Williston v. Camp , 9 Mont. 88 ( 1889 )

De Wolfe, J.

The first question presented for determination is the correctness of the ruling of the court in permitting the amendment of the complaint, after the evidence was all in, so as to make the complaint correspond with the proofs adduced. This the defendants allege as error, claiming that the amendment changed the nature of the action from one on a promissory note to an action for money loaned, or money had and received, and the amendment called for an answer different from that made to the action on the note. The objection we think specious, rather than real. The amendment asked and granted did not, in our view, change the nature or character of the action. It remained after as well as before one upon the promissory note. The court must have found from the evidence that the defendants were liable upon the note; otherwise it could not have rendered judgment against them. Any doubt as to this is set at rest by the facts which the court actually found and filed in the cause. In one view, the amendment may appear immaterial. If the defendants borrowed the money, and executed their note therefor, the use which they made of the money is no doubt unimportant as affecting their liability to repay it. While this is so, we hold that it was not error in the court to permit an amendment, the effect of which was only to show that the defendants received the benefit of the consideration for which they had executed their note. Besides, our statute is very liberal in the allowance of amendments. The Code of Civil Procedure (§ 112) provides: “No variance between the allegations in a pleading and the proofs is to be deemed material unless it has actually misled the adverse party to his prejudice in maintaining his action or defense upon the merits.” We do not think the amendment in this case could properly mislead or injure the defendant in maintaining his defense on the merits; and the decision of the court, from the facts found, must have been the same, whether the amendment had been allowed or not.

We come next to the consideration of the main question involved in this appeal, which is as to the liability of the defendants on the note sued on in this action. In other words, was it the note of the defendants? The answer to this involves the determination of two other questions. One is, did the assignment made by the defendants on the ninth day of July, 1886, operate, ipso facto, as a dissolution of the firm from that date? If it did, it gives rise to the other question, which is, did Charles D. Camp have authority from his former partners to execute the note in the firm name, or did they afterwards ratify his act by their words or conduct, or both ?

The authorities generally lay down the proposition that a partnership continues in a qualified or limited sense after dissolution; but this, for the purpose only of settling its affairs, collecting its demands, and paying its debts; that for this purpose the persons composing the partnership continue as agents of the partnership, and, unless restricted by agreement among themselves, one of the former partners has the same power in this respect after as before a dissolution of the partnership. But the power is limited to a settlement of past transactions, and does not extend to the formation of new contracts, nor to change the nature or form of existing contracts. Chancellor Kent lays down the principle in the following clear and succinct form: “ 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 a voluntary dissolution, due notice is requisite 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 indorse bills and notes previously given to tbe firm, nor renew a partnership note, nor accept a bill previously drawn on it, so as to bind tbe firm. He cannot impose new obligations upon the firm, or vary the form or character of those already existing.” (3 Kent Com. 63.) The principle here laid down is uniform, and further reference to authority is unnecessary.

On the question whether a general assignment for the benefit of creditors necessarily and of itself works a dissolution of a partnership, the authorities are somewhat scant, and less conclusive. In the present case the court found as a fact that the firm of Camp Bros, was not dissolved by the execution of tbe assignment in July, 1886; but the persons composing the firm agreed upon and signed articles of dissolution after the execution of the note, and during the same meeting or interview. In the absence of evidence to the contrary, all presumptions of law are in favor of the findings made by the court. If the firm of Camp Bros, was dissolved before that time, it must have been done by operation of law, and not by the act — at least, not by the intention — of the partners; for evidently they regarded themselves as partners up to that time, or they would not then have agreed upon and signed articles of dissolution.

Judge Story, in his work on Partnership, in discussing the power of one partner to make a general assignment for the benefit of creditors, questions the authority to do so, and gives as a reason that such a power “would seem to amount of itself to a suspension or dissolution of the partnership.” (Story on Partnership, § 101.) When we analyze this language, we are not certain that the author intended to lay down any absolute and fixed rule that a general assignment for the benefit of creditors, ipso facto, operated as a dissolution of a partnership; otherwise he would not have said that such an assignment operated as a “suspension or dissolution” of a partnership. There is a vast difference between the dissolution of a partnership and a mere suspension in the conduct of its business or operations. The terms are not synonymous, and it cannot be that they were used by so accurate a writer as Judge Story in the same sense. He, no doubt, intended just what he said; and, applying his language to the facts of this case, it may be correctly said that the assignment made by Camp Bros., on the 9th of July, 1886, suspended” the business of that firm, without saying that it dissolved the copartnership. Partnership results from contract; and its dissolution, when not brought about by death, bankruptcy, or some operation of law, rests in the same source — the will or action of the partners themselves.

It would not be difficult to imagine cases where partners might desire and intend to continue a partnership between themselves after a general assignment of all property, and without entering into new articles, or making any new agreement as to the future; and if parties should so act and treat each other, and so deal with others, it would be rather a continuation of than the formation of a new partnership. This view of the nature of a partnership, and the causes which operate as a dissolution, is not without authority for its support, in the ease of Pleasants v. Meng, decided by the Supreme Court of the United States at an early day, the court, speaking on the effect of a general assignment as affecting a dissolution, says: “Where there is no express agreement to make the dissolution, the assignment can only be considered as circumstantial evidence of it, which the defendant is at liberty to repel by contrary proof.” (Pleasants v. Meng, 1 Dall. 380.) In a very recént work on the subject of partnership, the author says: “ An assignment for the benefit of creditors is not necessarily a dissolution of the partnership, but is prima facie evidence of dissolution.” (Parsons on Partnership, § 132.) This we believe a more reasonable, and therefore correct, rule than the one which holds that an assignment, ipso fado, in all cases, operates as a dissolution. It has, however, been held in California that a general assignment operated as a dissolution. (Wells v. Ellis, 68 Cal. 243.) The same doctrine was held in Maine in the case of Simmons v. Curtis, 41 Me. 375; but the question was not directly involved, and its decision was, in part at least, dictum of the court. The case of Bank v. Horn, 17 How. 157, referred to in the California case, is not an authority to the point.

Whatever may be the correct rule on this, there is no doubt upon the other proposition, that after dissolution the partners may delegate to one of their number the authority to execute a note in the name of the former partnership, or they may ratify the act when done, and, if they do either, the firm becomes bound. If they do both, it follows, a fortiori, they are likewise bound. In the present case the court found, as matters of fact, that the defendants were all present when the note was given, and all knew of its execution, and the object and purpose for which it was done; also that they received the benefit of the proceeds by the relinquishment of property which would otherwise have been applied in payment of the debts of the firm. It is impossible to doubt, therefore, but what there was both a delegation of authority to the partner who executed the note, and a ratification of his act after it was done. Numerous authorities could be cited which uphold this proposition, and no authority has been found to the contrary. We refer only to the following: Eaton v. Taylor, 10 Mass. 54; Kelly v. Crawford, 5 Wall. 785; Simmons v. Curtis, 41 Me. 375.

In every view taken of this case, we are of opinion that the judgment of the District Court should be affirmed, with costs, and it is so ordered.

Blake, C. J., and Bach, J., concur.