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41 Jones & S. 467

Rust v. Hauselt

The Superior Court of New York City · decided 1876-06-05

<p>I. PARTNERSHIP.</p> <p>1. Individual debt.</p> <p>1. Notes, ob indorsements of the firm in payment thereof; (a) One partner has no power, without the assent of his copartner, to give to his individual creditor, in payment of an individual indebtedness due by Mm, a note drawn by Mm in the firm name, or an indorsement made by Mm in the firm name.</p> <p>(1) Assent—burthen of proof as to.</p> <p>(a) Creditors must, in this State, show the assent (Dobs v. Halsey, 16 J. R. p. 38).</p> <p>3. Settlement by one partner with a debtor of the firm.</p> <p>1. When not binding on the firm, so as to call upon the other partners to falsify it by particular allegations of mistake or fraud.</p> <p>(a) Individual transactions. It is not so binding when it comprises individual transactions, wMch the parties engaged in the settlement knew should not enter into the firm , accounts.</p> <p>(1) Debtor remitted in such case to his pri/me obligation.</p> <p>H. PLEDGEE.</p> <p>1. Cessation of rights as such.</p> <p>When the proceeds of the pledge and charges against them are carried by mutual consent into general accounts with the pledgor.</p> <p>HI. ASSIGNEE IN TRUST FOR BENEFIT OF THE CREDITORS OF A FIRM.</p> <p>1. Accounting.</p> <p>(a) Action for, by one of the partners against his copartner and the assignee.</p> <p>1. Application op above principles.</p> <p> Held, </p> <p>1. That the assignee could- not" charge against the' proceeds of the assets of the firm, a note drawn by the defendant partner, and indorsed by him in the firm name, and by him given the assignee (before the assignment) to secure his individual debt due by him to the assignee, it not appearing that the plaintiff partners had assented thereto.</p> <p>3. That notwithstanding a settlement made between tlm defendant partner and the asSignee, yet as the assignee was allowed to charge in the settlement such a note so given, he was thereby remitted to his prime obligation to account for the proceeds of the trust, and the plaintiff partner was not called on to falsify it by particular allegations and mistakes.</p> <p>3. That the assignee was chargeable with the proceeds of property of the firm, which prior to the assignment he had received, and, by mutual consent, carried, with the charges thereon, into general account with the firm, although the property was originally pledged to him by one member of the firm as security for an individual indebtedness.</p> <p>(1) The proceeds and charges thereon having been carried into general account with the firm before the assignment, his right as pledgee ceased, and upon the making of the assignment be became liable thereon as trustee for such proceeds.</p> <p>(a) The effect is either an increase of the assets of the firm, or a diminution of its indebtedness to the assignee.</p>

Relies on Dob & Dob v. Halsey

Decided 1876-06-05

By the Court.—Sedgwick, J.

¶1The learned judge on the trial, gave final effect to the accounting between the trustee defendant Hauselt, and defendant Ranche. I tahe it, he was led to this result not because the plaintiff was not entitled to open the discharge given by Ranche, but because the burden of proof being, as he considered, upon the plaintiff to give cause for opening it, he had failed to satisfy the judge’s mind by a preponderance of evidence. Indeed, the mass of plaintiff’s evidence on this point was remarhably vague, obscure and tangled. So far as the case is affected by the testimony as to the specific dealings between defendant Hauselt and the firm, the plaintiff gives no satisfactory evidence upon which an account between them *474could be made. The defendant Hauselt, however, testified to what, in absence of explanation by proof of other facts, would show that whatever were the specific dealings between him and the firm, he did not owe him three thousand dollars. He presented his own ledger, and said it showed the indebtedness. But the balance against the firm was made by charging it with a debt due by an individual partner Bancke, in the amount of five thousand dollars and interest incurred before the firm was formed. The basis for this being done, was that at a former time Bancke, to secure his individual debt, had given his own notes with the firm name, indorsed by himself. In the leading case of Dob v. Halsey, 16 Johns. 38, Justice Spencer said that the law in this State requires ‘ ‘ the separate creditor, who has obtained the partnership paper for the private debts of one of the partners, to show the assent of the whole firm to be bound while in England the burden of avoiding the security is upon the firm. .

¶2In the present case the circumstances were at least suspicious, and the plaintiff testified without proof or intimation to the contrary, that he never knew of the indorsement. If, then, all the statements of the account that. might be made upon the testimony for plaintiffs be disregarded it will appear that at the time the defendant Bancke gave the receipt in discharge of defendant Hauselt, the amount of indebtedness given in the accompanying statement as three thousand dollars was greater than it should be. As the testimony stands, I do not think justice can be done on this, appeal by modifying the judgment. Additional evidence may affect the merits. As to one point I am particularly in doubt. By the evidence of Bancke, it appears that in the transaction, as stated by him, of the wire gauze, a note of one thousand dollars of the firm was given up by Hauselt. The evidence *475does not show whether that was due besides the note of the firm, for one thousand dollars dated August 12, 1873.

¶3I am of opinion, that although, as matter of evidence, the statement made by Hauselt, and the receipt thereupon by Rancke, was prima facie evidence against the firm, yet upon it appearing that the item of three thousand dollars was incorrect for the reason stated, the settlement was not such that the plaintiff was called upon to falsify it by particular allegations of mistake or fraud. It would be binding upon the plaintiff as a settlement on the ground that in it Rancke represented the firm, from his authority as partner. This authority would, however, be negatived upon proof that the settlement comprised individual transactions, which both Rancke and Hauselt knew should not enter into firm accounts. Thereupon the defendant Hauselt is held to his prime obligation to account for the proceeds of the trust property.

¶4At the best for the defendant Hauselt, if it is granted that the proof shows that the individual indebtedness of Rancke was at one time secured by mortgage of his property, part of which was put in as his share of the capital stock of the firm, Rancke could never pay his individual debt wholly out of property of the firm, not included in the mortgage.

¶5The transaction of the wire gauze did not remain in such a state that the rights of Hauselt were those of pledgee, and therefore that he was not responsible as pledgee under his liability as trustee. At least, the present evidence shows that the proceeds of the gauze had been taken by general consent into the account with Hauselt, before the trust was created, and the result was an increase of the assets of the firm, or a reduction of its indebtedness to Hauselt.

¶6Under the facts of the case, I think Hiere was an *476implied promise that Hauselt should be compensated for his services in the execution of the trust.

¶7Judgment reversed and new trial ordered.

¶8Speir, J., concurred.

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