Regester v. Dodge

• Decision Date: 16 February 1881
• Citation: 6 F. 6
• Parties: REGESTER v. DODGE.
• Court: U.S. District Court — Eastern District of New York

6 F. 6

REGESTER v. DODGE.

United States Circuit Court, E.D. New York.

February 16, 1881

J. O McKeen, for plaintiff.

Thomas M. Morgan, for defendant.

BENEDICT D.J.

In this case I have listened to a reargument, and have re-examined the question upon which, as I suppose, the case turns, and my opinion remains unchanged, that the plaintiff is not entitled to recover. The earnestness of the contention made in behalf of the plaintiff has impelled me to state at length the reasons of my conclusion.

The action is a suit in equity, brought by the administrator of David Regester, who disappeared in the year 1870 and is supposed to be dead, against Harry E. Dodge, executor of Edward Dodge, for the purpose of charging the estate of Edward Dodge with the amount of certain deposits of money made by David Regester in the year 1869 with the firm of Jay Cooke & Co., of Philadelphia, of which firm Edward Dodge was then a member.

The material facts are as follows:

At the time of the deposits in question the banking firm of Jay Cooke & Co., of Philadelphia, was composed of William G Moorehead, Henry D. Cooke, Pitt Cooke, George C. Thomas Harry C. Fahnestock, John W. Sexton, and Edward Dodge. This firm dissolved January 1, 1871. John W. Sexton and Edward Dodge then retired from the business, and a new firm was formed, consisting of the remaining members of the old firm, and two new members, Jay Cooke, Jr. and James A. Carhart. The new firm succeeded to the business of the old firm, the account with the retiring members was made up and settled, and the new firm then assumed all the obligations of the old firm, and agreed that the liability of the retiring members therefor should be terminated.

The new firm continued business until November 26, 1873, when it was adjudged bankrupt. Among the debts of the new firm, published in the bankruptcy proceedings of that firm, was the debt here sued on. In June, 1873, this debt was, without objection, proved as a debt of the new firm in the bankruptcy proceeding of that firm by the representative of David Regester.

Upon this debt some to time declared out of the assets of the new firm of Jay Cooke & Co., and the same received by the representative of David Regester. In the year 1879 the estate of the new firm was wound up under the direction of trustees, in accordance with the provisions of the bankrupt law, and the stocks then constituting the assets of the new firm were distributed among the creditors of that firm in pursuance of a scheme assented to by the creditors.

Edward Dodge died in 1877. During his life-time no claim of liability for the deposits in question was made upon him in any form, so far as appears. In September, 1878, and prior to the distribution of the stocks by the trustees of the new firm, payment of this debt was demanded by the representative of David Regester of the executor of Edward Dodge, who then denied the existence of the debt as a liability of Edward Dodge. Thereafter the representative of David Regester participated in the distribution of the stocks belonging to the new firm of Jay Cooke & Co. made by the trustees thereof, and as a creditor of that firm received sundry shares of various stocks, which he forthwith, and on June 12, 1879, sold at private sale, without notice to the executor of Edward Dodge. The amount of the cash dividends received from the estate of the new firm, together with the amount realized from the sale of the stocks distributed by direction of the trustees of that firm, not being equal to the amount of the deposits made in 1869 by David Regester, this action is brought by his representative to charge the estate of Edward Dodge with the deficiency.

The law of the case is not doubtful. By the deposits made in 1869 with the old firm of Jay Cooke & Co., Edward Dodge, then a member of that firm, became liable for the amount thereof. That liability continues, unless facts be shown from which an intention on the part of the creditor to accept the liability of the new firm in lieu of the liability of the old firm can be fairly inferred. The question, therefore, is whether the facts above stated are sufficient to warrant the conclusion that the liability of the new firm was so accepted by the plaintiff.

In disposing of questions of this character, courts have frequently held that, when the dissolution of an old firm has occurred, and a new firm has agreed to assume the liabilities of the old firm, but slight circumstances are required to justify finding an intention on the part of a creditor of the old firm, who has notice of the dissolution and of the agreement by the new firm, to accept the liability of the new firm in place of the liability of the old. In Ex parte Williams, Buck, 13, the court, speaking of such a case, say: 'A very little will do.' In In re Smith, Knight & Co. L.R. 4 Ch.App. 66, the lord justice says: 'There is no doubt whatever that if you have an old firm, and either a new partner is taken into it or a new firm constituted, and the assets are taken over by the new firm, and the customer, knowing all these things, afterwards goes on and deals with the new firm, you infer assent on his part from slight circumstances. ' In In re Family Indorsement Soc. L.R. 5 Ch.App. 118, speaking of a case very like the present, it was said: 'Very slight evidence, indeed, would be required to establish that the creditor had taken the liability of the new firm instead of the old.'

What, then, are the circumstances in this case tending to show assent by the plaintiff to the novation of the debt sued on? In the first place, it will be observed that from the time of the publication of this debt as a debt of the new firm of Jay Cooke & Co., the creditor-- and the representative of David Regester was then the creditor authorized to collect and to discharge the debt-- knew that the old firm of Jay Cooke & Co. had dissolved; that Edward Dodge and John W. Sexton had retired from the business; that a new firm had been formed, containing members who were not members of the old firm; and that such new firm had agreed to assume all the liabilities of the old firm. The creditor is also chargeable with knowledge that the purpose of this agreement made by the new firm was to relieve the outgoing parties from their liability for the debts of the old firm. The nature of the agreement itself disclosed that to be its object.

This knowledge on the part of the creditor is not without significance in ascertaining his intention. If it had been the intention of the creditor to maintain intact the then existing liability of the retired partner, such an intention would naturally have evoked from the creditor, when he came to deal with the new firm in respect to this debt, some positive expression of a purpose to avoid a substitution of the liability of the new firm in place of the liability of the old. The proofs here fail to show that any expression of such a purpose in any form escaped from this creditor.

The next circumstance deserving attention is the time which elapsed before any attempt was made to enforce the debt as a subsisting liability of Edward Dodge. The deposits sued on came to be known at the time of the bankruptcy of the new firm of Jay Cooke & Co., in 1873. Edward Dodge lived until 1877 without the suggestion of a continuing liability on his part for this debt from any source. There is no evidence that he was insolvent or absent; and the omission to make a claim upon him in his life-time, the other members of the old firm being insolvent, is hardly consistent with the position now assumed, that there was no intention to accept the liability of the new firm in lieu of the old. Furthermore, no claim was made of the executor of Edward Dodge until September, 1878, when the estate of the new firm of Jay Cooke & Co. was substantially wound up, which seems to indicate that the making of the demand upon the executor of Edward Dodge had some connection with the result of the bankruptcy proceedings of the new firm, and gives rise to the suggestion that the intention to maintain a liability on the...