Newhall v. Wyatt

• Decision Date: 17 October 1893
• Citation: 139 N.Y. 452,34 N.E. 1045
• Parties: NEWHALL v. WYATT. CLARK v. WYATT et al.
• Court: New York Court of Appeals Court of Appeals

139 N.Y. 452

34 N.E. 1045

NEWHALL

v.WYATT.

CLARK

v.WYATT et al.

Court of Appeals of New York.

Oct. 17, 1893.

Appeal from supreme court, general term, first department.

Action by Henry G. Newhall against Christopher A. Wyatt for the dissolution of a partnership existing between them, under the firm name of C. A. Wyatt & Co., for an accounting, a receiver, and distribution. James R. Clark presented to the receiver appointed a claim for $33,824.49 against the firm. A referee was appointed to take evidence and pass on the claim, and from a judgment of the general term (22 N. Y. Supp. 828) affirming an order of the special term confirming the report of the referee, fixing and adjusting the amount of his claim for the purposes of distribution at $3,037.68, Clark appeals. Reversed.

William Woodward Baldwin,(James Byrne and Charles A. Boston, of counsel,) for appellant.

Kellogg, Rose & Smith, (L. Laflin Kellogg, of counsel,) for respondent.

Durnint Hendricks, for receiver.

FINCH, J.

In an action brought by the plaintiff for a dissolution of the partnership of C. A. Wyatt & Co., a receiver was appointed, who advertised for the presentation of claims against the firm, as preliminary to the winding upon of its affairs. James R. Clark appeared as one of the creditors, and presented a claim for something over $33,000. Upon the application of the receiver, a referee was appointed to take evidence and pass upon this claim, and his report, awarding the creditor only about $3,000, has been confirmed by the court, and approved by the general term on appeal. The creditor comes to this court complaining of the result, and insisting that his claim has been improperly reduced.

Most of the conclusions reached by the referee seem to us justified by the facts, but one of them, involving a serious amount, we deem erroneous, and an injustice to the creditor. The error consists in charging Clark with the amount of five drafts drawn by him, amounting to nearly $7,000, on the theory that he was debtor in that amount to the firm, and should allow it by way of set-off against his own demand. The facts underlying the question raised are, in substance, the following: There were two firms bearing the same name of C. A. Wyatt & Co. The first consisted of Wyatt alone, no one else having an interest with him. The second, formed later, was composed of Wyatt and the plaintiff, Newhall, as special partner. Clark was a creditor of each firm, which we may distinguish as the old and the new. Before the formation of the latter, he drew five drafts upon the old firm for sums which were concededly due to him, payable to the order of Conway, Gordon & Garnett, bankers, which were accepted by C. A. Wyatt & Co., and discounted by the bankers, Clark remaining contingently liable as drawer, and receiving the proceeds. All this occurred before the formation of the new firm, and was, in every respect, a regular, usual, and proper business transaction. These acceptances, the referee finds, were paid by Wyatt out of the funds of the new firm. The appellant criticizes the finding, mainly because the bank account of the new firm was a continuation of that of the old, without break or change; but the proof so far warrants the finding as to make it conclusive upon this appeal. The payees of the draft had no reason to suspect the real source from which the money came. They had no knowledge of the existence of the second firm, and necessarily believed, as they had a right to believe, that the payment was made by the real debtors out of their own funds. They accepted the payment, surrendered up the drafts, and of...