In re Davis' Estate

• Decision Date: 02 May 1840
• Citation: 34 Am.Dec. 574,5 Whart. 530
• Parties: Estate of DAVIS and DESAUQUE.
• Court: Pennsylvania Supreme Court

5 Whart. 530

34 Am.Dec. 574

Estate of DAVIS and DESAUQUE.

Supreme Court of Pennsylvania.

May 2, 1840

APPEAL.

1. Where the separate note of one partner is taken by a creditor holding the note of the firm, it is a question of intention whether this amounts to an extinguishment of the joint debt. The onus of showing that it is an extinguishment lies upon those who allege it; and it is necessary for them to show a special contract to that effect, or that the joint note was given up; and even where that is the case, the presumption may be rebutted by countervailing proof.

2. After the dissolution of a partnership by agreement, the partner who is authorised to settle the estate, may borrow money on the credit of the firm, for the purpose of paying the debts of the firm; and if the credit is given in good faith, though with a knowledge of the dissolution, and the money is faithfully applied to the liquidation of the joint debts, the creditor has a claim against the firm, and is not to be considered as a creditor merely of the partner borrowing.

3. A and B., partners, dissolved the partnership, B. remaining to settle the business, and shortly afterwards A. & B. made an assignment of the partnership effects to C. and D. The assignment contained a preference to C. for a certain sum " being the amount of accommodation notes or paper and liabilities or responsibilities, and of borrowed money for and on account of the late firm." It appeared that the firm was indebted to C. on three notes, which fell due after the dissolution and before the assignment, and for which new notes were given by C., who received the notes of B. for the same amount. The original notes remained in the hands of C. Between the time of the dissolution and assignment, B borrowed money of C. for the purpose of paying other debts of the firm, and the money was so applied. Held, that C. was entitled to retain the amount for which he was preferred in the assignment, and which included the three notes and borrowed money.

4. Where assignees for the benefit of creditors sold some of the goods at private sale, and delivered them to the purchaser who failed to pay, it was held, that they were chargeable with the amount; it appearing that the credit of the vendee was doubtful, and that the assignors had refused to trust him before the assignment.

THIS was an appeal from a decree of the Court of Common Pleas for the City and County of Philadelphia, in the matter of the accounts of Lewis Desauque and Thomas Taylor, assignees of Nathaniel Davis and Francis Desauque.

In the Court below the accounts were referred to auditors, who made a report, stating the material circumstances of the case, as follows:

" The objections taken by the opposing creditors were as follows:

1. That the assignees were not entitled to claim an allowance for the per centage claimed by them in the shape of guarantee and discount on the sales of stock at public auction and otherwise.

2. That the assignees should be charged with an additional sum per cask, for the wine purchased and taken by one of them.

3. That the assignees should be charged with the amount of a sale made by them to one Stork, for cash.

4. That the assignees were not entitled to an allowance for certain sums retained by them as preferred debts under the assignment.

For the purpose of enabling the Court fully to understand the last of these objections, the auditors report the following facts:

Nathaniel Davis and Francis Desauque, a son of one of the assignees, entered into a partnership, as wine merchants. This partnership was dissolved on the 16th of October, 1830, Nathaniel Davis quitting the concern and leaving Francis Desauque in possession of the store and stock. Francis Desauque was to wind up the business. At the time of the dissolution, certain notes given by the partnership to Lewis Desauque and Thomas Taylor, (the assignees) were outstanding. These notes constitute the preferences mentioned in the assignment. The wine business was continued by Francis Desauque in the same store, and with the same stock, until the 16th of November, 1830; when the assignment was made to the parties whose accounts are submitted. There was also an assignment made about the same time by Francis Desauque of his individual property.

The assignment by the partners contains, among others, this clause:

‘ That the said assignees shall and will pay unto Lewis Desauque the sum of eleven thousand three hundred and ninety-six dollars, being the amount of accommodation notes or paper and liabilities or responsibilities, and of borrowed money for and on account of the said late firm of Davis and Desauque; and in the third place shall and will pay unto the said Captain Thomas Taylor the sum of two thousand nine hundred and seventy dollars and sixty-one cents, deducting the amount of a shipment of flour to St. Thomas, transferred to him by them, being the amount of accommodation paper for which he is liable or responsible for them.’

During the month that intervened between the dissolution of the partnership and the assignment by the late partners, Francis Desauque obtained from Lewis Desauque five hundred dollars, on two checks, one dated the 12th and the other the 15th of November, 1830. These five hundred dollars are embraced by the preference.

Mr. Newlin, the clerk in the store, deposed as to the getting of the five hundred dollars. He also deposed that the five hundred dollars went to lift the notes of Davis and Desauque, falling due after the dissolution, although the entry of this sum was made in F. Desauque's cash book; and that F. Desauque went on doing business on his own account at the same time he was winding up the affairs of Davis and Desauque. Francis Desauque, he further stated, opened a new set of books, in which he entered all sales made by him. In fine, it did not appear, that Francis Desauque, for the month he continued in the business, made any distinction between his own and the partnership property, but mixed up the whole business.

The balance of the preference to Lewis Desauque was made up of the following promissory notes:

One dated June 19th, 1830, at four months, for three thousand dollars. Drawers, Davis and Desauque, payee, Lewis Desauque. This note fell due the 19th-22d of October, 1830, after dissolution and before assignment. It was taken up by L. Desauque by his note at four months for the same amount to F. Desauque; receiving at the same time F. Desauque's note, at the same payment, for the same sum.

One other, dated August 4th, 1830, at ninety days, for two thousand nine hundred dollars. Drawers, Davis and Desauque; payee, Lewis Desauque. It fell due the 2d-5th of November, was taken up, and notes passed in like manner.

One other, dated July 1st, 1830, at four months: drawers, Davis and Desauque; payee, Lewis Desauque. Due the 1st-4th of November, 1830; arranged in like manner. This was for two thousand dollars.

One other, dated September 9th, 1830; at six months, nineteen hundred and ninety-six dollars and thirteen cents. Drawer, F. Desauque; payees, L. Desauque and Son. Though this note bears date as of a day before the dissolution, in point of fact it was not given until after, and for money said to have been borrowed at the time to aid in lifting notes of the firm as they became due. This was deposed to by Mr. Newlin, the clerk.

One other, dated September 6th, 1830, at four months, for one thousand dollars. Drawers, Davis and Desauque; payee, Lewis Desauque. There was no difficulty as to this note.

The preference in favour of Taylor originated upon notes, one only of which was placed under the like circumstances. It is not deemed necessary to particularize the items of his claim, as the principle of the objection taken can be readily understood from the facts already stated.

The auditors are of opinion that there is nothing in the exceptions. They had no difficulty in coming to a conclusion on the three first. The guaranty and discount paid and allowed, was in the usual course of trade, and consistent with the duties which the assignees had to perform. The purchases made by them were at fair prices and in good faith. Better terms could not be had from strangers. Indeed, it was sufficiently in proof that they used every effort to sell to others before they ventured to buy themselves. The sale to Stork was also in good faith. It is not certain that the estate will sustain any loss by this transaction: granting that it must be so, the assignees are not liable. No such laches were proved as would justify a charge of the amount against them.

The fourth objection required more deliberation, and more was given to it by the auditors. On the one hand it was contended, that the giving of notes and borrowing of money after the dissolution, and before the assignment, were to be regarded as the individual transactions of Francis Desauque that Lewis Desauque and Son, in whose favour the note for nineteen hundred and ninety-six dollars and thirty-one cents was drawn, were not preferred under the assignment; that a new credit was given to Francis Desauque by the subsequent arrangements between him and his father, and Captain Taylor; and their original debts by that means extinguished, so that they could have no claim for such on the partnership effects: while on the other it was maintained that the money was borrowed for the purpose of settling up the partnership business; that the notes given by Francis Desauque were merely evidences of renewals not amounting to payment of the others, and were not so intended; that the original securities were not given up; that the partners were liable at the time of the dissolution for the whole amount preferred; that they recognised their liability at the making of...