Bristol v. Sprague

By the Court, Nelson, J.

It is well settled, that one part, ner may bind another after the dissolution of the firm, if the payee or holder of the paper is not chargeable with notice, express or constructive, after dissolution of the partnership, 6 Johns. R. 144, 6 Cowen, 701, and that such notice must be specially communicated to those who had been customers of the firm, and as to all others by publication in some newspaper in the county, or some other public and notorious manner. It was said on the argument that there was no time in this case, between the dissolution an the giving of the note, for notice to be given. The want of time cannot dispense with the rule of law ; so far as the public are concerned, the partnership obligations continue until notice is given. The responsibility of the good faith of the partners rests upon the members of the firm until notice, and the rights of innocent third persons cannot be affected by an abuse of confidence by either member of the firm.

*425The only question in this case is, whether the plaintiff is a bona fide holder of the note for a valuable consideration. Although he was not to call upon Rogers for a part of his debt if he failed in the collection of the note, which is mainly relied on to shew a valuable consideration, yet there is no doubt that if he should fail to obtain judgment against the defendants, his whole debt will revive upon the facts which appear in this case. The transfer of the note by Rogers to the plaintiff was a fraud upon him, which would be a sufficient answer to the terms upon which the note was received, Rogers knowing of the dissolution of the partnership when he took the note. In judgment of law, therefore, the plaintiff can be viewed in no better situation than if he had taken the note merely as collateral security for the payment of his debt; and if so, within the doctrine of Coddington v. Bay, 20 Johns. R. 637, he cannot be considered as having taken the note in the usual course of business, and for a full and valuable consideration.

The only doubt I have had is, whether this case came within that class of cases which allowed the defendant to shew malafides on the part of the holder, or the absence of that full and valuable consideration required in them. On further consideration, I am satisfied it does. Upon principles of strict law, Dann could not be bound by this co-partner after the dissolution; but for the protection of third persons, the obligation of the firm is continued until notice, either express or constructive, of the dissolution is given; within the reason and policy of the rule, however, partners should be held liable in such cases only where the holder has received the note in the usual course of business, and for a full and valuable consideration. 3 Pick. 177, It is like a note procured by fraud or felony, or lost and afterwards negotiated, and its negotiability should be subject to the same qualifications as in those cases. The note in this case was put in circulation in fraud of Dann’s rights by the co-partner, and the case must turn upon the equities of the parties. Within this principle the plaintiff cannot recover.

New trial granted, costs to abide the event