Rose v. Coffield

53 Md. 18, 1880 Md. LEXIS 2

Opinion

Miller, J.,

delivered the opinion of the Court.

This suit was brought by the appellee against the appellants, Eose and Porter, as partners, composing the firm of “J. B. Eose & Co.,” upon a check, of which the plaintiff was the endorsee and holder. This check was upon the Citizens’ National Bank for $430, was dated the 29th of November, 1871, and was payable on the 2nd of December following. It was drawn by “ Eastman & Eogers,” to the order of “ J. B. Eose & Co.” and bears the endorsement of the payees, and also of two other firms. The proof shows that this check was given in renewal of a promissory note for the same amount, dated the 27th of October, 1871, payable one month after date, drawn and endorsed by the same firms, and also endorsed by another firm. The plaintiff received this note, on the day of its date, from Eose, in good faith, and paid him therefor $430 in cash. He also received the check, in renewal of the note, on the day of its date, from Eose, who then endorsed the name of “ J. B. Eose & Co.” thereon. At the date of the note, and for some years • prior thereto, Eose and Porter had been partners, conducting the printing business under this firm name, Eose being the active business manager of the firm. On the 16th of November, 1871, after the date of the note, but before the check was given, the firm was dissolved, and notice of the dissolution published in the newspapers of Baltimore City, for several days. But there is no proof that the plaintiff took or read either of the papers in which this publication was made, and there is, therefore, nothing in the case bringing home to him actual notice of the dissolution, or affecting him with notice thereof. Boyd vs. McCann, 10 Md., 118. In this state of case the question arises, whether Porter is liable upon this check, the firm having been in fact dissolved before Eose endorsed the firm’s name thereon.

It is familiar law, that after dissolution one partner cannot impose new obligations on the firm, or vary the form or character of those already existing. Ellicott vs. Nicholls, 7 Gill, 100; Bell vs. Morrison, 1 Pet., 370. He has no authority after dissolution to give a note in the firm’s name, even though its consideration he a pre-existing debt of the firm, nor to renew an existing note of the dissolved firm, for these constitute new contracts, and cannot, therefore, hind his former partner. Hurst & Berry vs. Hill, 8 Md., 399; Hopkins vs. Boyd, 11 Md., 107; Martin vs. Kirk, 2 Humph., 529; National Bank vs. Norton, 1 Hill, 572. But to this general rule there are certain well defined and clearly established exceptions or qualifications. Eor instance, the agency of each partner to hind his co-partners can only he effectually determined by giving notice of its revocation. The principle is therefore now well established, that where a partnership is voluntarily dissolved, or one of the ostensible or known partners retires from the firm, (which is in fact a dissolution,) and there is no public notice of the dissolution given, by publication in a newspaper or otherwise, the power of each to hind the rest as to third persons, who have no knowledge of the dissolution, remains in full force, although as between the partners themselves, a dissolution or a retirement is a revocation of the authority of each to act for the others; and hence if a known partner retires, and no such notice is given, he will he liable to he sued in respect to a promissory note made after his retirement by his late partner in the name of the firm — even though the plaintiff may have had no dealings with the firm previous to the retirement or before the making of the note. Lindley on Partnership, 327; Parkin vs. Carruthers, 3 Esp., 248; Williams vs. Keats & Archer, 2 Starkie, 290; Mulford vs. Griffin, 1 Fos. & Fin., 145; Anderson vs. Weston & Badcock, 6 Bing., N. C., 296; Ketcham & Black vs. Clark, 6 Johns., 144; Dickinson vs. Dickinson & Co., 25 Grattan, 321. In such cases the law regards the contract as made with the firm and on their credit, and holds the retiring partner liable, upon tbe -principle that where one of two-innocent persons must' suffer from giving a credit, he who has misled the confidence of the other, and has been the cause of the credit, either by his representations or his-negligence, ought to suffer instead of the other. Again, while public notice by .advertisement, such as was given in this case, may suffice to conclude all persons who have not had any previous dealings with the firm, it will not be sufficient as to those who have had such dealings. All the authorities agree-that as to persons who have previously dealt with the firm, it is requisite that actual notice of the dissolution should be brought home to them, or at least, that the credit should be given under circumstances from which actual notice may be inferred. Story on Part., sec. 161; Parsons on Part., 412. But what will amount to-such previous dealing ^s to entitle a party to notice of this-kind, is sometimes a difficult question, and this in fact is the real and only point of difficulty in the case before us.

It has been argued with much force that the plaintiff' had but a single transaction with this firm before its dissolution, which consisted simply of the purchase by him of the note of the ‘Pith. of October, and that this did not-amount to such dealing with the firm, as to entitle him to actual notice. So far as our researches have extended, the cases in which this question has been considered are not numerous, and those in which the decisions have necessarily turned upon it are very few. It is certain that no inflexible rule or standard of dealing, by which all cases-can be governed or measured, has been established. There was a very able discussion of the question in the Court of Errors of New York, in the case of Vernon vs. Manhattan Co., 22 Wend., 183. In that case a note for $5000 was given by Yernon & Co. in December, 1831, payable to Moore. It was endorsed by another firm after Moore’s name, and in that shape was discounted by the bank for Moore’s accommodation. There were then several re newals of it in the same form, with payments reducing the amount, until the 15th of April, 1833, when the note sued on for the balance of $1100 was drawn by one of the partners in the partnership name. The firm of Yernon & Co. continued until the 28th of February, 1833, when it was dissolved, and notice of the dissolution published in the newspapers. There was therefore but one original note, though it was followed by several renewals before the dissolution, and the Court hold that the bank must be considered as having had dealings with the firm within the meaning of the rule requiring actual notice of the dissolution. That decision was followed by the Supreme Court of the same State, in National Bank vs. Norton, 1 Hill, 572, where a note was endorsed by a firm, and discounted by the bank, and several renewals with deductions followed. In that case the original note was discounted on the 24th of January, 1831, and the firm, was dissolved, and notice of dissolution duly published, on the 1st of February, 1831, so that the first, as well as the subsequent renewals took place after the dissolution. The Court held that the note sued on being an attempt to renew an old note of the firm, which lay in bank, and was confessedly binding on the firm, the partners must be considered as dealers with the bank, and that the latter was therefore entitled to actual notice of the dissolution. In Wardwell vs. Haight, 2 Barb., 549, two previous transactions, one consisting of a purchase of goods for cash, and the other a purchase on credit, which was paid prior to the dissolution were held sufficient. In Clapp vs. Rogers, 2 Kernan, 283, two previous very small purchases on credit, one to the amount of $11.03, and the other to $20.40, which had been paid prior to the dissolution were likewise held sufficient, and the Court of Appeals, by Denio, J., said the rule requiring actual notice “proceeds upon a general presumption that one giving credit to a mercantile firm, does so upon the responsibility of the individual partners; and we cannot annex to it a distinction based upon tbe amount of the credit without destroying that certainty which is essential to its utility.” In the subsequent case of City Bank of Brooklyn vs. McChesner, 20 N. Y., 240, there was no public notice of the dissolution by publication in the newspapers or otherwise, and what is said by the Court in that case, upon the question we are now considering, may well be regarded as a mere dictum. Reference has also been made to the cases of Hutchins vs. Bank of Tennessee, Hutchins vs. Sims, and Hutchins vs. Hudson, 8 Humph., 418, 423, 426 ; Grinnan vs. Baton Rouge Mills Co., 7 La. Ann., 638, and Amidown & Co. vs. Osgood & Minard, 24 Verm., 278, in which are to be found decisions or dicta, bearing to some extent upon this question, but we discover nothing in any of them in conflict with the New York decisions we have cited.

The principle, as shoAvn by these authorities, upon which this rule of actual notice is founded seems to embrace the present case. That principle is that credit already raised on the faith of the partnership is presumed to be continued on the same footing, unless special notice of a change be given; and as every partner knows, or has the means of knowing, who are the persons with whom his firm has transacted business, and from whom it has received credit, public policy and natural justice alike demand that he should give to every such party personal and special notice of the withdrawal of his responsibility. As was said by the Chancellor, in Vernon vs. Manhattan Co., the word “ dealing ” when used in reference to this rule “ is merely used as a general term to convey the idea that the person who is entitled to actual notice of the dissolution, must be one who has had business relations with the firm, by which a credit is raised upon the faith of the co-partnership.” It may be true, as was most forcibly stated by Senator Verplancic in the same case, that one who merely takes the negotiable paper of a firm from a third hand, and receives payment through a hank, or passes it away to another, cannot he called a dealer with the firm; and it may well he said that it would he to require impossibilities, to insist that the partners of a large commercial house in extensive business, should he able to know for years who had been the last holder of their paper, or through whose hands it may have passed, and to send to all of them special notice, as dealers. But the case now before us is not of that character, and no such difficulty arises. The plaintiff received the note of October, 1871, with all the subsequent endorsements then upon it, directly from Eose, one of the partners of this firm, then subsisting, and paid him for it its full face value, thus bringing the plaintiff -and the firm into a mutual dealing. It cannot he doubted hut that by this transaction a credit was raised upon the faith of the partnership, that the plaintiff gave them credit, and relied upon the united responsibility of the two partners. Porter, the other ostensible and known partner knew, or had the means of knowing, through whom the money upon this note was raised. The plaintiff dealt in this transaction immediately and directly with the firm, and did not receive the note from a third party, and merely pass it away to another. Eor is there any proof to show that this firm was a great commercial house, engaged in extensive trade, and constantly issuing their negotiable securities, so as to make it difficult for them to know through whose hands their paper may have passed. We are therefore of opinion, this case must he governed by the general rule, and that actual notice of the dissolution should have been given to the plaintiff in order to relieve the defendant, Porter, from responsibility on this check.

It follows there was no error in the rulings upon the prayers contained in the third exception. The evidence offered in the first and second exceptions was also clearly admissible. It was part of the plaintiff’s case to offer in evidence the note of October, 1871, not only to show the consideration for the check sued on, hut to establish a previous dealing with the firm, and to show the circumstances under which he received the note, what he paid for it, and that he, in fact, received it from one of the partners of the firm.

(Decided 28th January, 1880.)

Judgment affirmed, with costs.