The opinion of the court was delivered by
Redfield, J.In the present case it is very obvious, that, in moral equity and good conscience, the plaintiff has a just claim upon the defendant for the payment of his original debt against the late firm of Baxter & Throop. This debt is admitted to have been a just debt against the firm, and it is apparent it has never been realized by the plaintiff, or paid by the firm. This action then should lie, unless there is some inflexible rule of law, which interposes itself between the court and the justice of the case. That does not often happen. It is the boast of the law that its principles, if properly applied, if they fail of producing perfect justice, will seldom, or never, induce absolute injustice.
1. The note of Peake was, by the defendants, before the dissolution of the partnership, sold to the plaintiff- in settlement of his account. Here was no absolute agreement to take it in payment in all events, and at all hazard. It is not then necessarily payment. It is, at most, payment for the time, or conditionally, i. e. if it prove productive. If plaintiff used proper diligence and failed to collect it, he might return it and sue upon his original demand. Brown v. Kewley, 2 B. & P. 518. Davidson v. Bridgeport, 8 Conn. 472. Bill v. Porter, 9 Conn. 23. If the plaintiff had put the note in circulation he could not recover upon his original demand. Harris v. Johnston, 3 Cranch, 318. So too if he had been guilty of laches, Camidge v. Allenby, 6 B. & C. 373, 13 E. C. L. 201. So also if the note had been agreed to be received in absolute payment. Shirley v. Mandeville, 6 Cranch, 253. Where the creditor accepts either the promissory note of his debtor or of a third person in settle*457ment of a previously unsettled matter of account or dealing between them, this, prima facie, is payment. If it be the prommissory note of the debtor, there will be little necessity of ever resorting to the original cause of action. But if the note is by mistake defective, so that no recovery can be had upon it, I apprehend the creditor may always resort to his original demand. So, too, if he accept the note or bill of a third person, which prove unavailable, without his fault. Hence we see no difficulty in permitting the plaintiff, in the present case to recover upon his original demand.
2. But we think the special circumstances of this case fully justify a recovery on the ground of virtual fraud, or at least, mistake, on the part of the defendant.
At the time the plaintiff took the note against Peake in settlement of his own account, he took also the unlimited guaranty of the firm for its payment, in case the maker failed to pay it. He did, then, still hold the firm liable to him upon his original demand in one sense. If Peake failed to pay it, they were still to pay it. Peake did fail to pay it, in consequence of a contract made with the firm to pay his debt in another mode. If this contract was made before the sale of Peake’s note to plaintiff, and was known to the firm at the time of the sale, it was a gross fraud upon the plaintiff. If it was made subsequently and with the recollection that plaintiff held the note, it will be much the same. But if made either before or after the sale(and which does not appear,nor is it important,as it was made during the existence of the partnership) and without recollecting the sale to the plaintiff, it was still a mistake, which operated to defeat plaintiff’s claim upon Peake, and left him no other alternative, but to pursue his original claim or his guaranty. Under such circumstances, we think either partner of the dissolved firm had such an interest in settling the concerns of the partnership, and such necessary authority for that purpose, that he might receive back this note, which had by them been put wrongfully in circulation, or its ultimate payment wrongfully defeated. This view we think strictly in accordance with the decided cases upon this subject. King v. Smith, 19 E. C. L. 299. In Union Bank v. Hull, 1 Harper, 245, it was held that where a firm had indorsed a note, it was competent for one of the partners, after a dissolution, to consent to the hold*458er making a compromise with the maker, when such partner has no special authority to settle the concerns of the firm, and that this will bind the other partners. It is true that, in receiving back the note against Peake, it was not competent for Throop to give the note of the firm, as he attempted to do. He had, after the dissolution, no authority to create any new obligations on the part of the partnership, nor to change the name or character of the former ones. But he might pay, or release, a partnership debt, and much more might he receive back a note or bill, which the firm had fraudulently put in circutation.
3. But it is said that the plaintiff, by surrendering the note against Peake, and the guaranty of the firm, and accepting the individual note of Throop, released the firm from all obligation. If this had been understandingly done, I have no doubt the other partners would have been released. Arnold v. Camp, 12 Johns. 409. But this was not the fact. The plaintiff took the note of the firm, executed by Throop after the dissolution. This note Throop had no right to give, and the plaintiff cannot recover upon it against the firm. Shall he then be still compelled to rely upon it ? If the note is good to pay the debt of the firm, and the firm insist upon it for that purpose, they ought also to be bound by it as the note of the firm, for such it purports to be on its face ; and that is an end of this case. But' if the firm repudiate the note, as they may, then also may the plaintiff, for it would involve an absurdity too monstrous, even for argument, to contend that the firm might insist upon it for one purpose, and repudiate it for all others. The case comes back to the failure of the Peake note, by the fraud or mistake of the firm, and without the fault of the plaintiff, and in consequence of that, the note surrendered to one of the partners. Nothing then remains, but the original debt or demand of the plaintiff, against the firm, wholly unpaid and uncancelled. Gilman v. Peck, 11 Vt. R. 516. Where then is the great wrong or hardship in the firm still being compelled to meet this their just debt ? I confess if the arm of the law were so short that it could not be made to reach so palpable a case as the present, I should blush for its shortness, and for its helpless inefficiency.
The judgment of the county court is affirmed.