McAreavy v. Magirl

• Decision Date: 14 April 1904
• Citation: 99 N.W. 193,123 Iowa 605
• Parties: J. J. MCAREAVY, Appellee, v. JULIA MAGRIL, Appellant
• Court: Iowa Supreme Court

99 N.W. 193

123 Iowa 605

J. J. MCAREAVY, Appellee, v. JULIA MAGRIL, Appellant

Supreme Court of Iowa, Des Moines

April 14, 1904

Appeal from Delaware District Court.--HON. H. C. PLATT, Judge.

ACTION in equity to enjoin collection of a judgment. Decree for plaintiff, and defendant appeals.

Reversed.

Bronson & Carr for appellant.

Ransier & Everett for appellee.

OPINION

WEAVER, J.

The nature of the controversy here presented may be stated as follows: In the year 1889 one D. R. Magirl and the plaintiff McAreavy, were partners in business. The firm borrowed the sum of $ 200 from Julia McEnany (now Julia Magirl, the defendant herein), and made to her a promissory note for that amount, signed in the firm name. Thereafter, and while said note was still outstanding and unpaid, the partnership was dissolved, D. R. Magirl taking the firm property and agreeing to pay the firm debts, of all which the defendant had notice. Later Magirl married the defendant. On July 28, 1898, about eight years after the maturity of the note, Mrs. Magirl brought suit thereon against McAreavy, without making her husband a defendant, and obtained judgment in the sum of $ 416 and costs. The judgment has never been paid. On November 9, 1900, more than ten years after the maturity of the note which had been put in judgment against McAreavy, the latter began this suit, alleging that by virtue of the terms of dissolution of partnership by which Magirl assumed and agreed to pay this debt the latter became the principal debtor, and plaintiff thereafter stood in the relation of surety only. He further alleges that, plaintiff having failed to put the note in judgment against her husband, her right of action therein has become barred by the statute of limitations, and, having thus negligently allowed the principal debtor to escape liability, the plaintiff, as surety, is also released, and upon this theory he asks to have the collection enjoined, and the judgment canceled.

As members of the partnership, both plaintiff and D. R. Magirl were equally bound as principal debtors to the payee of the note. When Magirl took the partnership assets and assumed payment of the partnership debts, then, as between him and the plaintiff, he became liable as the sole principal, and plaintiff became his surety for the payment of said note. This proposition is upheld by all the authorities, and is not denied by the appellant. When we advance the next step, and inquire whether this change in the relations existing between the partners affects in any manner their relation to the holder of the note, we find a marked variance of views. The courts of several states--notably New York and Michigan--hold to the view that, when a partner retires from a firm under such an agreement, and notice thereof is brought home to the creditor, the latter is bound to recognize the new relations between the members of the late partnership, and any indulgence thereafter shown to the partner assuming the debt which would have the effect to discharge an original surety will operate to discharge the retiring partner from further obligation. Millerd v. Thorn, 56 N.Y. 402; Colgrove v. Tallman, 67 N.Y. 95 (23 Am. Rep. 90). Smith v. Shelden, 35 Mich. 42 (34 Am. Rep. 529). See, also, Leithauser v. Baumeister, 47 Minn. 151 (49 N.W. 660, 28 Am. St. Rep. 336). Brandt on Suretyship (2nd Ed.) section 36; Stearns on Suretyship, page 24; Baylies on Suretyship, pages 40, 481; Shumaker on Partnership, 341, 342. The reasoning by which this view is supported is very forcibly stated by Folger, J., in the Colegrove Case, and by Cooley, C. J., in the Smith Case and the writer of this opinion would be content to accept it as authoritative. The majority of the court prefers to follow the other line of authorities as announcing the sounder principle, and the result arrived at cannot be said to be essentially unjust. It is in accord with the views expressed by many courts and law writers, and is bottomed upon the proposition that the liability of the partners as principal debtors being fixed by the terms of the original contract, it is not competent for them by any agreement between themselves to change the nature of that liability, or impose upon the creditor, without his consent, any new or additional obligation or duty, a neglect of which may work a discharge of one of such debtors from his obligation to pay. The agreement between the partners by which one of them assumes to pay the entire debt is regarded res inter alios acta as respects the creditor, who is neither benefited nor prejudiced thereby. Barnes v. Boyers, 34 W.Va. 303 (12 S.E. 708); Buchanan v. Clark, 51 Va. 164, 10 Gratt. 164; Rawson v. Taylor, 30 Ohio St. 389 (27 Am. Rep. 464); 2 Collyer on Partnership, chapter 24, section 596; 1 Collyer on Partnership, chapter 17, section 407; Story on Partnership, section 334; Parsons on Partnership (4th Ed.) sections 296, 313, 324; Shapleigh v. Wells, 90 Tex. 110 (37 S.W. 411, 59 Am. St. Rep., 783); Hall v. Jones, 56 Ala. 493; White v. Boone, 71 Tex. 712 (12 S.W. 51). The case of Rawson v. Taylor, supra, is like the one at bar, so far as the relationship to the parties to...