Englis v. Furniss ( 1855 )

W00DRUFF, J.

In the view that I take of the right of the appellant to maintain this action, it is not necessary that I should consider the question whether the agreement between Brown and Furniss vested a present interest in Furniss at the time of the execution and delivery thereof so as to make him a joint owner of the steamboat Bhode Island, at the time when the repairs in question were made, — for my conclusion is, that assuming such joint ownership of the boat, the plaintiff cannot maintain this action.

In the first place I deem it quite clear that the plaintiff, by virtue of the assignment to himself by his copartner Brown, acquired no right which he and Brown jointly had not before the assignment was made. The claim to recover for the repairs, if any existed, against Brown and Furniss, was vested in Brown & Englis, and whatever defences existed as against the latter firm in favor of Furniss could not be defeated by Brown’s assignment to bis partner. The form of the action in respect to parties may be altered by such assignment, but in respect to the original title to recover from Furniss, he has a right to treat it as standing upon the footing of a copartnership claim.

In the next place it may be observed that this is not an action by Englis founded upon his right as a copartner to compel Brown (or Brown & Furniss) to restore copartnership funds or property applied by him to the use of Brown & Furniss, and which is necessary for the payment of the debts of the firm of Brown & Englis, or requisite to his indemnity against such debts, and to the payment to himself of all his share in the capital and profits of the last named firm. Conceding as above suggested, that Brown & Furniss were joint owners of the steamboat, and as such liable to third persons under the terms of their agreement as partners in the transactions relating to the steamboat Rhode Island, and conceding that (notwithstanding the agreement of Brown to make the repairs in question himself) the firm of Brown & Englis by doing the work became creditors of Brown & Furniss in equity in such a sense that Englis cannot be prejudiced by any private arrangement between Brown & Furniss respecting the manner in which, or party by whom, the repairs should be paid for, it is no doubt true that Englis may sustain an action against Brown, to which Furniss would be a proper defendant, in which an account should be taken ; and if upon such account Brown were found indebted to Englis after the payment of their partnership debts, Brown & Furniss would be held liable to the extent of the repairs done, to make him whole. Be this as it may, this is not such an action, nor is it in any respect of that nature. It is nothing more nor less than an action to recover the value of the work and materials, and the sums of money paid and applied by Brown & Englis in the repairing of the steamboat of Brown & Furniss, and there is no averment in the complaint or suggestion in the prayer thereof, which places the title to recover upon any other ground than sifeply that one firm (the defeadants) are indebted to the other firm (the plaintiffs); and in respect to such indebtedness the defendants are under this complaint in precisely the same position as if no assignment had been made to Englis. It is true that since this court is a court of equity as well as a court of law, the complaint may be said to be a complaint in equity, and in respect to parties to the action, the suit is free from objection in form, but it still remains an action by one copartnership against an alleged other copartnership, in which one partner is common to both firms, to recover an alleged debt by the latter to the former, upon the single allegation that such a debt exists. I do not think it necessary to consider whether the action can be at all sustained upon this mere allegation without some averment that shows that the fund which the plaintiff avers to have come to the possession of Brown & Furniss is necessary to the just settlement of the affairs of Brown & Englis, irrespective of the fact that Brown assigned his interest in the claim to him, or if he rested his claim upon that assignment, then that as between Brown & Furniss it ought to be paid over by them to Brown. Whether these averments ought to be inserted in the complaint or might be dispensed with, it seems to me quite clear that the claim of the plaintiff necessarily and from its very nature brings into view all the equities existing between the parties, and the moment it appears that as between Brown & Furniss it is inequitable that the fund should be taken from the latter firm, Englis cannot require its payment without showing a higher equity. Brown is his partner and he cannot claim such payment, nor can Englis make such claim through Brown — neither can he separate himself from Brown, and escape the effect of the rule that notice to one partner is notice to all, without showing some equity that is peculiar to himself.

It is not denied that Brown undertook to make the repairs himself. It is found by the referee, and the evidence clearly warranted it, that upon a settlement between Brown & Furniss, the latter has advanced to Brown enough and more than enough to cover the whole amount. *

At law there could be no recovery by Brown & Englis against Brown & Furniss under these circumstances, because Brown cannot sue himself, and because at law Bi'own cannot become indebted to himself, and so at law (as insisted by the plaintiff’s counsel) there can be no set-off of a debt due by the copartner against a copartnership claim, nor will the fraudulent application of the copartnership claims to the private debt of one partner defeat a recovery by the firm. But where, by reason of the membership of the one partner in both firms, the alleged creditor firm comes into equity for relief, they come to do equity as well as to seek it. The complaining plaintiffs come also upon their own equities, which are alleged to be prejudiced. These equities cannot be ascertained, nor can it be discovered what is requisite to the doing of equity, without ascertaining what is equitable as between all the parties.

In Bailey v. Bancker (3 Hill, 190), where one stockholder sued his associates (the statute having in principle established a relation between themselves and Siso as to third persons) for a contribution, Bronson, J., in giving the opinion that the action could not be sustained, says — “ they may go into chancery for an account and have the claims of all parties settled upon equitable principles. So where a necessity to go into chancery arises from the fact that two firms have one or more common members, the rule that whatever assets arose out of the business of the one firm shall be deemed to belong to them, though it consists of an indebtedness by the other firm, does not over-ride the equity of the partners in the latter to compel the common partner to do justice to them.”

The case of Jacand v. French (12 East, 317), goes to a great length in affecting a copartnership by means of what is done with another firm having with the former a common member ; and when such common member had agreed with the drawer of a bill that his last named firm should pay it, and acting for such firm had received securities out of which funds were realized for the purpose, it was held that his other firm being holders of the bill could not recover of the acceptor. As to him the bill was satisfied, and he could not, by uniting with his partners in the last named firm, maintain the action, although not a dollar had come to their hands, and although the other partners were ignorant of the arrangement. In some respects that case resembles the present. The firm of Englis & Brown cannot divest themselves of the consequences of Brown’s knowledge that the repairs they were making were done for his benefit, and in performance of his express undertaking to do them himself, and therefore, as before, when compelled to come into equity, the equities existing between Furniss & Brown can only be overcome by showing a higher equity in favor of Englis; so far as his claim rests upon Brown’s equity he must fail. He cannot, therefore, in my judgment, maintain the action upon any ground, unless be shows that upon a settlement with Brown, this money is necessary to the adjustment of their accounts. I do not, in this view of the subject, mean to exclude the idea that where a partner in the one firm by his dealings with another firm in which he is also a member, has diverted partnership property in such wise as to amount not •only to a withdrawal of capital, but to a contravention of the copartnership articles, the injured partner may not have a bill to compel its restoration for the purposes of the trade, or that a court of equity will not in general treat the assets of a firm as a fund devoted to the payment of copartnership debts and the fair settlement of the accounts between the partners, and marshal them accordingly wherever they obtain proper jurisdiction for that purpose, but the plaintiff has not placed his present claim upon that footing, nor shown any facts warranting a judgment founded upon such an equity. He comes as assignee of Brown’s interest in the claim, insisting that he has become such creditor of Brown & Furniss, and seeking to recover on that ground, not for the copartnership purposes of Brown & Englis, but for his own sole use.

Another view of the subject seems to me to pwesent a like obstacle to the plaintiff’s recovery. Furniss, by force of the covenant of Brown to make the repairs himself, and in virtue of the advances made to Brown which render it inequitable that he should be required to pay the money, has become entitled in equity to every defence which Brown himself could make to an action by Englis to recover for these repairs, and Brown, by uniting with Englis in the action, could not deprive him of this right, — and what Brown could not do directly he cannot accomplish indirectly by an assignment to Englis upon which he may sue alone. Suppose then Englis had filed this complaint against Brown & Furniss without averring any assignment by Brown to himself, it seems to me clear that Fur-niss, upon showing Brown’s agreement to make the repairs, and that he had paid or advanced to Brown moneys sufficient and more than sufficient upon a due accounting between them to cover this claim, might successfully insist that until Englis established a right to compel Brown to restore the money for the protection of his equities as a copartner, he could not recover. Furniss, under such circumstances, cannot in equity be compelled to pay this money to be enjoyed by Brown in common with Englis, and as the case may be, to come into Brown’s pocket in the division of profits between them; and as before suggested, Brown’s assignment to Englis does not drive Furniss from this position.

If it be suggested that Furniss has his remedy over against Brown, the answer is obvious — a court of equity will not, where full justice can otherwise be done, compel a party to resort to such circuity of action: and besides this, the proofs showed without contradiction that Brown failed in July, 1851, and before his assignment of this claim to Englis, and is (in his private business) insolvent. The report of the referee, though it contains no specific finding of that fact, exhibits a finding in support of that conclusion. I hold it inequitable that Brown, an insolvent, should on the 7th of August, 1851, (the date of his assignment to Englis), take from Furniss moneys which, as between Brown & Furniss, the former was bound both at law and in equity to pay, and throw them into the hands of his firm of Brown & Englis, who are not insolvent, where they would (for aught that appears irrespective of the artifice resorted to, viz., Brown’s assignment), have been given back to Brown himself or his representatives as a dividend of the copartnership effects. Nothing less than higher equities shown by Englis as copartner, existing independently of any assignment by Brown to him, can entitle him to insist upon any such payment by Furniss.

These views do not conflict with the rule that one partner may not pay his own debt with the property of his firm or that he may not release a debt due to his firm in consideration of a benefit derived to himself alone, or that an individual debt of a partner cannot be set off against a copartnership claim — and there are other cases no doubt in which a firm standing in a court of law upon their joint title cannot be defeated by the transactions of one of the partners in his private dealings.

But where the firm are compelled to come into a court of equity, to assert the copartnership title, that tribunal will take care that in recognizing the joint title of the firm and enforcing it against the act of one of the members, no injustice is done, and where such member is insolvent, it will not take money from a third person which such member ought to pay, unless protection of the rights of the other parties makes it necessary.

In the present case, stating it most strongly in the plaintiff’s favor, it is the plain duty of Brown to pay for these repairs. He having become insolvent, Purniss has the right to insist that his interest in the copartnership should be so applied. Indeed it may better, perhaps, be said that Brown has himself made that application by repairing the ship at the yard of the firm. Nothing in the case impeaches the good faith of Furniss in this matter. Brown was engaged in shipbuilding on his own account — in the department of repairing. Englis was his partner — and doubtless, Englis was entitled to claim from Brown & Furniss that the bill for repairs be regarded as co-partnership assets. But the circumstance that the repairs were so done, does not warrant any imputation upon Furniss of collusion with Brown to appropriate the firm property to Brown’s private purposes. Even if he is to be deemed chargeable with notice of Brown’s partnership with Englis in the business of repairing, he had reason to believe that what was done, was done under Brown’s covenant with him, and it is not bad faith on his part that he assumed that Brown caused these repairs to be made upon his own responsibility to Englis, and upon a full understanding with him on the subject.

Had Brown when he agreed to make these repairs had no interest in the ship, but having made a covenant to repair the vessel upon terms agreed upon, had taken her into his own possession for that purpose, and the repairs had been made by himself and Englis, the right of Englis & Brown as partners to recover for such repairs, notwithstanding advances made by Furniss to Brown in good faith and in reliance upon such covenant, would not have been free from doubt; and it appears that although Furniss’ advances were not on terms applicable to this one vessel, they were made in reliance upon Brown’s two agreements, only one of which was in any sense performed— and Furniss is clearly, I think, entitled to the benefit of them as an advance upon that relating to the Rhode Island, for it was made in reliance on that agreement, though not solely on that agreement. But I do not pursue this inquiry nor rest my conclusion upon any solution of the doubt suggested.

The precise grounds upon which the decision of the referee was based do not appear by his report. His conclusion of law is given in sweeping terms without informing us of the particular conclusions from which his result was derived. But for the reasons above stated, I think his decision was correct, and should be sustained by an affirmance of the judgment.