to perform any part of such agreement, it was to become void and of no effect; and the gross sum so paid ($5000) with an iron cylinder, to be furnished by the plaintiff, was to be forfeited to him. The second condition mentioned in such contract was that the $5000 paid to the plaintiff was to be refunded out of the earnings of the machine, whenever the plaintiff’s share exceeded $2000. The third condition mentioned in such agreement was that the plaintiff was not to be prejudiced by any misunderstanding or litigation or other contingencies between the defendants. “ But that his interest ” should “ be kept inviolate by keeping in active operation the machinery (t)herein contemplated and used by” the defendants “so that it may be made available and productive and payable as (f)herein before provided for.” The fourth condition stated in such instrument was that the defendants should make no sale or transfer of such patent rights except by the plaintiff’s consent indorsed on and made part of such agreement. After these conditions the instrument in consideration of them and in compliance therewith, on the part of the defendants, assigned to them the exclusive right of using such patent right in the states of Hew York and Connecticut, and with the exception of two counties which the plaintiff reserved to himself, the state of Hew Jersey. A privilege was also given therein to the defendants to commute the payment of the sums reserved to be paid to the plaintiff on each bag of coffee passing through his machine by paying a certain sum ($15,000.) The plaintiff also bound himself thereby to prosecute all offenders who infringed on such patent, and to furnish iron cylinders desired in addition to that one agreed by him to be furnished, at the price of $600 each.
    The complaint, after setting out the agreement and the compliance by the plaintiff with every obligation entered into by him thereby, alleges as breaches thereof, first a failure by the defendants to make monthly returns of the number of bags of coffee passed by them through the plaintiff’s process, and pay him the sums stipulated in such agreement therefor, although a large number of bags were passed through such process; and secondly, a neglect by the defendants 11 to keep the plaintiff’s interest in such agreement inviolate by keeping in active operation the machinery in the said agreement contemplated and used by the defendants, and * * make the same available and productive.” It prays damages for such neglect so to keep such interest inviolate, and demands any other equitable relief to which the plaintiff may be entitled.
    The defendants' answer sets up, by way of counter-claim, a demand for the $5000 paid by them for the grant of the right to use the plaintiff’s patent, which sum they allege was obtained by knowingly false representations of the plaintiff as to the benefits to be derived from submitting coffee to the patented process conducted by his machine. The defendants also set up as a defense such false representation to controvert any neglect to make monthly returns of coffee submitted by them to the plaintiff’s process, deny rendering any false ones, and allege payment of all sums due the plaintiff for the bags of coffee so submitted by them to such process. They set out particular defects in the process of the plaintiff, rendering it valueless and preventing persons from having coffee submitted thereto, and allege it to be wholly worthless.
    On the trial some evidence was given of unsuccessful efforts by the defendants to procure work for such machine, which is referred to in the opinion of the court. Some evidence was also given of the insufficiency of accounts rendered by the defendants of the work done by a machine furnished by the plaintiff according to his patent, referred to in such agreement, and consequent deficiencies in the payment made by the defendants of the agreed tolls for work done by such process specified in such agreement.
    On the trial the judge, before whom the action was tried, took away from the Jiury “all consideration of the question whether the defendants had exercised diligence and good faith in * * keeping the machine in operation and endeavoring to procure proper employment for it,” and instructed them that the only questions for them were “ whether the plaintiff had been guilty of any fraud in * * * effecting the sale to the defendants,” and directed them, if they found for the plaintiff to find a certain sum ($23,044,90) for his damages. This sum was claimed to be arrived at by multiplying the lowest toll mentioned in such agreement of March, 1858, (six cents) by the number of bags which the evidence showed could be cleaned by such machine daily, (209,) and that again by three hundred, as the number of working days in each year, and that again by nine, as the number of years it could be worked, and'deducting the $5000 paid and a certain sum ($953.09) paid by the defendants to the plaintiff, for the tolls due him under such agreement. To all of which withdrawals, directions and instructions the defendants’ counsel excepted,
    Other material facts appear in the opinion of the court,

      E. T. Gerry, for the plaintiff, respondent.

      Wm. D. Booth, for the defendants, appellants.
   By the Court,

Robertson, Oh. J.

The plaintiff now applies for a re-argument of the motion for a new trial, on exceptions of the defendants, taken on the trial, and ordered to be heard in the first instance at general term. Such motion is made, not upon the ground of any oversight or mistake upon a question of law, but of a misunderstanding by the court of facts or evidence in the case, which has induced it to think that certain questions of fact ought to have been submitted to the jury, and with their submission the question of damages also ; and also upon the ground that if there was any error in the damages, the court could and should have corrected it by the evidence, by giving the plaintiff an opportunity of remitting the excess. Such an application is rather a novel experiment in correcting judicial errors !>y bringing the opinion of one general term before another differently constituted, for the purpose, of criticising the soundness of its views upon the facts which the evidence before it tended to establish. Such a mode of review, whatever deference may be paid or felt for the action of the former general term, would be very apt to lead to disrespectful comments upon the conduct of the court, and at least to reflections on the diligence with which the case has been examined on the first occasion. For this reason, it seems to me both just and proper that the moving party should secure, from the prior court, some acknowledgment of oversight or error, in order to make such a proceeding very decorous. It is true, no courts are infallible, but the usual mode allowed by law for correcting their errors is by appeal; and it is only in courts of last resort, where there is no other remedy for an oversight or mistake, that re-arguments are permitted, unless in extraordinary cases, and then only upon the failure to present or notice an important legal question, or a recent statute or decision, (Mount v. Mitchell, 32 N. Y. Rep. 702.) It is only upon some acknowledgment of error by an inferior court, that the same court should tolerate a re-argument, which may delay a decision of the case, without any benefit gained, but a possibility of a change of opinion. It is clear no re-argument should be ordered, merely for a present apparent preponderance of evidence on one side, where the evidence, is conflicting, and a previous general term has decided against such preponderance. A new trial, or an appeal, is the proper remedy, for such error. In this case, therefore, it will only be necessary to examine the evidence so far as to ascertain whether there were any material facts upon which there was such evi- ■ deuce as to require them to be submitted to the jury, and, perhaps, whether they were those mentioned in the former opinion of this court.

The opinion of this court, delivered in this case, at a former general term, which is made the basis of the present application for a re-argument, placed its order for a new trial upon two grounds : First. That certain questions of fact were not submitted to the jury* which ought to have been; and secondly, that the question of damages was not submitted to them ; the latter being, perhaps, rather a consequence of the former. The court also took occasion to lay down what it considered the true rule of damages, as founded upon the result of the finding of the jury upon such questions of fact. Those questions of fact were the diligence and good faith of the defendants in keeping the plaintiff’s machine in operation ; the propriety of the accounts rendered by them of the work done by such operations ; and, lastly, the correctness of the amount paid to the plaintiff as his share of the earnings by such operation.

It seems to have been assumed, both on the trial and the former argument, that by the agreement of March, 1858, entered into by the parties, the defendants undertook to keep in operation, and make every effort to supply with work while so in operation, the machinery alluded to in such agreement, and for which the plaintiff furnished the iron cylinder mentioned in such agreement, and which, is called therein, “■ the machinery herein contemplated and used by the defendants merely to enable the plaintiff to receive the specified tolls. This appears to have been done on the assumption that the exception to the third of. the conditions mentioned in such agreement upon which the plaintiff assigned the right of using his patent, and in which such machinery is mentioned, created an obligation to run such machinery constantly on the part of the defendants, for the plaintiff's benefit. Eor the purpose of testing the plaintiff's right to a re-argument, upon the first ground urged, to wit, that there was no evidence in the case authorizing the submission of the questions of fact alluded to in the opinion of this court, already mentioned, to the jury, I shall assume, for the present, that the defendants were so bound. The grounds of the motion, as urged, are that the court mistook and misstated the facts. Upon the argument before us, the -only facts alleged in the opinion of the court, on which a new trial was granted to have been misstated, are that “ evidence was given by the defendants, upon the question of diligence and good faith in keeping the machine in operation, and endeavoring to procure employment for it,” and also as to the other matters before mentioned, as to accounts and payments. Assuming that evidence may properly be designated as “facts,” the plaintiff’s counsel seems to labor under an error, in supposing that he has detected an oversight in such statement. In the first place, there was evidence that the machine was kept by the defendants in running order, and it is. to be- found in the letter of the defendants, Wheeler, Lacey & Co. dated in May, 1862, introduced by the plaintiff, and the testimony of the defendants Lacey'and Randolph, and the brother of the latter.

The defendant, Randolph, testified that “he had solicited custom for it,” and “urged its use.” His brother, (Lewis,) testified that he knew of such efforts of the former, and made efforts himself for the same purpose. A great deal of evidence was given to show the worthlessness of the process, the reluctance of coffee dealers to use it, and the unsalability of coffee prepared by it, which sustained the futility of such efforts. The plaintiff's counsel was, therefore, evidently mistaken in supposing that there was no evidence to go to the jury, upon the question of the defendants’ good faith, in endeavoring to keep such machine employed. But it is said there is overwhelming evidence in the case, that the defendants, by their abuse of the process, and the use of deleterious ingredients, had ruined the reputation of the machine, and thus rendered their own efforts to procure work for it abortive. Assuming this to be so, the court clearly do not appear to have mistaken or misstated any facts in relation thereto. It may have been in error in regard to the law, and supposed that such misconduct of the defendants, if proved, did not deprive them of the right of showing, as a defence to the plaintiff’s action, that they could not with reasonable diligence, have procured work for the machine, but that furnishes no reason for a re-argument, whatever ground it may form for an appeal. But I am not prepared to say, and no part of the testimony has been pointed out to us sufficient to justify the assertion, that - the evidence as to the injury done by the defendants’ acts to the character of the machine, and its consequent disuse, was so overwhelming" as to have warranted the judge on the trial in withdrawing the consideration of that question, if material, from the jury, and instructing them, that the disuse of the machine by customers was due to such misconduct of the defendants. The use of plumbago to give color to the coffee, and soapstone to enable its refuse to rise and be thrown off, was the principal cause of complaint. There was conflicting evidence as to the propriety of their use, and the witness, Lewis Randolph, testified that the plaintiff instructed him that “ when the coffee was a little old and dry, and it would not come up very quick, a little soapstone would assist it,” and to use plumbago “ to color the bleached peas to make it look all sound, beautiful-colored, dark coffee.” That he only used it a month or six weeks, and possibly once or twice since, and only in extreme cases, and when the beans were very badly bleached,” and that generally they did not use them. The plaintiff, it is true, denied such statements under oath, and testified that he remonstrated with such witness, for running the machine at too great speed, producing excessive heat, which caused the result, rendering the use of soap stone necessary, but such remonstrance as Well as such result, was denied by the witness. So that the evidence was sufficiently strong on both sides, and so conflicting as to have warranted the learned judge, before whom the cause was tried, in submitting to the jury the questions, whether the defehdants’ mode of using the machine had destroyed its character ? and if it did, whether such inode of using it, had not been sanctioned by the plaintiff ? Such a state of the evidence, is very far from convicting the court of so mistaking and • misstating facts, in stating in their opinion that there was evidence of the good faith and diligence of the defendants, in employing such machine, as to justify a re-argument.- If they were right in that view the order for a new trial was correct, without reference to the other facts mentioned in the opinion, which are the rendering of accounts, and payments to the plaintiff, on which we think on a thorough re-examination of the case, . there was sufficient evidence to warrant the submission of the questions of fact contained in them to the jury, unless the defendants were not to be made liable for what they did, but only for what they omitted to do. If is not necessary to give such evidence in detail. It is true, the amount paid to the plaintiff was agreed upon, but the amount due, depended upon the work done ; and evidence was given of what work the machine could do, to throw on the defendants the burden of proving that the machine had done less from causes beyond their control. In any event, a mistake at general term in such matters, on the part of the court, will not affect questions on a new trial, where the evidence may be entirely different.

The question of damages was clearly one which should have been left to the jury, if the diligence of the defendants in procuring employment, and their actual employment of the machine were proper questions to be considered by them. The rule of damages as laid down in the former opinion of this court, seems to me to be the only one applicable to the case as it came before it, if the defendants are to be made liable at all; How far such rule will be applicable in any future trial, cannot be known, but I have been unable to find either expressly or by implication in the agreement of March, 1858, any undertaking by the defendants to run the machinery under the plaintiff’s patent at all. Such instrument consists of three parts : First, a grant of an undefined interest in the plaintiff’s patent, for certain considerations, and upon certain conditions which are specified, and of a forfeiture of the rights of the defendants to the money paid in case of failure on their part to perform what they undertake thereby. Second, a grant of an interest which is described in such patent, in consideration of such preceding conditions; and third, an agreement by the plaintiff to allow the defendants to commute their payment of a portion of the profits received for a .gross sum, to prosecute for infringements of the patent, and to furnish cylinders at a certain price. The only clause relied upon to create a liability of the defendants to run such machine, is, that in the third condition, of that part of such agreement which grants an indefinite interest in the plaintiff’s patent, which provides that the plaintiff should not be prejudiced by “ any misunderstanding or litigation between” the defendants, “but his interest should be kept inviolate, by keeping in active operation the machinery, (t)herein contemplated and used by” the defendants “ or their successor,” so that it may be made available and productive and payable as (t)herein provided. But such agreement contained no provision for making it available and productive, but only one for paying certain sums if it were. I feel at a loss to understand how a mere exception to a condition of a grant, can be construed by itself into a positive undertaking, particularly as while stating that such machinery is to be kept in operation, it does not state by whom. The whole instrument was evidently a grant of a right to use the patent in certain states for a specific sum and a toll on every bag of coffee on which it was employed, which sum was to be deducted from any future earnings ; the use of the machine by the defendants, was to depend on their own sense of self interest. A remedy for the omission of the defendants to perform any part of such agreement was expressly provided in such instrument for the plaintiff by a forfeiture of the ■specific sum paid, ($5000,) and the large iron cylinder to be furnished by him. If the defendants found it to their interest to go on, they were entitled to be reimbursed the sum so paid, out of the plaintiff’s share of the earnings of such machine.

' If the defendants were bound to work the machine, and did not; the plaintiff could have sequestrated the sum received by him, canceled the grant, taken back his cylinder, and carried on the operations himself. In the face of such an express provision, I do not see how any contract could be implied to work the machine, or the defendants be liable for all damages sustained by not doing so. Such question will, however, in any event have to be disposed of on the new trial ordered.

In regard to the question of damages, it could not have been disposed of until the finding of the jury upon the other material facts was determined, and therefore the failure of the court to order a deduction instead of a new trial, which is always a matter of discretion, forms no legal ground of complaint.

The motion for a re-argument is, therefore, denied, with costs.


author: Monell, J.

text:
    Elizur Linsly, plaintiff and respondent, vs. Josiah Carpenter, defendant and appellant.
    1. The law implies an agreement on the part of consignees of property intrusted to them for sale, to obtain the best price, by means of faithful and diligent efforts to ascertain and procure at 'least the highest market value of the property consigned.
    2. Where merchandise was delivered to the defendant, under an express agreement on his part, to sell the same for the highest market price, and to make extraordinary efforts to sell the same for the highest price, for which efforts he was to receive an extra commission; Held, that the agreement required the exercise of every reasonable and diligent effort by the defendant, to obtain the highest market .price-for the .property.

      3. In an action upon such contract, it was held that the principal, if not the sole, question which it was necessary to submit to the jury was, whether the defendant had complied with his express or implied agreement by obtaining for the merchandise the highest market price. In determining that question, it was the duty and province of the jury to examine the evidence of the quality of the merchandise, and of its fair value in the market, at the time of the sale; and that their determination of that question would not be disturbed, unless it was so clearly against the weight of evidence as to lead to the conclusion that they were influenced by wrong motives.
    4. The evidence, in respect to quality and price, though conflicting, being quite sufficient to justify the jury in finding that the defendant did not perform his duty as a commission merchant by obtaining the best price for the plaintiff’s property; he having sold in great haste, without notice, and for a price, according to the weight of evidence, below the market value; a verdict and judgment in favor of the plaintiff were sustained. .
    (Before Hobertsob, Oh. J., and Monebl and Garvib, JJ.)
    Heard May 7, 1866;
    decided June 30,1866.
    This action was brought to recover, the price of a quantity of tobacco delivered by the plaintiff to the defendant, a commission merchant, for sale. The complaint alleged, that the tobacco, which consisted of 3812 pounds first and 957 second quality, Connecticut and leaf 'tobacco, was delivered under an express agreement with the defendant, that he should sell the same for the highest market price, and should make extraordinary efforts to sell the same for the highest price, and for which efforts he should receive five, per cent of the proceeds, which was two and a half per cent above the usual commissions. That the market value was at least fifty cents per pound for first quality, and at least twenty cents per pound for second quality. That the defendant, in violation of his agreement, and with intent to cheat and defraud the plaintiff, sold, or pretended to have sold, the tobacco on the day it was received by him, at fourteen cents a pound, and refused to account for any sum beyond fourteen cents per pound.
    The answer denied that the tobacco was first and second quality, and averred that it was of greatly inferior quality and of a kind known as “ fillers and binders,” and that the same was sold at the highest market price.
    The action was tried before Justice Jones, and a jury. There was no exception to the charge, and only one exception to the admission or rejection of evidence, which was abandoned on the argument of the appeal.
    The jury found a verdict for the plaintiff, and judgment was entered thereon. A motion for a new trial on the minutes of the court was. denied, and the defendant appealed from the judgment and order.

      S. Sanxay, for the appellant.

      W. Gleason, for the respondent.
   By the Court,

Monell, J.

A compliance with the agreement alleged in the complaint, and proved substantially by the testimony of the plaintiff, required the exercise of all reasonable and diligent, efforts, by the defendant, to obtain the highest market price for the tobacco. Independently, however, of any express agreement to use extraordinary efforts to sell, the law implies an agreement, on the part of consignees of property intrusted to them for sale, to obtain the best price, by means of faithful and diligent efforts to ascertain and procure, at least, the highest market value of the property consigned. The principal, if not the sole, question, therefore, which it was necessary to submit to the jury, was, whether the defendant had complied with such express or implied agreement, by obtaining for the tobacco the "highest market price. In determining that question, it was the duty and province of the jury to examine the evidence of the quality of the tobacco, and of its fair value in the market at the time of the sale ; and their determination of such questions will not be disturbed, unless it is so clearly against the weight of evidence as to lead to the conclusion that they were influenced by corrupt motives.

I have read the evidence attentively, and am unable to find any reason for disturbing the verdict. The plaintiff furnished much proof of the quality of the tobacco. He was himself a grower of and dealer in tobacco. He assisted in assorting and casing some of it, and examined the whole, and' says it was of fair quality. The witness Moore, who raised the tobacco, described the manner of airing and packing. He says it was assorted into two qualities, fillers and wrappers, and that it was a good quality of tobacco. Sidney 0. Linsly also testified that the quality was good. Two witnesses, William and Levi Palmer, furnished evidence that first quality tobacco was worth from forty to fifty cents per pound, and second quality from ten to fifteen cents. Besides, the declaration of the defendant, to two of the plaintiff’s witnesses, that Connecticut seed leaf was worth from forty-five to fifty cents, was uncontradicted.

In opposition to this there is only the evidence of one witness and the defendant’s' testimony. Dreyer, who purchased the tobacco, says he paid the market price, but could not say what the quality was, as he had no particular recollection of that particular lot. The defendant testified that it was the poorest grade of Connecticut tobacco, and that he got more for it than he could have since got.

The evidence in respect to quality and price was .conflicting; but, in -my judgment, it was quite sufficient to justify the jury in finding that the -defendant did not perform his duty as a commission merchant, by obtaining the best price for the plaintiff’s property. He sold in great haste, without notice, and for a price, according to the weight of evidence, below the market value.

The judgment and order should be affirmed, with costs.