Davidson v. Kelly ( 1851 )

Le Grand, C. J.,

delivered the opinion of the court.

This is an action of assumpsit. It appears, from the evidence, that the appellants sold a quantity of goods to one Thomas Donnelly, who was the partner of the defendant, the latter being unknown to the vendors, as being one of the house conducting business under the name and style of Thomas Donnelly. At the time of the purchase, Donnelly gave his single bill for the amount, which, not being paid at maturity, he gave to the appellants two promissory notes for the amount, signed, Thomas Donnelly. So soon as appellants discovered that Kelly was a partner of Donnelly, they issued an attachment against their goods. Kelly appeared, a declaration was filed, and the suit regularly proceeded against him.

The prayers offered on behalf of the plaintiff, are all drawn inartificially, but we understand the first as asserting the proposition, in substance, that if the single bill was received by the appellants in ignorance of the fact, that Kelly was a secret partner, then its acceptance did not extinguish the original debt of appellants against Kelly, If this be the true construction of the prayer, then we 1hink the county court did right in rejecting it; and if it be not, the court would still have been justified in rejecting it, on the ground that it was likely to mislead the jury.

It is too plain and familiar a principle of law, to require the citation of authorities to sustain it, that the acceptance of a security of a higher dignity, merges and extinguishes the original cause of action. It is clear, therefore, that the acceptance of a single bill of Donnelly, extinguished the original debt. Although, in the case of Moale vs. Hollins, 11 Gill Johnson, the plaintiff became informed of the existence of a secret partner, before he obtained judgment against the ostensible one; yet the court do not seem to attach much importance to the circumstance, for they cite, as authority, the case of Smith, et al., vs. Black, 9th Serg. & Rawle, 142, in which it was expressly held, that the ignorance of the creditor of the existence of a dormant partner, at the time of obtaining a security of higher and greater dignity, did not affect the question of extinguishment.

We think the court erred in the rejection of the second prayer. It, in substance, affirms, that if the jury find the facts stated in it, that the acceptance of the single bill does not bar the right of the appellants to recover. We do not understand the prayer as asserting (for if we did, we would concur with the county court,) that the acceptance of the single bill did not bar the right of recovery on the original cause of action; that is to say, the sale and delivery of the goods; but merely as asserting, that the single bill did not constitute a bar to the recovery of the appellants in this action.

We think the appellants were entitled to recover, if the jury believed the facts, and that that recovery should have been had on the two promissory notes. Whilst there is no doubt that the giving of the single hill extinguished the claim of the plaintiffs, on the original contract, against the defendant, and, also, that in the absence of an express authority, or subsequent ratification of the act, one partner has no power to hind his co-partners by a matter under seal, it is equally clear, the giving of the single bill did not extinguish Donnelly’s claim against Kelly. Had Donnelly paid the claim out of his private funds, he would, of course, have extinguished that claim against his partner, because it would have been paid and gone; but still his partner would be liable to him for his proportion of the amount; or, had Donnelly given the notes of the firm to raise the amount with which to pay the debt, could there be a doubt of the liability of Kelly on these notes? It can make no difference, whether the notes be issued before or after the debt is paid. In one case, the debt would be due to a stranger, and, in the other, to a partner; and, in either case, the active partner Was authorised to issue the notes of the firm to raise the funds to pay the debt. The whole effect of the arrangement was equivalent to one partner paying, out of his own funds, a partnership debt, and the question is, whether he has not a right to indemnify himself out of the assets of the firm? Or, where he has become individually liable, whether he has not the right to use the name of the firm to raise the means to meet this liability incurred on behalf of, and for the interest of the partnership. The articles of agreement in this case, are broad enough to confer the right. Had Donnelly had the notes discounted at a bank, to enable him to take up his single bill, there could have been no doubt of the right of the bank to have recovered on the notes.

We think the court did right in rejecting the third and fourth prayers. The third prayer declares, that the single bill is no extinguishment or release of the liability of Kelly for the “said partnership debt.” Understanding this prayer to refer to the debt arising out of the sale of the goods, for the reasons which we have stated in regard to the first prayer, we think the court did right in rejecting it. The fourth prayer asserts the proposition, that the giving of the promissory notes revived the original debt. In this view we do not concur.

Holding that the court should have granted the second prayer, and that the plaintiffs were entitled to recover on the promissory notes, we reverse the judgment, and award a procedendo.

Judgment reversed!, mid procedendo awarded.