Coleman vs. Lansing and others

Coleman vs. Lansing and others. Where one purchases the interest of one of the partners, in a partnership, and takes his place in the firm, not agreeing to pay, at once, all the debts of the firm, but only that he will “assume" the share of the liabilities of the firm which belong to the outgoing partner, the intent and meaning of such assumption is to indemnify the outgoing partner. If the latter is obliged to pay any of the old debts, under such circumstances, then, and then only, he is entitled to maintain his action. At the time of the purchase by the defendants of an interest in a partnership firm, there was a balance of $200 due from the firm to R. The account was kept along with the new firm, and was one continuous ; and payments were made to R. more than sufficient to extinguish such balance of $200, without any specific appropriation by either party, other than such as arose from the charges and credits in the continuous account and the appropriation thereupon assumed by the rules of law, Held that the rule in such a case is, that the payments are to be applied to the earliest items in the account, although the payments are made by the new firm, some of whom are not liable to the creditor for the debt extinguished by their application. And that this is especially so, where the incoming partner has assumed his share of the old liabilities. APPEAL from a judgment on the report of a referee. On the 17th day of July, 1868, the plaintiff was a partner with one Barnes, and with him owned a' fruit jar patent, and was carrying on business with him under the name of Coleman & Barnes. Coleman sold his one-half interest to the defendants, and they took his place in the firm under an agreement, in these words : “Whereas, S. Coleman is equal owner of the patent fruit jar in the copartnership of Coleman & Barnes, and, whereas, Messrs. W. -V. K. Lansing and W. R. Lansing are desirous of buying an interest in said jar ; therefore, for, and in consideration of the sum of ten thousand dollars, the receipt whereof is hereby acknowledged, I hereby sell, assign, and make.over, all my right, title and interest, to one undivided half of said patent, and also to all claim of any profits or interest in the present year’s business. The Messrs. Lansing to assume all liabilities, and to receive all the profits January 1st, 1868, and to share with Mr. Barnes precisely as said Coleman would have done, had not this agreement been entered into. S. Coleman, W. Y. K. Lansing, Wm. R. Lansing.” The action was founded on the last clause of this agreement. At this time a contract existed, dated December 31, 1867, between Coleman & Barnes of the one part, and Southwick & Reed of the other, by which S. & R. were to make jars for C. & B. at a certain price per gross, and deliver the same by May, 1868, and C. & B. were to pay for the same by good notes at 30 days. The goods had not been delivered on. the 17th of July; C. & B. were, however, indebted for jars before then delivered, in the sum of $10,000. Before September 8,1868, Barnes sold out to Klinck, and the business was transacted under the name of Klinck, Lansing & Co., and on the 8th of September, 1868, this firm gave their note to Southwick & Reed" for $10,000 on account of this contract. It had not been paid, but Mr. Reed testified he received it to apply on C. & B.’s account, in existence 17th July, 1868. The note was discounted, sued, and afterward taken up by Mr. Lansing, who now has it; and other indebtedness accrued to Southwick & Reed under the contract for goods purchased and delivered to K., L. & Co., and also to C. & B. Coleman, the plaintiff, had never paid any part of the indebtedness to S: & B. ' Prior to July 17, 1868, C. & B. employed one Bussell as travelling agent to sell goods on commission, and under the same arrangement he continued to work for Barnes & Lansing, and Klinck, Lansing & Co. The account, ■ during these employments, was continuous, and after July 17th, the defendants paid Bussell, from time to time, more than enough to pay the sum due from Coleman & Barnes, but at the close of the season K., L. & Co. owed Bussell more than $300, and the plaintiff paid him $300. , ' The referee found “that the amount of the liability of said. Coleman & Barnes to said Bussell, on the 17th day of July, 1868, was satisfied and extinguished by the subsequent payment of the defendants to said Bussell as aforesaid.” Also, “ that the balance aforesaid found due to said Southwick & Beed not having been paid, nor any part of it, by the plaintiff, no right of action has accrued to him to recover the same of the defendants. That no right of action has accrued to the plaintiff to recover the amount of $10,000, due from said Coleman & Barnes to said Southwick & Beed on the 17th of July, 1868, for which said Klinck, Lansing & Co. subsequently gave their note to Southwick & Beed as afore-' said;” and gave judgment for the defendants. The plaintiff, after judgment, appealed to this court. F. L. Durand, for the appellant. 6r. F. Danforth, for the respondents. [MAJORITY — By the Court, Talcott, J.] By the Court, Talcott, J. The referee was correct in holding that the plaintiff could not maintain his action on account of the debt due to Southwick & Beed until he had been compelled to pay the same, or some part thereof. [Fourth Department, General Term, at Buffalo, June 27, 1873. Mullin, Talcott and S. D. Smith, Justices.] By the agreement, the defendants purchased the interest of Coleman in the partnership of Coleman & Barnes, and took his place in that firm as of the first of January, 1868. They did not agree to pay at once all the debts of the firm of Coleman & Barnes. They only assumed the share of the liabilities of the firm which belonged to Coleman. The intent and meaning of such an assumption on the part of an incoming partner is merely to indemnify the outgoing .partner. If the outgoing-partner is obliged to pay any of the old debts, under such circumstances, then, and only then, he is entitled to maintain his action. (Pars, on Part. 434-437.) As to the balance of $200 due to Bussell at the time the defendants assumed the place of Coleman, it appears that the account was kept along with the new firm, and was one continuous account, and payment had been made to him more than sufficient to extinguish the balance which was due at the time of the change in the firm, without any specific appropriation by either party other than such as arose from the charges and credits in the continuous account, and the appropriation thereupon assumed by the rules of law. In such a case, where there is an outgoing partner and the account is continued as one continuous account, the rule is, that the payments are to be applied to the earliest items in the account, although the payments are made by the new firm, some of whom were not liable to the creditor for the debt extinguished by their application, and this is especially so where the incoming partner has assumed his share of the old liabilities. (Pars, on Part. 432, and cases cited.) ■ It does not therefore appear that the referee has committed any error, and the judgment must be affirmed.