Cochran v. Cunningham's Ex'r , 16 Ala. 448 ( 1849 )

DARGAN, J.

The counsel for the plaintiffs in error, in their argument, present three questions: 1st — that one partner has no right, after the dissolution of the firm, to transfer its effects or ehoses in action so as to bind the firm; 2d — that the admissions made by Estill after the firm was dissolved, in reference to the transfer made by him, were illegal proof; 3d— that Dixon was interested in the event of the suit, and therefore incompetent to testify.

1. We do not not deem it necessary to examine how far, or under what circumstances, one partner, after the dissolution of the firm, has the power to transfer the partnership assets, or assign the partnership demands; for ihe rule is well settled, that in a suit at law all the plaintiffs must be entitled to recover, or the suit cannot be maintained; and any matter that will negative the right of one of the partners to bring the suit is sufficient to defeat the action. If, for example, one partner has released the debt, although such release may be a fraud on his copartner, yet-a suit at law cannot be maintained in the partnership name for its recovery, and the party injured by the act of his partner can obtain redress in a court of equity only. Richmond v. Hemppy, 1 Starkie’s Rep. 204; Coll. on Partn. 383; Biggs v. Lawrence, 3 Term. Rep. 383; Jacaud v. French, 12 East. 317.

By joining in the suit the partner who has done the wrongful act, they rely on his right to recover, and must abide by all his acts; and if any one of them would bar the right of one partner, this is sufficient to bar the action. In the case of Jones v. Sikes, 9 B. & C. 532, it was said by Lord Tender-den, that he was aware of no case in which one has been alj^ lowed in a court of law'to rescind his own act on the ground that it was a fraud on the rights of another, whether the party seeking to do this sues in his own name or jointly with the person injured by his act. The principle that all the partners must be entitled to recover, or the action cannot be maintained, is fully recognised in Ihe American courts, and indeed, so far as I have observed, has never been denied where 1he common law of England prevails. Story on Partn. ch. 12, p. 360 to 365; 2 Gallison, 130; 16 Johns. 438. As it is the established rule that all the partners must be entitled to recover, in order to maintain the suit, any act of one partner, whether done before or after the dissolution of the firm, that will bar him, will equally preclude the partnership from bringing an action at law in the name of all the partners. The transfer of the judgment to Cunningham is binding on Estill, and he therefore cannot recover of the defendant on the ground that he had a lien on the judgment for fees due to the firm of Cochran & Estill; and as Estill cannot recover, it follows that a suit at law cannot be maintained in the name of Cochran & Estill.

2. Nor is it necessary for us to examine how far, or under what circumstances, the admissions made by one partner, after the dissolution of the firm,will bind the other partners; for if it be admitted that such admissions could not be received as evidence to bind the other partners, it is very clear they are admissible to show that the partner making them has no right of action, and if this be shown, the whole suit must fail. The admissions of Estill, in reference to the transfer made by him to Cunningham, are evidence in a suit at law, binding on him, and, being binding on him, they are legal testimony in bar of the suit.

3. We come, however, to the conclusion that the court erred in admitting the testimony of Dixon. Although the transfer of the judgment was made to Cunningham alone, the goods with which it was purchased belonged to the firm of Cunningham & Dixon, and the judgment was satisfied by Thomas by his paying the amount of it on a debt due by Cunningham & Dixon to the Bank at Montgomery. The judgment was therefore purchased with the goods of the firm, and its proceeds were paid for the benefit of the firm, and it may be said to the firm. The transfer to Cunningham must therefore be considered as in trust, or for the use of the firm. If the amount of this judgment or any part of it should be recovered against Cunningham, in consequence of anything growing out of the contract of transfer, he would stand as a creditor of the firm to the extent of the recovery, for the reason that money received to the use of Cunningham & Dixon would be recovered of Cunningham alone. Such a recovery would entitle Cunningham to call on Dixon to account for his proportion of the money improperly received by the firm, and which he alone had to refund. Dixon, notwithstanding his opinion that he was in no manner bound to account for any portion of the recovery, is liable to Cunningham for his proportion of any amount that may be recovered of him. He was therefore legally interested in defeating the suit, as he thereby defeated his liability to Cunningham.

For this error, the judgment must be reversed and the cause remanded.

Judge Chilton, having been employed as counsel in the court below, did not sit.