American Linen Thread Company v. . Wortendyke

24 N.Y. 550

Opinions

Dentó, J.

The defendant’s counsel .insists that the new dealing, which- formed the consideration of the note sued on, was not with the firm with which the plaintiffs had previously dealt; and that the rule requiring notice, in order .to protect a- former partner who had .ceased to be interested, .does, not apply. This argument is not satisfactory; for in every case where a partner has withdrawn, and there is a further dealing with the remaining partners, under such circumstances as to leave the retiring partner responsible, the contract is not between the creditor and the former firm, but it is with a new firm, which the creditor has been led to believe still embraced the partner who has in fact gone out. The bare fact, therefore, of the dissolution of the old firm and the creation of a new one, with which the credit sought to be enforced was had," and which did not embrace one of the old partners, is not conclusive against the plaintiffs. Indeed, it is upon such a state of facts that the question is generally presented. The liability of the defendant depends upon other considerations. ¡Nor does the circumstance that another partner is actually introduced into the firm furnish a conclusive reason against the operation of the rule. If the creditor is not informed of .the fact, as where the same firm name is used, and the same kind of business is transacted, and some of the former partners remain, the creditor may still hold a member of the former firm liable though .he has retired. Here the same business was carried on at the same place, and a portion of the partners were the same. But a new firm name is introduced ; and upon that alone the present question arises. H the change in the name were such as to indicate that the defendant was no longer a partner, there would be no pretence for holding him liable. Cases of that kind are reported. There was a firm of bankers, transacting business under the name of Dickenson, Groodall & Fisher, with whom the plaintiff’s testator kept an account.. In 1799, Fisher ceased to be a partner, but the plaintiff continued to deposit and draw; and in 1805 the partnership became bankrupt, having a balance in their hands of $2,000 to the credit of the plaintiff’s testator. Ho notice of the retirement of Fisher had been given; but it appeared that immediately after he had withdrawn, the tes- ■ tator was furnished by the bank with printed checks, addressed to Dickenson, Groodall & Co.; and subsequently, when another Dickenson'was taken into the firm, the checks were again changed to Dickenson, Groodall & Dickenson. The testator made use of these checks; a great number of which he filled up, signed and caused to be presented. The question was, •whether Fisher remained responsible for the dealings which .took place after he had withdrawn; and it was held, that he was not responsible. Lord Ellenborough said that, when the testator had been accustomed to draw upon checks furnished him with the name of Fisher, and others were sent him with the name of Fisher-omitted, before using these it became him to inquire what change had really taken place; “ and when he did continue to use them, I must presume (he added) that he was perfectly well aware that Fisher had retired, and that he continued to deal with the house upon the credit of the other partners.” (Barfoot v. Goodall, 3 Campb., 147). A case of the same nature was lately decided in the Supreme Court of this State. There was a firm of Hewett & Co., consisting of the defendants, Henry and William E. Hewett. They dissolved, but gave no notice of dissolution.. After-wards the plaintiff sold goods to William E. Hewett, charged them to him and made out the bill in his name, and finally took his individual note for the amount; he declaring, as it was proved, that Henry was still interested with him, and that they were using his individual name in the business for some purpose relating to the collection of debts. It was very correctly decided that, when this new name was introduced, the plaintiff was bound to ascertain to whom he was giving credit ,* and that the false declarations of William did not affect the question.

These two cases, it seems to me, stand upon the ground that the name of the firm was altered in such a manner as to indicate to those dealing with it that the person sought to be charged with the subsequent dealings had withdrawn. In the first case, the name of Fisher formed a part of the title of the old firm. When a name was subsequently adopted, in which, the name of Fisher was omitted, any one would understand that he had ceased to be interested. So in the other case: the name first used showed that, prima facie, there was more than one partner; that Henry and William Hewett were trading under that name. The name subsequently adopted, and under which the dealing in dispute was had, showed, to a common intent, that there was only one person concerned; namely, William E. Hewett. "To be sure, the plaintiff was told that Henry was still interested, but that was false; and Henry was not responsible for the deception. If the plaintiff was deceived by that, it was his own misfortune. But the defendant was responsible that the business should not he continued under a name calculated to deceive the world or former dealers with them; and he could not be charged with neglecting, any necessary precaution, when the name used in the subsequent dealings was such as to indicate that he was no longer concerned. I will -now mention a case where, .although there was, in effect, .a -dissolution, and the organization of another firm with a different name, the retiring partner.was held liable, because the change of name did not -indicate that he-was the partner going out. (Howe v. Thayer, 17 Pick., 91.) The defendants were Thayer and Fellows, who, together with one Colton, were claimed to have been in partnership until June 23, 1830, when a dissolution took place, and the business, which seems to have been the carrying on of a boarding school, was continued ■ by Fellows -and one Newton. The ^plaintiff had furnished provisions for the use .of the institu - tian, both before and after the change; and the question was, whether Thayer was liable for those furnished -after ,’h'e had ceased to be interested. Before the change, the firm name of Colton &. Fellows was used; and afterwards, that of Newton & Fellows was adopted; and during the whole time, the name ■of The Mount Pleasant -Institution was also employed to some extent in their dealings. It will be seen that the name of Thayer, whose liability was alone in contest, was not' found .'in either title-; but the change from Colton & Fellows to Newton ■&-Fellows showed,jorima facie, that Colton had withdrawn, and -that Newton had been taken in. Hence, the defendant’s point was, that-if the plaintiff knew that Colton had ceased to be a member of the firm, it was-in law a notice to him of the dissolu tian of the partnership as to all its members; that, by the withdrawal of one partner, the identity of the partnership was destroyed; and that if the plaintiff doubted the responsibility of the new firm, unless Thayer was liable for their contracts, he Should have inquired whether he continued to be a member. The charge to the jury was, that the change of the firm from Colton & Fellows to Mew ton & Fellows had no tendency to prove that Thayer had ceased to be a partner, if it were shown that before that time he was a partner; but if the plaintiff knew of the change, and knew that after that, Newton & Fellows only were answerable, the plaintiff could not recover for the supplies subsequently furnished. On a review of this charge, upon exceptions, after a verdict for the plaintiff, it was held to be correct. The court, by Chief Justice Shaw, who drew up the opinion, said: “When a -business is carried on by three or more as partners, and one withdraws, or one is added, or both, and notice thereof given, and the business is carried on as before, those as to whom no notice is given must ■be presumed to hold the -same -relation to the concern that they did before.; and such change furnishes no presumption that the others have ceased to be partners. If the plaintiff knew that Colton had withdrawn, and ceased to be a partner, it was not in law a -notice to the plaintiff of the dissolution of the partnership, as to all its members, to the effect contended for, and to -the purpose for which that proposition was advanced, -namely, to exempt the-other members from liability; or if it was, in-a certain sense, evidence-and notice of the dissolution of -the same identical ^partnership that existed before, •it was at the same time evidence and notice of the formation of a new partnership among all the remaining members of the -firm to carry on the-same business, holding the same relation -to its customers and the public, with the .single exception implied by the fhct that the retiring partner will -be no longer -liable for new contracts, and that the acceding partner will •thenceforward "become liable.” He added, that “the withdrawal of -one partner other -than -the defendant, Thayer, and ■the "accession of another, the business-in other respects going. on as before, was not evidence from which a jury should infer a dissolution in respect to the defendant, Thayer; but if he knew that by the new arrangement Newton & Fellows alone were to compose the partnership, before he furnished the supplies, the defendant, Thayer, would not be responsible.” None of these cases can be regarded strict3y as authority; but being the judgments of respectable courts, acting upon the principles of the common law, we should prefer to follow rather than depart from them, unless, they seem inconsistent with sound reason or with legal analogies. The proposition which they all tend to establish, and which is distinctly laid down in the last, is, that when a notice of a change of firm name is relied on to exonerate one who has been a partner, such change must show that he has withdrawn from the business; and any change which does not indicate that, does not put dealers with the concern upon inquiry. They may safely assume, until they have notice to the contrary, that all the former partners not apparently affected by the change of name yet remain in the business. There is certainly some force in the argument that, where any change is made in the members of a copartnership, the identity of the commercial society is destroyed; and that the arrangement which takes its place is substantially a new society; and that parties proposing to deal with it must ascertain who its members are, in the same manner as though it had no connection with any previous arrangement. But I think that position would be likely often to sacrifice substantial justice to considerations of form. The present case affords a pretty striking instance of the superior equity of the rule laid down by Chief Justice Shaw. The three ■ brothers Wortendyke were in partnership, and the plaintiff may be supposed to have known of whom that firm was composed. The name which they gave it indicated that it was composed of several persons of that name, who were brothers. As to that, there was no change effected by the new name: it was still Wortendyke Brothers, and something more. The added words, standing for and company, do not carry the idea 'that the brothers, who were up to that time concerned toge ther, had separated, or that any of them had withdrawn; but, *; rather, that there had been an addition of one or more persons to the concern, who would not have been indicated by the former title. . This, I think, is the inference which nearly every person would draw from the change of name. The plaintiff, it is true, might have acted upon the mere formal view of the matter, and have made inquiries; and the partners might also have given personal notice of the character of the change to all their correspondents. In the absence of that precaution, I think it more just to impute to the plaintiff only a knowledge of the change which the new firm name indicates'; namely, that a new partner, or new partners, had been taken in; the former partners continuing to be interested as before.

These views, if concurred in, will lead to the reversal of the order for a new trial, and for judgment absolute in favor of the plaintiffs on the report of the referee.

' Davi-es, Wright, Gould and'Allen, Js., concurred.