Calkins v. . Smith

48 N.Y. 614

• Court: New York Court of Appeals
• Decided: May 5, 1872
• Status: Published

Opinions

Eabl, O.

I propose to consider in this case but one question, which I regard as decisive of this appeal. When Ger-main indorsed the name of Germain & Oo. upon the notes, without the knowledge or consent of his copartners, to pay his private debt, he undoubtedly committed a fraud upon them; and if the defendant aided in this fraud by transferring the notes to a bona, fide holder, who could enforce them against all members of the firm, he was also guilty of a fraud, and liable to the copartners of Germain for all the damage he occasioned to them. But the fraud was not upon the firm. It was upon the three partners who did not consent to the indorsement. Germain, who made the indorsement, was not defrauded, and the firm could not have sued to recover damages for the fraud.

I am inclined to think that the fraud was not a joint fraud for which the three partners could unite in a common-law action. But it was a fraud upon each partner separately, for which he could sue alone to recover the damage which he sustained. The damage sustained by each partner was not the same, but was in proportion to his interest in the partnership. This is a common-law action for fraud, in which the plaintiffs base their right to recover upon a cause of action for fraud assigned to and jointly held by them. Plaintiffs’ counsel, upon the argument before us, claimed that “ plaintiffs took their title to this demand through the assignment from the receiver.” But it passes my comprehension how they could get title to the cause of action from that source, as Tifft was appointed receiver only of the assets of the firm. This cause of action was no part of the assets of the firm, was never vested in Tifft, and he could not therefore transfer any title thereto to the plaintiffs. And the plaintiffs did not get any interest in the cause of action by virtue of the assignment to them from Scroggs and Germain, contained in the agreement of January 1,1863. This is so, aside from any other reason that might be assigned, because they only assigned “ all their right, title and interest in and to the property and effects of said firm of Germain & Co., and the choses in action of said firm of every nature and description whatever.” This assignment did not cover this cause of action.

For the same reason the plaintiff, Henry W. Grannis, did not get any interest in this cause of action by the assignment to him from Charles W. Grannis, dated June 6th, 1863, because that was an assignment only of the assignee’s interest in the assets and property of the firm.

The sale of the assets of the firm to the plaintiffs could not, in any way, vest them with this cause of action for the alleged fraud. It is true that the fraud diminished the assets, but it was perpetrated months before the sale. It was not a fraud upon Henry W. Grannis, but upon the three partners of Germain. The plaintiffs took the assets as they were when they bought them. The fact that they had been diminished by a prior fraud, in no way connected with the sale to them, gives them no cause of action. The defendant had nothing to do with the sale of the assets, and the fact that he may have committed a fraud affecting the value of the assets upon the prior clause cannot make him liable to the plaintiffs.

Hence it is quite clear that Henry W. Grannis had no title to or interest in the cause of action, and that the plaintiffs have not, therefore, any joint interest in the cause of action which enables them to maintain this action.

If the alleged fraud was committed, it gave a cause of action to the plaintiff Calkins to the extent of his injury as one of the partners, which he could have prosecuted alone against the defendant, and probably the court had the power in this action, if the claim had been made, to have awarded to Calkins his damages in this action, giving judgment against the other plaintiffs under section 274 of the Code. But the court was not hound to do this, and committed no error in defeating the plaintiffs because they did not establish a cause of action in which both were interested. But the claim that Calkins had a separate cause of action for the fraud upon him was not put forth in the complaint, nor made upon the trial, nor upon the argument before us; and hence, even if we should decide that, upon all the facts appearing in the case, he had a separate cause of action, it would not be proper for us, upon that ground, to reverse the judgment below.

The judgment, therefore, should be affirmed, with costs.