Cole v. . Reynolds

18 N.Y. 74

• Court: New York Court of Appeals
• Decided: September 5, 1858
• Status: Published

Opinion

Harris, J.

By the Code, the distinction between actions at law and suits in equity is abolished. The course of proceeding in both classes of cases is now the same. Whether the action depend upon legal principles or equitable, it is still a civil action, to be commenced and prosecuted without reference to this distinction.

But, while this is so in reference to the form and course of proceeding in the action, the principles, by which the rights of the parties are to be determined, remain unchanged. The Code has given no new cause of action. In some cases parties are allowed to maintain an action who could not have maintained it before, but in no case can such an action be maintained where no action at all could have been maintained before upon the same state of facts. If, under the former system, a given state of facts would have entitled a party to a decree in equity in his favor, the same state of facts now, in an action prosecuted in the manner prescribed by the Code, will entitle him to a judgment to the same effect. If the facts are such as that, at the common law, the party would have been entitled to judgment, he will, by proceeding as the Code requires, obtain the same judgment. The question, therefore, is whether, in the case now under consideration, the facts, as they are assumed to be, would, before the adoption of the Code, have sustained an action at law or a suit in equity.

The defendants’ firm are indebted to the plaintiffs’ firm upon an account stated and settled between them. This fact, standing alone, would have entitled the plaintiffs to maintain an action at law. But there is another fact in the case, which upon a technical rule peculiar to the common law, would have defeated such an action. One of the individuals composing the plaintiffs’ firm is also a member of the defendants’ firm. A man cannot sue himself ; and as, at common law, all the members of a firm must unite in bringing an action, it follows that in such a case no- action at law could be sustained.

But in equity this technicality does not stand in the way of justice. It is enough, there, that the proper parties are before the court. They may be plaintiffs or defendants, according to circumstances, but, being before the court, it will proceed to pronounce such judgment as the facts of the case require. This latter rule is obviously the dictate of common sense. So far as I know, it prevails everywhere else except at the common law. «

Indeed, equity, like the law of Scotland and the systems of continental Europe, goes farther, and treats the copartnership as a distinct existence, having its own distinct rights and interests. “In all such cases,” says Story, “courts of equity look behind the form of the transactions to their substance, and treat the different firms, for the purposes of substantial justice, exactly as if they were composed of strangers, or were in fact corporate companies.” (1 Story’s Eq. Jur., § 680; Story on Partnership, § 235.)

There is no difficulty, therefore, growing out of the fact that one of the parties is a member of both firms, in sustaining this action. How, then, can it be defeated? The fact that, upon a settlement between the two firms, it was agreed that the balance now claimed by the plaintiffs was due from the defendants’ firm to the plaintiffs’ firm is scarcely denied in the answer, and, upon the trial, the plaintiffs offered to prove it. The indebtedness, therefore, for the purposes of this decision, must be assumed. The amount claimed must be regarded as, ex ctquo et bona, due from the defendants’ firm to the plaintiffs’ firm. Its payment would constitute a final adjustment of all the transactions between the two firms. Why, then, should not the plaintiffs be allowed to recover it?

In the view taken by the court below, it was necessary to have an accounting in order to determine the rights of the parties. But it is to be remembered that, as between the two firms, an accounting has already been had. What other accounting did the court below contemplate? ' Shall it be between the several, members of the plaintiffs’ firm or the several members of the defendants’ firm? In short, what must the plaintiffs do, more than they have done, to entitle themselves to recover the acknowledged indebtedness of the defendants to their firm ?

Had it been set up as a ground of defence that, as between the plaintiffs’ firm and the partner who is made a defendant, the state of accounts was such that it would be inequitable to require this debt to be paid, such a defence might have rendered an account necessary in order to determine the equitable rights of the parties. Even then, I suppose, the better doctrine would be to let the debtor firm pay its debt, and the creditor firm, after receiving their debt, adjust their individual equities among themselves. This would seem to be more in accordance with the common sense of the commercial world, and the rule of equity which treats a copartnership firm, for the purposes of a trial, as an artificial body, a quasi corporation.

Upon the whole, I am of opinion that the case stated by the plaintiffs, and which, upon the trial, they offered to prove, was sufficient, prima facie, to entitle them to recover. If, upon another trial, the defendants shall be able to present a state of facts which renders it necessary that, an account should be taken between the different members of either firm, to enable the court to determine whether the amount claimed is equitably due from the defendants to the plaintiffs’ firm, it will be entirely competent for the court to direct that such an accounting be had. But no such defence would be admissible under the present state of the pleadings-

The judgment should be reversed and a new trial ordered, with costs to abide the event.

Pratt, J., dissented; Selden, J., expressed no opinion, all the other judges concurring,

Judgment reversed and new trial ordered.