Ellicott v. Nichols , 7 Gill 85 ( 1848 )

Martin, J,

delivered the opinion of this court

In this case an action of assumpsit was instituted in Baltimore county court, by the appellee against the appellants, as partners, trading under the name of Jonathan Ellicott and Sons, for the recovery of a promissory note, given by the firm to the appellee, on the 29th of May 1838.

The appellant pleaded, non assumpsit, and the statute of limitations, and it appears from the record, that the plaintiff at the trial below, to relieve the case from the operation of the bar, created by the act of limitations, relied, mainly, upon the letter of Nathaniel Ellicott, of the 4th February 1843, and upon the admissions and assumptions, supposed to have been made by the said Ellicott with respect to this debt, in a conversation held with Mrs. Anne Nickolls, in the autumn of 1842.

It appears from the testimony exhibited in the bill of exceptions, that the firm of Jonathan Ellicott and Sons, was dissolved on the 9th of July 1839, and that Benjamin H. Ellicott, one of the partners, was empowered to collect the assets, and settle up the business of the partnership;' and the dissolution of the firm, and the selection of Benjamin II. Ellicott, as an agent, to wind up the concerns of the house, was, on the same day, communicated to the public through the medium of the Baltimore newspapers.

The promissory note in controversy, was drawn by the appellants on the 29th of May 1838, payable twelve months after date; and it therefore appears, that the admissions relied on by the appellee, to take this case out of the statute of limitations, were made not only after a dissolution of the partnership, but after the statute had attached to the claim. And in this posture of the case, the counsel for the appellants have contended, that Nathaniel Ellicott had, at that period, no power to bind his former co-partners, by his acknowledgments and promises, so as to deprive them of the defence of the statute of limitations. Upon the point thus presented for the consideration of the court, there has been, as on almost every question connected with the statute of limitations, a most embarrassing conflict of judicial opinions; but, after a careful examination of the prominent cases bearing upon this subject, we have reached the conclusion, that the proposition advanced by the counsel for appellants is correct, and that on this ground the judgment of the court below must be reversed. We proceed to state the reasons by which we have been conducted to this conclusion.

In the case of Duval against Peach, decided in 1843, 1 Gill, 172, the defendant relied on the statute of limitations, and asked the court to instruct the jury :

“ That if the jury should find from the evidence, that the agreement was made, and the purchase money paid on the-30th of December 1826, and that the original writ in this cause did not issue until the 1st of March 1840, that then this action-was barred by limitations, unless they should find some subsequent assumption or promise by the defendant, either to repay the money, or perform the contract. ’ ’

The county court granted this prayer. The action of the court below was ratified by this court, and they announce the principle :

“ That in Maryland, to remove the bar raised by the statute of limitations, there must be such an acknowledgment of a subsisting debt, as is equivalent to an express or implied assumpsit or promise to pay.”

In the case of Frey against Kirk, decided in 1832, 4 G. & John., 509, the statute of limitations was pleaded. It was proved at the trial, that the defendant admitted the debt was due, but said “the plaintiff might save himself the trouble of suing him, as he had taken the benefit of the insolvent laws.” The discharge under the insolvent laws, to which he referred, imparted to him, in fact, no protection. But the statement was held insufficient to remove the bar; and the court said:

“Every acknowledgment to take a case out of the statute; should be of such a character, as that an implied promise may arise therefrom.”

We consider it, therefore, perfectly clear, in accordance with the principles enunciated in the cases to which we have just adverted, that a plaintiff who seeks to extricate a case from the operation of the statute, must show a new promise within three years prior to the institution of the suit, either express or implied. It is not the mere acknowledgment of a subsisting indebtment which removes the bar. Where a debt is admitted to be due, the law raises a promise to pay it. And it is this new promise, either made in express terms, or deduced from an acknowledgment, as a legal implication, which is to be regarded as re-animating the old promise, or, as imparting vitality to the remedy, which, by lapse of time, had become extinct, and thus enabling the creditor to recover upon his original contract.

In the case of Little against Blunt, 9 Pick., 492, the court said :

“ If the debt remained, the remedy was gone, and there was no subsisting cause of action. The new promise, therefore, is a new cause of action; for without it there was no cause of action. * * * « * But it is not necessary to declare upon the new promise. According 1o the established rules of pleading, the plaintiff had the right to declare on the original promise, and when the statute of limitations was pleaded, he might reply the new promise. When the pleadings assume this shape, the original promise is, apparently, the cause of action, but it is the new promise alone that gives it vitality; and that, substantially, is the cause of action.”

In the case of Keplinger against Griffith, decided in 1830, 2 Gill and Johnson, 296, and recently recognised by this court, as authoritative, in the case of Cross vs. Carter, the Court of Appeals say:

<x It was ruled by this court in Oliver vs. Grey, 1 Harr. and Gill, 204, that the acknowledgment of the debt, with a naked refusal to pay, or a refusal accompanied with an excuse, for not paying it, which, in itself, implies an admission that the debt remains due, and furnishes no real objection to the payment of it, is sufficient to take a case out of the statute of limitations;” and it has been supposed that the rule thus stated, is incompatible with the proposition announced by this court in Prey against Kirk, and Duval against Peach, that, to take a case out of the statute, there must be a new promise, either express or implied. We do not think so.”

The principle embodied in the fourth resolution, in Oliver vs. Grey, was probably transferred to that case, from the case of Swan against Sowell, 2 Bar. and Ald., 761, where Bayley, Justice, said:

“The question, in these cases, always is, whether the admission, where no express promise to pay is made, be sufficient for the law to raise from it an implied promise. If a party admits a debt, and does not say that it is satisfied, and refuses to pay it, alleging, at the same time, an insufficient excuse for not paying it, the law will, in these cases, raise an implied promise to pay the debt then acknowledged to be due.”

And we consider the doctrine announced in Oliver vs. Gray, in Keplinger vs. Griffith, and in Swan against Sowell, as the mere enunciation of the principle, that if a party admits a debt to be due, but at the same time refuses to pay it, upon insufficient grounds, the law will raise a promise to pay it, in invitum, and against the will of the debtor. But so far from enfeebling, it fortifies the position, that nothing less than a new assumpsit, express or implied, will be sufficient to remove the bar interposed by the statute of limitations, after it has once operated upon the demand.

We have seen that the partnership of the appellants was regularly dissolved on the 9th of July 1839, more than three years anterior to the period when these alleged acknowledgments were supposed to have been made by a member of the firm; and the doctrine upon this subject is fundamental, that from the moment the partnership terminates, the partners become distinct persons with respect to each other, and that consequently, one partner can have no power to subject, by his acts or declarations, his former associates, to new obligations, burdens or responsibilities.

In 3 Kent’s Com., 62, it is said :

“The power of one partner to bind the firm, ceases immediately on its dissolution, provided the dissolution be occasioned by death, or bankruptcy, or by operation of law; though in cases of voluntary dissolution, notice is necessary, to prevent imposition on third persons, who might continue to deal with the firm. The partners from that time become distinct persons, and tenants in common of the joint stock. One partner cannot impose new obligations on the firm, or vary the form or character of those already existing.”

In Bell vs Morrison, 1 Pet., 370, Mr. Justice Story, when speaking upon this subject, says:

“ By the general law of partnership, the act of each partner during the continuance of the partnership, and within the scope of its objects, binds all the others. It is considered the act of each and of all, resulting from a general and mutual delegation of authority. Each partner may, therefore, bind the firm by his contracts, in the partnership business; but he cannot bind it by any contract beyond those limits. A dissolution puts an end to the authority. By force of its terms it operates as a revocation of all power to create new contracts; and the rights of partners, as such, can extend no further, than to settle the partnership concerns already existing, and to distribute tiie remaining funds.”

It is unnecessary to cumulate authorities upon this familiar subject. The principle is fully established, that the power of adjusting the unsettled affairs of the partnership, and as a portion of this authority, the right to collect and pay the outstanding and subsisting debts of the firm, survives the dissolution, as a necessary power, liable as all partnerships are, to arbitrary and sudden terminations; yet with this qualification, and subject to this exception, those who formerly were partners, stand to each other, after the dissolution, as if the association had never been formed.

The promissory note, which forms the subject of the present dispute, was a firm debt, drawn by the appellants during the continuance of their partnership, and for the payment of which, they were therefore originally responsible, in solido. This is conceded. But the counsel for the appellants have insisted, that the defendants were exonerated from their original responsibility, for this demand, by force of the statutory bar, in June 1842, and that they cannot be deprived of the protection afforded by the statute, and subjected to a new liability, with respect to this debt, by the acknowledgments and promises of a former partner, made subsequent to the dissolution of the partnership, and after the action of the statute upon the claim had been fully consummated.

In the case of Atkins against Tredgold, 2 Bar. and Cres., 23, Bayley, Justice, said :

Ci Here the statute appears to have attached, before the payment was made by Robert Tredgold, and therefore John Tredgold, being at that time protected, could not be subjected to any new obligation by the act of Robert.”

In the case of Sigourney against Drury, 14 Pick., 391, the court discriminate between a part payment by one of several promissors of a note, within the legal period, and a payment after the statute has attached; and say :

“ We consider it a material circumstance, that the payment was made before the statute took effect, and do not mean to give any opinion, as to the effect of payment of interest or principal by one, to affect the liability of others, after the parties are, in fact, exonerated by lapse of time, and the operation of the statute. There is an obvious difference between the effect of a payment within the term, which shall continue an existing liability in force, and such payment made after the liability is barred, to revive and create a new liability.”

The cases to which we have just referred, recognise the proposition, that by withdrawing from a joint debtor the protection afforded him by the statute, you subject him to a new liability, and it is this principle which is conclusive against the attempt of the plaintiff in this cause, to revive the action against the appellants, by the acknowledgments of Nathaniel Ellicott.

After the statute of limitations has operated upon a claim, it is supposed, in the eye of the law, to have been satisfied. Those who formerly occupied the position of joint debtors, covered by a common obligation, no longer stand in that relation to the creditor, or to each other. There is no means of enforcing against them, the barred demand. The act, promise, or acknowledgment, which deprives the parties, thus situated, of the benefit of the statute, and subjects them to the payment of a debt from which they were exonerated, practically and necessarily imposes upon them a new liability. And it is perfectly immaterial whether this is accomplished by considering the new assumpsit, as creating an independent and substantive cause of action, upon which the creditor must specially declare, or as restoring vitality and vigor to the remedy, which, by lapse of time had become powerless and useless.

The power thus to implicate and bind the firm, is not to be considered as remaining in any one of the partners, after the expiration of the partnership. It would be a solecism to affirm, that the continuing power to adjust outstanding and subsisting debts, which we have seen survives the dissolution of the partnership,- carries with it, as incidental, the authority to revive, as against others, a demand, which, in legal contemplation, is presumed to have been paid, and which is not to be regarded as a subsisting debt, until it has been made so by a new promise.

The authorities upon this branch of the law, are numerous and contradictory, and it is proposed only, to examine a few of the leading cases, relied upon by those who maintain, that an acknowledgment of a subsisting indeblment, by one co-promissor or partner, will remove the bar with respect to the others, even after the statute has operated upon the claim.

The leading case on this subject, and upon the authority of which the more modern cases of Perham vs. Raynal, 2 Bing., 306, and Barleigh vs. Scott, 8 B. & Cres., 36, were determined, is that of Whitcomb against Whiting, 2 Dougl., 652, decided in the King’s Bench in 1781.

It was an action on a joint and several promissory note, executed by the defendant and several others. The defendant pleaded the statute of limitations, on which issue was joined. At the trial, the plaintiff established the note, and, to take the case out of the statute, proved payment of interest,-and part of the principal, by one of the other pasties to the note, within sis years. Upon tbis evidence there was a verdict for the plaintiff.

Lord Mansfield, on discharging the rule for a new trial, said:

“ The question here is,-only, whether the action is barred by the statute of limitations? When cases of fraud appear, they will be determined by their own circumstances. The payment by one is payment for all, the one acting virtually for the rest;, and in the same manner, an admission by one is an admission by all, and the law raises the promise to pay, when the debt is-admitted to be due.”

The correctness of this decision has been sometimes questioned in England, notwithstanding the commanding influence of the name of Lord Mansfield in Westminster Hall. But, we think, without just case. The vindication of the opinion is to be found in the explanation given to it, by Mr. Justice Bayley, in Atkins against Tredgold, 2 Bar. and Cres., 23, that the part payment of the principal, and the payment of the interest, relied on to take the case out of the bar, was made within the legal term, and before the statute had attached. Until the statute had barred the demand, the promissors were subjected to a joint and common responsibility; and under such circumstances it might well be maintained, that a payment made by one of the parties to the' note, was a payment made for the benefit of all. Wittes, ./., therefore properly remarked:'

“ That the defendant had the benefit of the partial payment,- and must therefore be bound by it.”

In the case of Brandham against Wharton, 1 Bar. and Ald., 468, Lord Ellenborough, after repudiating the authority of Jackson vs. Fairbank, 2 Hy. Blac., 340, says, with respect to the case of Whitcomb vs. Whiting, 2 Dougl., 652 :

“That the acknowledgment was not, indeed, by the party liimself, but by one of the parties bound, and who could be called upon for contribution.”

Can it be affirmed, that a defendant is benefited by the pay-ment of a- debt which- he has not admitted to be due, and which, in law, he is under no obligation to pay? Or that one co-promissor who pays a debt barred by the statute, against the" consent of his co-debtor, can maintain against him an action-for contribution?" We think not.

Upon this point, Mr. Justice Story, in a note to his Treatise on Partnership, sec. 323, says:

“It is not correct to assert, that payment by one partner, after a dissolution, of any debt, as a supposed partnership debt, binds the other partners. They have the right to say, that it never was, or was not at the time of the payment, an existing partnership debt. Suppose it had been already paid, or extinguished, how is the partner liable to pay it again. It is assuming the very point in controversy, to insist that a debt, once barred by the statute of limitations, is not extinguished, if voluntarily revived by the acknowledgment of one of the partners.”

In Peaselee vs. Breed, 10 New Hamp. Rep., 48, the action for contribution was sustained upon the circumstances of the case. But the court say :

“ Had it appeared that Peaselee was at any time discharged by the operation of the statute of limitations, and that he, or his administrator, after that, refused to avail himself of the defence, and voluntarily paid money which he could not at the time have been compelled to pay, it would have presented a very different question.”

We infer, therefore, from the remarks of Willes, Justice, in 2 Dougl., 652; from the reasoning of Lord Ellenborough, in Brandham vs. Wharton; and from what was announced by Mr. Justice Bayley, in Atkins vs. Tredgold, that the decision in Whitcomb vs. Whiting, rested upon the fact, that at the period when the partial payment was made, the statute of limitations had not acted upon the demand, and that there was therefore, with respect to the debt, a continuing joint liability. It is upon this hypothesis alone, that one of the joint debtors could be considered as virtually the agent of the others.

In the case of Pease against Hirst, decided in 1829, 10 Bar. and Cres., 122, it appeared, that interest on the note had been paid annually by Hirst, one of the makers. The statute of limitations never attached. And it was held that it was not a bar, as interest had been paid on the debt within six years, by one of the four persons jointly liable.

In the case of Channell against Ditchburn, decided in the Court of Exchequer, in 1839, 5 Mees and Wel., 494, it was held:

“That payment of interest by one of the makers of a joint and several promissory note, though made more than six years after it became due, was sufficient to take the case out of the statute of limitations, as against the other maker.”

Parker, Baron, so ruled, but observed :

s ¿ That it does seem a strange thing to say, that where a person has entered into a joint and several promissory note with another person, he thereby makes that other his agent, with authority, by acknowledgment or payment of interest, to enter into a new contract for him.”

With regard to this case, it may be said, that if the doctrine announced by the court be correct, the counsel for the appellants were warranted in invoking it, as an authority on the side of the proposition for which they contend. For the principle is established in the law of partnership, that after the dissolution of the firm, one partner' cannot bind' his co-partners by a new contract.

But we apprehend, that the error of the'learned Baron consisted in his not discriminating between a payment of interest^ made before and after the statute had attached. In the former case, a payment by one of the makers of a promissory note,might be regarded as a payment by all, because at the time of the payment, the parties were jointly liable for the debt, and one might therefore be considered as the agent of the other, with respect to the debt.

The condition and relation of the parties is changed, as soon as the bar of the statute'has become complete. They are no longer bound' for the debt. It is impossible to maintain, that a partner or maker of a promissory note, is, in law, liable for the claim after the statute of limitations has operated upon it. He may'become responsible, but it is by force of a new promise.

It was the opinion of Lord Tenterden, in Martin and Bridges vs. Elmore, 3 Car. and Paine, 83:

That the acknowledgment made by a partner, who was not himself liable at the time when he made it, was not sufficient to take the case out of the statute of limitations, -so as to charge his co-partner.

The case of Goddard vs. Ingram and Wartnaby, decided in the Queen's Bench, in 1842, 3 Gale and David., 46, was cited by the counsel for the appellee.

It was there held, that a payment made by one partner, after the dissolution of the partnership, on account of a partnership debt, and after six years had elapsed, without any acknowledgment of the debt, was sufficient to take the case out of the statute of limitations, as against the other partner, though the jury found that the payment was fraudulently made, against his consent, and in concert with the creditor, to revive the debt. And it must be conceded, if that, case could be regarded as authoritative, it would be conclusive upon the point now under consideration.

But we cannot recognise the ruling of Lord Denman, as containing the correct doctrine upon this subject.

In Whitcomb vs. Whiting, Lord Mansfield anticipated a case like this, and said, when cases of fraud appear they will be determined by their own circumstances. And certainly the legal proposition is perfectly clear, that from an acknowledgment tainted and vitiated by fraud, the law would infer no promise.

We have examined the record in Ward against Howell, reported in 5 Harr. and John., 60, and find that the point raised by this exception, was not presented in that case for the consideration and judgment of the Court of Appeals.

It was an action of assumpsit, brought by the appellees against the appellant, and Chandler and Raison, to recover the sum of $188.43, alleged to be due by them as partners.

The defendants confessed the promises alleged in the declaration, subject to the opinion of the court, on the following statement of facts:

“ It is agreed that the co-partnership existed between Peregrine Ward, Philip P. Raison, and Francis B. Chandler, from a period prior to the signing of the paper, hereafter mentioned, till the fall of 1814, at which time the said co-partnership was dissolved. That on the 17th of August 1815, after the dissolution of the co-partnership, and after the knowledge of such dissolution on the part of the plaintiffs, Philip F. Raison, one of the co-partners aforesaid, subscribed the paper hereto annexed, in the manner as thereby appears. It is submitted to the court, whether the signature of Philip F. Raison, made as aforesaid, is evidence to prove the existence of the debt against the said Peregrine Ward.”

It appears that the single question raised by the case stated for the determination of the court, was, whether the admission of one partner, made after the dissolution of the partnership, was evidence to prove the existence of the debt against the other partners.

Upon this point the court said :

“ The evidence was not sufficient to charge the partnership with a debt, though it would be sufficient to take the debt out of the statute of limitations.”

The observation of the court with respect to the statute of limitations, is, of course, a dictum; and the language used is so general, that we cannot assume that the learned court intended to intimate an opinion, that the admission of one partner would be sufficient to remove the bar, in a case where the statute had attached.

. The question, then, is to be treated as an open one in Maryland; and we consider the safe and sound doctrine to be, both upon principle and analogy, that the acknowledgment of one partner, of a subsisting partnership debt, if made subsequent to the dissolution of the partnership, and after the statute of limitations has operated on the demand, is not evidence against his co-partners, so as to deprive them of the benefit of the statutory bar.

Upon this ground we reversé the judgment of the county court.

We desire to be understood as expressing no opinion, with reference to the sufficiency of the acknowledgments, relied on by the appellee to take the cause out of the statute of limitations; and the view we have taken of the defence, presented by that statute, renders it unnecessary to decide the various questions which were agitated in the argument of the cause,

JUDGMENT REVERSED, AND NO PROCEDENDO AWARDED.

Dorsey, J., dissented.

The appellee afterwards, at the same term, moved for a writ of procedendo, to enable him to re-try the cause, and supply further evidence upon the subject of limitations. That motion is still depending.