Summary
In Welles v. March, 30 N.Y. 344, the court held that the authority of each of several partners, as agent of the firm, is necessarily limited to transactions within the scope and object of the partnership, and in the course of its trade or affairs.
Summary of this case from Reeder v. LockwoodOpinion
March Term, 1864
Alex. S. Johnson, for plaintiffs.
John Sessions, for defendants.
The action was brought against the defendants March, Coe and Nace (the two latter composing the firm of Nace Co.), to set aside an assignment of the copartnership property, on the ground that it was made to hinder, delay and defraud the creditors of the assignors. Fraud was the only material issue presented by the pleadings; and the court found that there was none in the transaction. The case made, justified no other conclusion. The assignment appropriated the firm assets to the payment of all the partnership creditors; and the fact that the instrument was executed with the intent to prevent one of the firm creditors from getting a preference by execution, and thereby secure an equal distribution of the partnership effects among all the creditors, did not tend to establish the fraudulent purpose alleged.
But one of the partners had absconded, taking with him a large amount of the assets of the firm, and the assignment was made by the other partner. On the ground that the re-assignment was executed by Coe in the firm name, it was first claimed at the trial, that the instrument was invalid, and no interest in the property passed thereunder. The defendant Coe executed it some two months after Nace left, and it was not preferential. But it is urged, however (and this was the view of the court below), that without the consent or authority of his copartner, he had no power to make even an assignment not preferential; and further (which the court did not agree to), that there was no such consent or authority shown.
The right and power of one partner to make a general assignment of all the funds and effects of the partnership, to a trustee, for the payment of debts, has undergone much discussion in the courts. The point was distinctly presented to this court in the case of Robinson v. Gregory et al., decided at the last December term. In that case, two of three partners made the assignment, giving preferences, without the knowledge, consent or authority of the third partner, and in his absence from the country; and he never, in writing or verbally, assented to it, but, on the contrary, dissented. We held the assignment invalid; our judgment proceeding upon the ground that it was not competent for the two partners, without the assent or authority of the third, to make a general assignment of the partnership property to a trustee, for the payment of debts. Our opinion was that no such power could be implied from the partnership relation. Each partner possesses an equal and general power and authority in behalf of the firm, to dispose of the partnership property and effects, for any and all purposes within the scope of the partnership and in the course of its trade and business. As agent of the firm he may sell or mortgage, pledge, apply or otherwise dispose of the firm effects, for partnership purposes; may assign the firm property as a security for antecedent debts, as well as debts thereafter to be contracted on its account; and there are cases holding that his authority even extends to a transfer or pledge of all the partnership effects directly to a creditor, in payment or for the security of a debt due from the company, though the tendency and ultimate effect of such a transaction may be to destroy the partnership business. ( Mabbett v. White, 2 Kernan, 442, and cases cited.) But the authority of each of several partners, as agent of the firm, is necessarily limited to transactions within the scope and object of the partnership, and in the course of its trade or affairs. A general assignment to a trustee, of all the funds and effects of the partnership, for the benefit of creditors, is the exercise of a power without the scope of the partnership enterprise, and amounts, of itself, to a suspension or dissolution of the partnership itself. It is no part of the ordinary business of the copartnership, but outside and subversive of it. No such authority as that can be implied from the partnership relation. It is true, that in Robinson v. Gregory, the assignment preferred some $30,000 of partnership debts; but, as the question is one of power in a less number than the whole of the partners to transfer the entire firm property — not in the course of trade in which the firm is engaged, but in such manner as to terminate the partnership — whether the assignment is with or without preferences, can make no difference. The assignment in the present case was without preference, but the principle of law to be applied to it is not affected by that circumstance.
If, then, the defendant Coe executed the assignment, without the assent or authority of Nace his partner, it was void, and did not operate to pass the title to the firm property to the assignee named in it; and the judgment dismissing the plaintiffs' complaint was erroneous. On the contrary, if it appeared from the acts or declarations of Nace, either before or subsequent to the assignment, that he assented to making it, or that it was made by his authority, it was a valid act, and presented an insuperable obstacle to the plaintiffs' sustaining their action.
On this question the plaintiffs are met by the finding of the court that Nace assented to the making of the assignment, or rather that the letter left with Coe, when Nace absconded, was an authority from the latter to Coe to make it. It is true that the fact of assent is not expressly found; but the acts of Nace, and his communication to his partner, when absconding, is construed as an authority. I think this was the effect of the letter. It was in substance an assent on the part of Nace, and a full authority to Coe to make such disposition of the partnership property as he thought proper. Nace had been the active partner in the concern, and left it largely insolvent. Before leaving he wrote to Coe the letter in question. In it he declares that he could not manage the debts of the firm; that he would be far out to sea before Coe would receive the letter; that he was going to California where he would start again in business with $2,100 of the funds of the firm which he had taken with him, and adds: "I hereby assign you my interest in the business of Nace Co., and Nace Reinnie also," — "Take charge of every thing in our business; close it up speedily." This, I think, under the circumstances, was a full assent on the part of Nace, and an authorization to his partner Coe to make such disposition of the partnership property as should be deemed most expedient to close up the partnership enterprise. "Take charge of everything in our business; close it up speedily;" that is, take upon yourself the entire disposition of the partnership property; close up the partnership enterprise that I have abandoned; and that you may do this effectually, and with power, I assign you my interest in the concern. After this, Nace certainly could not have been heard to object to Coe's disposition of the firm property on the ground that it had not been assented to or authorized by him.
There is no force in the suggestion that evidence of an assent or authority by the non-executing partner was inadmissible under the pleadings. The complaint treated the assignment as the act of the firm, and no charge was made that it was invalid for the reason that it was executed by one of the partners. It was asked to have the assignment declared void on the ground of fraud, and not because Coe had not the power to make it. The latter ground was first assumed on the trial, and was not an issue made by the pleadings. The defendants having this point sprung upon them at the trial, it was quite competent for them to meet it by evidence tending to show that, although the execution of the instrument was the act of one of the partners, it was assented to or authorized by the other.
Upon the whole, therefore, the legal conclusion of the judge, at special term, that the assignment was a valid instrument, and passed the co-partnership property to the assignee, was correct. The judgment should be affirmed.
The ground on which the plaintiffs in their complaint sought to have the assignment set aside and declared void, was that it was made with intent to hinder, delay and defraud the plaintiffs and other creditors of the firm of Nace Co. This, the justice, before whom the action was tried, without a jury, found not to be the fact. The alleged invalidity is now sought to be established on the sole ground of a want of power on the part of Coe to make the assignment so as to bind both partners. It was found upon the trial, both as a fact and a conclusion of law, that the defendant Coe who made the assignment in the name, and apparently, on behalf of both copartners, had authority from Nace, the other partner, to make it. Whether he had any such express authority, depends altogether upon the construction of the letter of Nace of the 19th April, 1856. I think that letter contains sufficient authority to authorize the assignment, and make it a valid and operative instrument as against him. In order to determine what power he intended to confer upon his partner in reference to a disposition of the partnership effects, we have the right to take into consideration the circumstances under which it was written. Nace was then absconding. He had involved the affairs of the partnership in ruin, and had determined to leave the country, and abandon all control over whatever was left. Under these circumstances he writes to his partner, amongst other things, "take charge of everything in our business. Close it up speedily." Also, "I hereby assign you my interest in the business of Nace Co., and Nace Reinnie also;" and further: "Our own debts are maturing, and I cannot manage. Forgive me. You will lose nothing, but it will require much care to get through."
I can not doubt that it was the intention of Nace, by this letter, to give to his partner, whom he was thus forsaking, the entire power, as far as he could, of management, control and disposition of all the partnership effects; nor that such intention is sufficiently expressed in the letter. I do not see how any other construction can be put upon this communication, under the circumstances of this case. This disposes of the whole case, and renders it wholly unnecessary to examine the question as the implied power of a partner, in such a case. The judgment should be affirmed.
All the judges were for affirmance, except SELDEN, J., who thought the letter of Nace was not good as an assignment, for want of consideration; and that as a power it was only an authority to Coe to wind up the business as a partner. He did not vote. Judgment affirmed.