Summary
In Serviss v. McDonnell it was "to pay one-third of the liabilities of the late firm," without specifying the several or particular liabilities to which the promise should attach.
Summary of this case from Spingarn v. RosenfeldOpinion
Argued October 3, 1887
Decided November 29, 1887
Nathaniel C. Moak for plaintiff. N.P. Hinman for defendant.
The plaintiff was the owner of two notes, each made by John McDonnell, Perry Kline and Thomas Harvey, who thereby jointly and severally promised to pay to his order, in one case $500, and in the other $2,000, in one year from April 1, 1873, with interest. The makers constituted the firm of McDonnell, Kline Co., and the notes were given in consideration of money loaned to them in that capacity. One of the makers, John McDonnell, died, and the complaint alleges that thereafter aud in February, 1878, his widow, Lucy McDonnell, Perry Kline and Thomas Harvey formed a new firm under the same name of McDonnell, Kline Co., and in consideration of a transfer to them of the business and property of the old firm, agreed to pay into said new firm and for the purpose of carrying on said business, certain large sums of money, and to assume and pay all the obligations, debts and liabilities of said former firm of McDonnell, Kline Co., among which debts, liabilities and obligations were the two promissory notes above referred to; that no part of either of said promissory notes has been paid, except that the interest has been paid to April 1, 1883, and for the principal sum, with interest, the plaintiff asked judgment against Lucy McDonnell and Thomas Harvey.
The action was commenced February 7, 1884, and the defendant, Lucy McDonnell, alone answered, in substance denying all the material allegations of the complaint and setting up that the alleged cause of action did not accrue within six years. Upon the trial at the circuit before a justice of the Supreme Court and a jury, the only proposition seriously litigated was the liability of Mrs. McDonnell, and to establish that parol evidence alone was given. Its force need not be considered, for at a subsequent stage of the trial she put in evidence written instruments containing the only agreement by which she can be bound, and the question upon the whole case was finally submitted to the trial judge as one of law. He not only denied the defendant's motion for a nonsuit, but also refused to rule, when subsequently requested by her counsel, "that the plaintiff was only entitled to recover against her one-third of the amount due upon the notes," and upon the plaintiff's application directed a verdict in his favor upon the whole sum claimed, and judgment was entered. Upon the defendant's appeal to the General Term, that court modified the judgment by reducing it to one-third, and, from the judgment so modified, both parties appeal to this court, the plaintiff against the modification, and the defendant because it was not altogether set at naught.
The plaintiff's appeal is so fully met by the reasoning of the learned judge at General Term that little need be said. An incoming partner is not as of course, liable for the debts of the firm, whether he succeeds an outgoing partner by purchase, or whether upon the death of one partner he joins with the survivors in carrying on the business by virtue of a new partnership. He may become liable by agreement, but an undertaking on his part alone, or in connection with others, that the new firm will pay the debts of the old firm, can be enforced only by the old firm, and the creditors could not sue for the breach of it. The evidence which led the General Term to modify the judgment was a written instrument dated February 25, 1878, executed by Lucy McDonnell, her son Willard McDonnell, Perry Kline and Thomas Harvey. By its terms these persons became partners under the name of McDonnell, Kline Co., to continue the business theretofore conducted by the former firm of that name, for such time as they should agree, with a capital equal to the amount of the capital of the old firm, and it was declared that Mrs. McDonnell and Willard McDonnell, as parties of the first part thereto, were to pay one-third of the liabilities of the late firm of McDonnell, Kline Co., and were jointly to receive one-third of the profits of said business, to pay one-third of the expenses of conducting it and bear and pay one-third of all losses which might happen, and furnish one-third of the capital.
The parties of the second and third parts were each to receive one-third of the profits, to furnish one-third of the capital, bear and pay one-third of all expenses in conducting said business, and one-third of all losses which might happen or occur. The learned court held that the defendant's liability must be measured by this agreement, and could not exceed one-third of the debts of the old firm. In this conclusion the learned judge was clearly right. The agreement contained the terms on which the defendant became a member of the firm, and expressed the full extent of her obligation, whether it inured to the surviving members of the old firm or to its creditors. The plaintiff's appeal must, therefore, in any view of the case, fail. If he could maintain an action at all, it could be only for the one-third which came within the terms of the agreement. But the defendant also appeals. Her contention is that the plaintiff's contract was with the members of the old firm; that there has been no change of credit, not even a communication with her, much less a promise on his part to accept her as his debtor. Upon the record before us that contention is well founded, and the adjudged cases show that without some one of these things being done, or some analogous act on the part of a creditor, he cannot maintain an action on such an agreement as that by which the defendant bound herself. Here it is apparent that the obligation of the defendant to her copartners is the only foundation for the plaintiff's action, and there is no circumstance in the case to exempt him from the general rule of law that one who is not a party to a contract cannot sue in respect of a breach of duty arising out of the contract. Moreover, our decision in Wheat v. Rice ( 97 N.Y. 296), is justly relied upon as controlling the disposition of this case. In that the undertaking of the defendant was to "assume and pay one-quarter of all the indebtedness" of the firm named. In this the defendant jointly, with her son, promised "to pay one-third of the liabilities of the late firm." The cases cannot be distinguished, and the principle applied in that cited would seem to require the reversal of the judgment, if the defendant was in condition to avail herself of it. It is obvious, however, from the record, that no such question was raised at the trial term, and, so far as appears, the point is taken for the first time in this court. This will not do. Had it been raised in season it might perhaps have been obviated. In such a case it is well settled that an exception not taken in the court below cannot be available on appeal. The defendant's appeal must, therefore, also fail, and the judgment of the General Term be affirmed
All concur.
Judgment affirmed.