Exchange Bank v. Ford

7 Colo. 314, 4 Colo. L. Rep. 585
Supreme Court of Colorado·Decided April 15, 1884·Published·Cited by 26 cases

Opinion

Helm, J.

This action was brought to collect a partnership debt. At common law partners are held to be jointly liable for the firm debts. While each is bound for [315]*315the whole indebtedness, and while a judgment might be recovered, under some circumstances, in an action at law against one of the partners, yet the liability is regarded as joint only, and not as joint and several.

At common law, therefore, the doctrine of merger, contended for by defendant in error, who was defendant below, would undoubtedly govern this cáse; and he could plead the judgment rendered against his co-defendants in bar of the proceedings against him for the same demand.

A desire to avoid the hardship resulting from the application of this common law rule to the case at bar, coupled with the general importance of the subject, has led us to give the questions presented more than the usual degree of care and consideration.

The suit was first brought against Ford and others upon a promissory note; Ford’s co-defendants defaulted, and judgment was rendered against them; afterwards, and before the trial against Ford, plaintiff voluntarily amended its complaint so as to abandon the note, and rest the action entirely upon the original indebtedness represented thereby. The action was, therefore, tried against Ford upon an unwritten contract. At the trial the former judgment against his co-defendants was regarded by the court as a merger of the entire cause of action, and upon this ground plaintiff’s right to recover against Ford was denied.

A number of objections to the position taken by the court below are presented by plaintiff in error, and are thoroughly argued by counsel for both parties. As at present advised, we are inclined to believe that, under our practice, the doctrine of merger might be held inapplicable to the'case, provided the contract is one of those which are by statute declared to be several as well as joint.

Bearing directly upon this subject we have two provisions, viz.: Section 1834 of the General Statutes, which reads as follows: “All joint obligations and covenants [316]*316shall hereafter be taken and held to be joint and several obligations and covenants; ” and section 11 of our Code of Procedure, to wit: “ All persons jointly or severally liable upon the same obligation or instrument, including parties to bills of exchange and promissory notes, and sureties on the same or separate instruments, may all or any of them be included in the same action, at the option of the plaintiff.”

The principal question for consideration, as we view the case, is, do these statutes, or does either of them, refer to and include joint oral contracts; or was it the intention to confine their operation in this respect to joint specialties, and joint simple contracts which are evidenced by writing ?

Of course no argument is necessary to show that the words “covenants” and “instruments” do not cover unwritten contracts; our inquiry is, therefore, narrowed to a discovery of the true import of the word “obligation,” as used in these statutes.

This word has two well-defined legal meanings: one is, where it is a name given to the contract itself; the other includes those cases where it refers to the duly imposed upon a person in connection with his contract to perform it, or to a liability arising from his contract or from his actionable tortious conduct.

The first class formerly covered only sealed instruments wherein the obligor was bound under a penalty to do a certain thing; but more recently it has been frequently extended to all written contracts.

Under the second class, Chief Justice Marshall, in Sturgis v. Crowninshield, i Wheaton, 193, thus defines one meaning of the word: “A contract is'an agreement wherein a party undertakes to do or not to do a particular thing; the law binds him to perform his engagement, and this is the obligation of the contract.”

In illustration of another meaning of the word under this class, we quote the language of Mr. Justice Smith in [317]*317Crandall v. Bryan, 15 Howard’s Pr. R. 56. Speaking of a certain statute, and referring to the word obligation, used therein, he says that, it includes all cases “where the action would not rest upon the contract, but would rest upon the legal duty; where the law rests a liability upon a man guilty of fraud, for which an action will lie; whenever fraud and damage give a right of action, the law casts a liability and creates an obligation.”

The word is used in statutes, as well as in text books and decisions, with these different meanings; and the significance to be given it in each statute must be gathered from the purpose and context of the enactment. The third, and perhaps most uncommon legal use of the word, is found in a New York law; it reads: “When the defendant has been guilty of fraud in contracting the debt or incurring the obligation for which the action is brought,” etc. 15 Howard, 56, supra.

Wo are hardly prepared to quarrel with the court’s interpretation, above given, of this statute. It seems reasonably certain that the legislature mean, when they speak of the obligation being “incurred,” a liability affixed by law to the fraudulent conduct mentioned. Contracts are either expressly made by the parties, or created by implication of law. It can hardly be said that they are ever incurred; the liability is incurred when the contract is violated, or the fraud committed; and when the word “obligation” is used with reference to this liability, the obligation may also be said to be incurred.

In Hargrove et al., Adm’rs, v. Cooke, 15 Ga., Lumpkin, J., says: “In Oomyns’ Digest, obligation is defined to be a deed, whereby a man binds himself under a penalty to do a certain thing. But in its more popular sense, the term obligation signifies the instrument of writing by which the contract is witnessed.”

So, also, in Illinois, the expression “obligations and covenants,” in a statute exactly similar to our said section [318]*3181834, was construed to include a promissory note, and the guarantors thereon. Gage v. Nat. Bank, 79 Ill. 62.

It has, however, recently been held doubtful if this Illinois statute has any application to partnership contracts. Coates v. Preston et al. 105 Ill. 473.

But no case has been cited, and we have not succeeded in finding one, which holds that this word, when used in a statute with reference to the contract itself, and not the duty or liability arising thereon, includes oral agreements. Brainard v. Jones et al. 11 Howard’s Pr. R. 569, seems to hold this way, and has been mentioned by counsel as doing so, but the action there was upon a replevin bond, and it was unnecessaiy to determine this question; besides, in Strong v. Wheaton, 38 Barb. 616, this case is discussed, and no such interpretation of the word deduced therefrom.

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Exchange Bank v. Ford, 7 Colo. 314, 4 Colo. L. Rep. 585 (Colo. 1884).

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