Opinion
December, 1872.
ERROR to the District Court of Perry county.
The original action was brought in the Court of Common Pleas of Perry county, by John C. Whitaker, against Samuel Feigley as the survivor of James E. Davis, partners of the late firm of Feigley Davis.
The action was brought for money loaned; and the petition alleges that the plaintiff, "on the 15th day of February, 1866, while said James E. Davis was in full life, and while said partnership was in existence and doing business as such, he, at the request of said firm, through one of its members, James E. Davis, lent to said firm two hundred dollars, which said firm, through its said agent, then promised to pay in a few days, with interest," etc.
The defendant, Feigley, answered, admitting the existence of the late firm and the survivorship, but denying each and every other allegation of the petition.
On the second trial of the case to a jury, exceptions were taken by the defendant to the admission of certain evidence, and also to the charge of the court as given to the jury, and to certain refusals to charge as requested.
A verdict having been rendered for the plaintiff, the defendant moved the court to set aside the verdict, and for a new trial, upon the grounds that the verdict was contrary to the evidence; that the court erred in admitting testimony and in its charge to the jury, and in refusing to charge as requested; which motion being overruled, the defendant excepted, and placed on the record, by bill of exceptions, all the testimony offered in the case, as well as the several matters excepted to by him during the trial.
On petition in error, the District Court of Perry county affirmed the judgment of the Common Pleas; and this action is prosecuted to reverse the judgment of affirmance, etc.
Kelly Marsh, for plaintiff in error:
An acknowledgment of debt, after dissolution of the firm, by one partner is not binding on the other partner. Hackley v. Patrick, 3 Johns. 528; Palmer v. Dodge, 4 Ohio St. 21; Walden v. Sherburne, 15 Johns. 409; Smith v. Ludlow, 6 Johns. 267; Hopkins v. Banks, 7 Cow. 650; Geeson v. Clark, 9 Cow. 57; Baker v. Stackpole, 9 Cow. 419.
The paper relied on by the defendant in error is neither a promissory note nor an account.
Lyman J. Jackson, for defendant in error:
An admission made by a partner, after dissolution, in reference to a matter occurring before dissolution, is admissible in evidence against all the partners. 1 Phil. Ev. 413, and notes; Gay v. Brown, 8 Met. 100; 3 Kent, 59; 1 Taunton, 104; Johnson v. Beardsley, 15 Johns. 3; Smith v. Ludlow, 6 Johns. 207; Myers et al. v. Standart et al., 11 Ohio St. 29; Cady v. Shepherd, 11 Pick. 400; Lewis v. Woodworth, 2 Comst. 512.
1. Although the dissolution of a partnership revokes the implied authority of each partner to bind his copartners by any new promise or engagement, yet it leaves upon each partner the duty, and continues to each the right, of doing whatever is necessary to collect claims due to the partnership, and to adjust, settle, and pay its debts.
2. That in so far as a partner, after dissolution, acts within the scope of such limited authority, his acts and admissions are admissible as evidence to charge his copartners.
3. In an action against A., as survivor of B., partners in the late firm of A. B., it having been shown that certain dealings between the plaintiff and the firm were unsettled at the date of its dissolution, it is competent for the plaintiff to prove, as against the defendant, that the deceased partner B., after the dissolution, upon adjustment with the plaintiff of such unsettled business, admitted that there was due the plaintiff, on account thereof, the amount claimed in the action.
On the trial in the Court of Common Pleas, the plaintiff offered testimony tending to prove, that, in the year 1865, the firm of Feigley Davis was doing business as merchants and produce dealers, at New Lexington, Ohio; that the business of the firm was under the general management and control of James E. Davis, one of the members of the firm; that the defendant, the other member, resided at Cincinnati, and occasionally visited their place of business; that, during the summer of 1865, the plaintiff was engaged in buying wool at said town; that he kept his wool money on deposit with Feigley Davis, and took in the wool purchased by him at their store, where the money was paid to the plaintiff's customers by Davis, who also adjusted their accounts; that plaintiff purchased wool, on commission, for Cone Rickley, of Columbus, and that the firm of Feigley Davis received a portion of his commissions for their services and the use of room; that the firm of Feigley Davis was dissolved in September, 1865, and that plaintiff, about the same time, quit the purchasing of wool; that the firm of Feigley Davis was succeeded by the firm of Feigley, Davis Co., composed of the partners of the old firm and one Perry A. Edington; that the new firm continued the same business, and was under the charge of Davis. No settlement was shown to have been made between the plaintiff and Feigley Davis before the dissolution of the firm. Davis died in August, 1866. The plaintiff also offered testimony to show that after the dissolution of the firm of Feigley Davis, and both before and after the death of Davis, he had in possession a statement, in the handwriting of Davis, as follows:
"February 15, 1866. Feigley Davis, to J. C. Whitaker: Dr. To wool money, $200."
To the introduction of the testimony touching this statement, the defendant excepted. No testimony was offered by the defendant.
Thereupon the defendant asked the court to charge the jury, that if they should find that Whitaker did have in his possession a paper writing in these words: "February 15, 1866. Feigley Davis, to John C. Whitaker: Dr. To wool money, $200;" which was written by Davis after the firm of Feigley Davis had been dissolved by the introduction of Edington, a new member, the same can not be regarded, and is not evidence to be considered by the jury of an indebtedness to Whitaker and against Feigley, which charge the court refused to give, but did charge that it was competent, but not conclusive, to charge the other party; and further asked the court to charge the jury "that if they should find that after the dissolution of the firm of Feigley Davis, and Feigley no longer a member of the firm, Davis made any acknowledgments, or admissions or statements, of an indebtedness of the late firm to the plaintiff, the evidence could not be regarded by them, as a late partner can not bind the old members of the firm by any admissions after the dissolution," which the court refused to charge, but did charge the same was competent, but not conclusive.
The bill of exceptions also shows, that, after verdict, the defendant moved for a new trial, upon the ground (among others) that the court erred in refusing to charge the jury that said paper writing "was not evidence of an indebtedness of said firm to Whitaker, even if in the handwriting of one of the firm; and in charging that the same was an item of evidence to go to the jury, to be considered by them, and upon which they might render a verdict or not, according as they might be of opinion that said paper writing was sufficient or insufficient, in connection with other testimony, upon which to found a verdict in favor of or against the plaintiff."
The rulings of the court below mus tbe reviewed in the light of the whole case, as developed in the record. The principal question thus presented, is, whether or not the admission of a partner, made while engaged in the adjustment of unsettled partnership business, but after the dissolution of the firm, can be used as evidence to charge the other partners in relation to such business.
Reported cases upon this subject are in conflict, with a majority, perhaps, apparently in support of the negative of the proposition. But when considered in the light of what we conceive to be the true rule, the weight of authority, we think, is in favor of the affirmative.
It can not be disputed that the implied authority of a general partner to bind his copartners to any new engagement, contract, or promise, although within the scope of the partnership business, is absolutely revoked by the dissolution of the partnership.
But it is nevertheless true, when not otherwise agreed upon, that an implied authority continues in each partner after the dissolution to act for himself and his copartners in the matter of winding up and adjusting the business of the firm; and while acting within the scope of such limited authority, we can see no reason why the several members of the firm should not be bound by the acts and admissions of each other, as in other cases of agency. The maxim, qui facit per alium, facit per se, should apply in its full force.
Doubts may often arise in particular cases as to whether, or not a particular act or admission falls within or without the scope of such limited authority. But it is quite clear to our minds that the settlement of mutual accounts, pre-existing between the firm and its customers, and the adjustment and ascertainment of balances on claims and demands in favor of and against the firm, are within the scope of such agency.
We do not think that a paper writing, made by a partner after dissolution of his firm, and purporting to be a statement of accounts between the firm and a stranger, or of a balance due him, would alone constitute even prima facie proof of indebtedness against the other partners. But with proof aliunde that an account was current between such person and the firm before and at the time of its dissolution, such statement would be admissible as tending to prove the state of accounts between them at the date of the dissolution. Or, if proof be made of certain dealings between the firm and a third person, unsettled at the time of the dissolution, then an act or admission made by a partner after the dissolution, if made in the matter of adjusting such business, is competent to be given in evidence for the purpose of proving a claim founded on such dealings against all the partners.
In Wood v. Braddock, 1 Taunton, 103, Mansfield, C. J., said: "Clearly the admission of a partner, made after the partnership has ceased, is not evidence to charge the other in any transaction which occurred since the separation; but the power of partners, with respect to rights created pending the partnership, remains after the dissolution. Since it is clear that one partner can bind the other during all the partnership, upon what principle is it that the moment it is dissolved, his account of their joint contracts should cease to be evidence?" And Heath, J., said: "Is it not a very clear proposition that when a partnership is dissolved, it is dissolved, not with regard to things past, but only with regard to things future?"
Though it is not necessary in this case to approve, to the full extent, the doctrine of Wood v. Braddock, it is nevertheless true that the rule of that case is fully approved by all the English common-law decisions, and is adhered to in many American cases. See Joslyn v. Smith, 13 Vt. 353; Parker v. Merrill, 6 Greenl. 41; Mann v. Locke, 11 N. H. 246; Cady v. Shepherd, 11 Pick. 400; Gay v. Bowen, 8 Met. 100; Brewster v. Hardeman, Dudley, 138; Wilton v. McNeile, 4 Dowl. Ry. 7; Pritchard v. Draper, 1 Russ. M. 191; Whitcomb v. Whiting, 2 Doug. 352; Jackson v. Fairbank, 2 H. Bl. 340; Shelton v. Cooke, 3 Mumf. 191; Simpson v. Morrison, 2 Bay, 533. See also Smith v. Walker, 6 Johns. 267; Bridge v. Gray, 14 Pick. 55; and Hackley v. Patrick, 3 Johns. 536.
It must be admitted, however, that the broad doctrine of Wood v. Braddock has been disapproved in many American cases, especially by the courts of New York, Kentucky, Illinois, Indiana, and Missouri; and also by the Supreme Court of the United States in Bell v. Morrison et al., 1 Pet. 351. But it will be observed that no well-considered case, either in England and America, has denied that, in the absence of express stipulations to the contrary, an implied authority after dissolution is continued in the several partners to wind up the unsettled affairs of the partnership.
In Bell v. Morrison et al., it is expressly declared that "each partner may, therefore, bind the partnership by his contract in the partnership business; but he can not bind it by any contract beyond those limits. A dissolution, however, 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 right of the partner can extend no further than to settle the partnership concerns already existing, and to distribute the remaining funds. Even this right may be qualified and restrained by the express delegation of the whole authority to one of the partners."
This case ( Bell v. Morrison) is much relied on as an authority against the power of a partner, after dissolution of the firm, to bind his copartners, by his act or admission, in any transaction whatever. The question decided arose on a plea of the statute of limitations, and we think the doctrine of the case is by no means as broad as that contended for. Justice Story, in delivering the opinion, said: "The question is not as to the authority of a partner, after dissolution, to adjust an admitted and subsisting debt (we mean, admitted by the whole partnership, or unbarred by the statute); but whether he can, by his sole act, after the action is barred by lapse of time, revive it as against all the partners, without any new authority communicated for that purpose. We think the proper resolution of this point depends upon another; that is, whether the acknowledgment or promise is deemed a mere continuation of the original promise, or a new contract springing out of, and supported by, the original consideration. We think it is the latter." And again, he says: "The light in which we are disposed to consider this question is, that after a dissolution of a partnership no partner can create a cause of action against the other partners, except by a new authority communicated to him for that purpose. . . . When the statute of limitations has once run against a debt, the cause of action against the partnership is gone. The acknowledgment, if it is to operate at all, is to create a new cause of action, to revive a debt which is extinct." There is nothing in this decision that conflicts with the rule we have stated. And it may be said that most of the cases relied upon as supporting a contrary doctrine arose in the same way, and were decided upon the principle, that an acknowledgment or promise to pay a debt, barred by statute of limitations, does not revive the old debt, but creates a new one; and hence it is, that we stated above that the decided weight of authority is, that a partner, after dissolution, to the extent that is necessary to settle pre-existing claims against the firm, may so exercise his authority as to bind all the partners; but never, without new authority from them, can he create a new cause of action against them.
This court, in Palmer v. Dodge, 4 Ohio St. 21, held that the dissolution of a partnership worked an absolute revocation of all implied authority in either of the partners to bind the other to new engagements or promises made with persons having notice of the dissolution, although springing out of, and founded upon, the indebtedness of the firm; and in Myers et al. v. Standart et al., 11 Ohio St. 29, it was held, that under an averment of due demand and notice of the dishonor of a bill of exchange, drawn by a firm, the declarations of one of the partners made after dissolution (no notice, however, of the dissolution having been given to the payees), showing an acknowledgment of liability thereon, and a promise to pay the amount of the bill, were admissible in an action against the other parties. But in each of these cases the doctrine is distinctly affirmed, that while the dissolution revokes the implied authority of each partner to incur new obligations for his fellows, it leaves upon each the duty, and continues to each the right of doing whatever is necessary to collect claims due the partnership, and to adjust, settle, and pay its debts. And it is said in Palmer v. Dodge, that "this right of each of the partners to participate in the settlement of its concerns, can not be interfered with by his copartners without subjecting them to the controlling power of a court of equity."
The ascertainment of the amount due to or from the partnership on account of unsettled transactions, is a necessary step in the winding up of its affairs, and within the authority vested by implication in each partner after dissolution.
We are, therefore, of opinion that the testimony objected to by the plaintiff in error was competent, and that the jury, having found from other testimony in the case, that, at the date of the dissolution of the firm of Feigley Davis, there were unsettled dealings between the plaintiff and the firm, and that the paper referred to was made by Davis upon the settlement of such dealings, were authorized to find the amount due the plaintiff thereon from the admission of Davis so made.
It may be proper to add that the proof in this case did not strictly conform to the allegations in the petition, but as no objection has been made upon the ground of variance, we do not deem it our duty to consider that question.
Judgment affirmed.
I do not concur in the affirmance of the judgment. As I regard the case, there was no evidence of an indebtedness of the firm but the admissions of a partner after the dissolution of the partnership. The court below, I think, erred in holding that such admissions were admissible to prove an indebtedness of the firm.
In support of the conclusion to which I have arrived, I refer to the following authorities: Palmer v. Dodge, 4 Ohio St. 21; Hackley v. Patrick, 3 Johns. 536; Walden v. Sherburne, 15 Johns. 409; Gleason v. Clark, 9 Cow. 57; Van Keuren v. Parmelee, 2 Comst. 523; Miller v. Neimerick, 19 Ill. 172; Winslow v. Newlan, 45 Ill. 145; Brady v. Hill, 1 Mo. 315; Little v. Ferguson, 2 Mo. 598; Yandes v. Lefavour, 2 Blackf. 371; Daniel v. Nelson, 10 B. Mon. 316; Hamilton v. Summers, 12 B. Mon. 11; Searight v. Craighead, Ib. 135; Owings v. Low, 5 Gill Johns. 134; Shelton v. Cocke, 3 Munf. 191; Chardon v. Olephant, Tread. 685; Brewster v. Hardeman, Dudley, 138; Bishop v. Patterson, 2 McLean, 87; Bell v. Morrison, 1 Pet. 351; 3 Kent's Com. 58; Story on Part., secs 323, 324.