own, and that the officers of the bank, being satisfied that she was the owner, paid it over to her as such. Her counsel then asked the court to instruct the jury that the receipt of money under such a claim would not raise an implied promise in law to pay the money to the plaintiff, and, if this were the fact, the action could not be maintained. This request was refused, but the refusal was held to be error, and the judgment for the plaintiff reversed. This case follows the earlier case of Sergeant v. Stryker, 16 N.J. Law, 464, which is a very thorough and instructive examination of this subject, on principle and authority. An analysis of the cases cited by the plaintiff, which are representative cases out of many, discloses a trust relation quite sufficient to sustain the action in the particular instances, without adopting the broad expressions that have been used in many of the opinions as the rule of law. Gaines v. Miller, 111 U. S. 395, 4 Sup. Ct. Rep. 426, was a case of ratification of a sale of plaintiff's property, and suit for the proceeds. If the defendant sold the plaintiff's property, clearly they would hold the proceeds to her use, and the court so held. Bank v. Bank, 22 Blatchf. 58, 19 Fed. Rep. 301, was a case of collection of negotiable paper with a qualified indorsement. Under the notice given by the indorsement it was held that the money was received to the plaintiff's use. White v. Bank, 64 N. Y. 316, was to recover back money paid on an altered draft, in ignorance of the forgery. The defendant had received the plaintiff's money without right, and could only hold it for the plaintiff. Risdon v. De La Rua, 51 N. Y. Super. Ct. 63, was to recover money which the defendant's testator had agreed to pay to the plaintiff when collected. Harper v. Claxton, 62 Ala. 46, was to recover back money paid on a rescinded contract. When the money which the defendant received from the plaintiff was no longer the consideration for a contract, it belonged to the plaintiff, and was held to her use. Lawson's Ex'r v. Lawson, 16 Grat. 230, 80 Amer. Dec. 702, was for specific money delivered to the defendant by plaintiff's testator, for safe keeping. A trust results to the owner from the custody or disposition of his property. Railroad Co. v. Bank, 73 Ga. 383, was a case of special indorsement of a draft. Held, that the plaintiff in error had notice it was to be paid to the defendant in error, and hence it was paid to its use, and there was privity. In Knapp v. Hobbs, 50 N. H. 476, the defendant took property from a mortgagor at his request, sold it, and paid him the proceeds. As the recorded mortgage was constructive notice of plaintiff's title, it was held that the defendant received the proceeds to the plaintiff's use, and should have paid the money to him. State v. St. Johnsbury, 59 Vt. 332, 10 Atl. Rep. 531: The town collected fines and costs, which inured to the state by statute. It was the ordinary case of money received to the use of another. Pugh v. Powell, 11 Atl. Rep. 570, was for money paid to the defendants for plaintiff's use. O'Conley v. Natchez, 1 Smedes & M. 31, was for wharfage collected for use of plaintiff's wharf by trespassers in possession. The tort being waived, the defendant stood as the agent or trustee of the plaintiff for the profits. Peterson v. Foss, 12 Or. 81, 6 Pac. Rep. 397. Defendant surreptitiously took a note belonging to the plaintiff, and collected it. Held, that he received the money for the plaintiff. In some of these cases the money passed directly from the plaintiff to the defendant; and, when it appeared that the defendant had no right to hold it, the duty to return it to the plaintiff arose, and thus he became the plaintiff's trustee. Privity and implied promise follow from this relation of the parties. In other cases money was paid to a defendant expressly for the plaintiff's use, or under such circumstances as to warrant his holding it only for the plaintiff's use. These cases, therefore, disclose an important qualification to the general statement that an action will lie upon an equitable claim, namely, that the claim must be coupled with a duty to pay the money to the plaintiff, arising from the relation of the parties, or the character of the defendant's receipt or holding of the money. The case of Brand v. Williams, 29 Minn. 238, 13 N. W. Rep. 42, is not within this qualification, but goes to the full extent of the plaintiff's claim. Hall v. Marston, 17 Mass. 575, is often quoted in support of the rule as claimed by the plaintiff. But in that case money had been sent to the defendant to be paid to the plaintiff, and the court found that he acquiesced in the direction. In this respect the court distinguished the case from Williams v. Everett, 14 East, 582, saying: "In that case there was a positive refusal of the agent to act according to the order of the person who remitted the money, except so far as to receive the contents of the bill. The difficulty was to establish an implied promise against an express denial." The point upon which these two typical cases turned was not whether the money equitably belonged to the plaintiff, but whether the defendant stood in such a relation to the plaintiff as to raise the duty of payment to him, and to imply a promise to do so. In support of the rule that there must be privity of contract between plaintiff and defendant, see Clarke v. Shee, Cowp. 197, 200; Grant v. Austen, 3 Price, 58; Douglass v. Skinner, 44 Conn. 338; Allen v. McKeen, 1 Sum. 276; Cobb v. Becke, 6 Q. B. 930; Jones v. Carter, 8 Q. B. 134; Watson v. Russell, 5 Best & S. 968; Libby v. Robinson, 9 Atl. Rep. 24. The following cases are exactly in point: Hall v. Carpen, 27 Ill. 386. These parties sent cattle to market, which were sold by the same broker. In accounting, he paid the defendant too much, and the plaintiff, in precisely the same proportion, too little. The plaintiff sought to recover his deficit of the defendant, but the court held there was no privity of contract. Moore v. Moore, 127 Mass. 22. One received money as his own from an executor, under a mistaken interpretation of the will; but it was held that the former was not liable for money had and received to the person who should have received the money. Rand v. Smallidge, 130 Mass. 337, was a similar case. It is clear from this examination of cases that it is not enough for a plaintiff in assumpsit to show that a third party should have paid money to him, instead of paying it to the defendant. To hold the defendant he must go further, and show some relation or duty, in the nature of a trust, arising from the receipt of the money. In the case before us we find nothing which tends to show this. The defendant received the money from the Farmers' Loan & Trust Company and from Osborn as a gift, prompted by a sentiment or obligation of friendship; or else it was intended as payment of a debt understood to be due to the estate in his hands. In either case he holds it under a claim of a right, not only independently of the plaintiff, but without any recognition whatever of the plaintiff's claim. Under advice of counsel, and pending litigation, he has refrained from entering the amount received in his account, but in no way has he admitted the plaintiff's right to the money. How can we imply a trust relation or a receipt of money to the plaintiff's use in the face of a denial of the plaintiff's right? Circumstances may show such a relation, although the defendant deny it; but here the plaintiff at most shows nothing more than that the money ought to have been paid into Mrs. Burnside's estate. If so, the Farmers' Loan & Trust Company and Osborn are still responsible for it, as well as for the entire proceeds for which the plaintiff has sued them. This case well illustrates the reasonableness of the rule requiring privity between the parties; because it throws upon the defendant, a stranger to the transaction, the litigation of the plaintiff's claim against the parties in New York. It may be decided one way here and another way in New York. While this would be no ground, in itself, for dismissing the suit, if it lies, the embarrassment of such a result shows that the point in issue ought to be settled between the parties from whose relation it arises. The defendant has no specific property belonging to the plaintiff,-nor anything received from the plaintiff; he has received no money under a promise or direction to pay it to the plaintiff; he has disposed of no property of the plaintiff; nor has the money sued for come into his hands in any way as the trustee of the plaintiff. We do not think, therefore, that he is liable to the plaintiff in an action of assumpsit. There is no privity of contract between the parties, and hence the nonsuit was properly granted. Petition dismissed. (16 R. I. 288) COLWELL v. WEYBOSSET NAT. BANK et al. 1. PARTNERSHIP ASSIGNMENT BY SURVIVING Partner-FIRM AND PRIVATE CREDITORS. Upon an assignment for benefit of creditors by the surviving partner, individually and as surviving partner, the estate of the deceased partner being insolvent, the proceeds derived from individual assets are to be used primarily to the discharge of individual liabilities, and those from partnership assets to partnership liabilities.1 2. SAME-FIRM LIABILITIES. Notes executed by one of the partners to the order of and indorsed by the other partner, the proceeds of which were used by the firm, being partnership paper in everything but form, the holders are entitled to share pari passu with the undisputed partnership creditors. 8. SAME-EXTENT OF LIABILITY. The holders of a note executed by the deceased partner to the order of and indorsed by the surviving partner, given in exchange for two notes of like amount of said holders, which were to be used and actually were used in raising money for the firm, one of which was taken up by the makers after the death of the deceased partner, are entitled to share in the partnership fund only to the extent of the amount paid in taking up said note. 4. SAME-RIGHTS OF ESTATE OF DECEASED PARTNER. The holders of the notes having proved them against the estate of the deceased partner, both in Massachusetts, where he was domiciled at his death, and in Rhode Island, the Rhode Island administrator is not entitled to share for the estate both in Rhode Island and Massachusetts in the proceeds of the assignment in respect to said notes, though the Massachusetts estate is insufficient to pay them and other claims, it being conceded that there will be no surplus after paying the creditors under the assignment. 5. SAME CLAIMS FOR SPECIAL PREFERENCES-BAILORS. Persons who had left goods with the firm, to be sold at auction for their account, are not entitled on the mere statement in their bill to a preference over other firm creditors, they not appearing to support their claim. 6. SAME-Rights of Debtors-Set-OFF OF INDividual Debts. Partnership debtors are not entitled to set-offs for debts due them from one of the partners. Bill in equity for instructions. Francis Colwell and Walter H. Barney, for complainant. James Tillinghast, James M. Ripley, Joseph C. Ely, Arthur L. Brown, and John T. Blodgett, for respondents. DURFEE, C. J. This is a bill for instructions. It is brought by the complainant as assignee of George W. Elliott, under an assignment made by him individually, and as surviving partner of the firm of George C. Elliott & Son, for the benefit of his individual and the firm creditors, "according as they be entitled under the rules of law for the settlement of insolvent partnership and individual estate." The firm was formed in 1870. It was composed of George C. Elliott and his son, George W. It continued to do business until November, 1886, when it was dissolved by the death of George C. It carried on its general business in the name of George C. Elliott & Son, and was advertised and known by that name. The assignment was made on November 30, 1886; the assignor being insolvent, both individually and as surviving partner. The estate of George C. was also insolvent. Among the creditors note. 'The surviving members of a firm can make a valid general assignment for the benefit of creditors, giving preferences. Beste v. Burger, (N. Y.) 17 N. E. Rep. 734, and As to the priorities between firm and private creditors in making disposition of the assets of an insolvent firm, see Coffin v. Day, 34 Fed. Rep. 687, and note; Blankenship v. Wartelsky, (Tex.) 6 S. W. Rep. 140, and note; Consaulus v. McConihe, 2 N. Y. Supp. 89. claiming under the assignment are several banks and banking institutions, which claim as holders of negotiable promissory notes which matured after the death of George C. Two of these notes, one for $9,000, and the other for $8,750, were signed by George C. Elliott & Son, and made payable to and indorsed by George C. Elliott; and the other notes, eight in number, were signed, "GEORGE W. ELLIOTT," and made payable to and indorsed by George C. Elliott. The total amount for which these eight notes were given was $37,500. It appears in evidence that these eight notes were made and negotiated to raise money for the firm, and that the money, when raised, was placed to the credit of the firm, and was used in its business, except in so far as it was withdrawn for the individual needs of the copartners, under a practice which was common to both of them. The evidence shows that the negotiation of notes drawn as these eight notes were drawn was not only one of the modes, but the more usual mode, employed by the firm in raising money for its purposes. As to some of the banks, the evidence is full and distinct that it was understood by them, when the advances were made, that the advances were for the firm; and as to the others, though the evidence as to the circumstances under which the notes were taken is not so clear, it has not been claimed that in matter of fact the differences are material. The notes are mostly renewals, after a series of previous renewals, and generally when renewal was made the money was put to the credit of the firm, and checked out in the name of the firm, for the payment of the old note. The interest on renewal was always paid out of the funds of the firm. The notes and their renewals were all entered in the book of bills payable, kept by the firm. The loan at one of the banks was originally applied for in the firm name; and when George W. brought the note the cashier remarked to him that it did not correspond with the application, and George W. replied that that was the way they made paper for the business of the firm. George W., who generally procured the loans and attended to the renewals, had no business except that of the firm, and neither had George C. except such as was incident to a small place which he had in the country. The first question asked by the complainant for his instruction is whether the proceeds of the assignment ought to be marshaled, so that those derived from individual assets shall go primarily to individual creditors, and those derived from copartnership assets shall go to copartnership creditors. We answer the question affirmatively. Tillinghast v. Champlin, 4 R. I. 173, 190; Silk v. Prime, 2 White & T. Lead. Cas. Eq. 111, and notes. The second question is whether the notes signed by George W. Elliott, and indorsed by George C., are entitled to participate in the partnership or in the individual assets, or in both, and, if in the partnership, to what extent. We think they are entitled to participate in the partnership assets pari passu with the undisputed partnership creditors. The notes are evidently partnership paper in everything but form; and even if, for technical reasons peculiar to commercial paper, the firm could not be sued upon them directly, it seems to us that there are cases on the authority of which it might be sued independently of them, for money lent. Denton v. Rodie, 3 Camp. 493; Maffet v. Leuckel, 93 Pa. St. 468; Hoeflinger v. Wells, 47 Wis. 628, 3 N. W. Rep. 589; Allen v. Coit, 6 Hill, 318; Tucker v. Peaslee, 36 N. H. 167, 176: Beebe v. Rogers, 3 G. Greene, 319; Van Reimsdyk v. Kane, 1 Gall. 630; Clark's Ex'rs v. Van Riemsdyk, 9 Cranch, 153. See, also, Ex parte Brown, cited in 1 Atk. 225. It has been held that a note signed by each and every partner individually may be treated as a copartnership note if made or negotiated for copartnership purposes. In re Thomas, 8 Biss. 142; Maynard v. Fellows, 43 N. H. 255; Gay v. Johnson, 45 N. H. 587; Kendrick v. Tarbell, 27 Vt. 512; Ex parte Stone, In re Welch, L. R. 8 Ch. 914; Woolen Co. v. Juillard, 75 N. Y. 535, 31 Amer. Rep. 488; Ex parte Nason, 70 Me. 363; De Jarnette's Ex'r v. McQueen, 31 Ala. 230; 1 Bates, Partn. § 453. And it has likewise v.15A.nos.2,3-6 66 been held that a note signed by one of the two partners, and indorsed by the other, if for partnership purposes, may be treated as a debt of the firm. Bank's Appeal, 54 Conn. 269, 7 Atl. Rep. 548; Ex parte Bank, 70 Me. 369; Smith v. Felton, 43 N. Y. 419. These cases are like the cases at bar, and show no stronger equities. The court, in the Maine case, referring to the rule of law which has been urged, that oral testimony is inadmissible to prove any person a party to commercial paper who does not appear to be such on its face, remark that the rule has generally been enforced where the attempt has been to maintain actions at law on the paper against persons not named or indicated thereon as parties. 70 Me. 379. But equity," say the court, "looks more to fact than to form." See, also, Smith v. Felton, supra, per ALLEN, J. In the case at bar the notes were all made and negotiated in the course of the business for the firm, and it is only because of their form as negotiable paper that this objection to their participation in the partnership fund can have any face. We do not think the objection should prevail. In Ex parte Bank, supra, it was held that the holder of the note was entitled to prove it either against the individual or copartnership fund, but not against both. In the case at bar we understand that the holders prefer to prove against the copartnership fund, and we think that, as regards the two funds under the assignment, they should be confined to that fund, and to the surplus of the individual fund, if any remains, after the individual debts are paid. The firm of Billings Bros. are holders of a note for $6,750, signed by George W. Elliott, payable to the order of George C., and indorsed by the latter. It was given for two notes for $4,000 and $2,750, signed by Billings Bros., payable to the order of H. A. Billings, a member of the firm of Billings Bros., and indorsed by him. Said two notes were procured by George C. Elliott to be used in raising money for his firm, and were so used. The smaller one was taken up by his firm before his death. The latter was taken up after his death by Billings Bros. The third question is whether the holders are entitled under the assignment in respect of both the $6,750 and the $4,000, or of only one of them. We think they are entitled to prove against the copartnership fund, to the extent of what they have had to pay in taking up the $4,000 note, and only to that extent. George C. Elliott was at the time of his decease a resident of Massachusetts. Administration has been taken out on his estate, both in Massachusetts and in Rhode Island. The bill states that the holders of the notes before mentioned have proved them against his estate in Rhode Island, and have also proved, or are about to prove, them against the estate in Massachusetts, and that the estate is insufficient to pay them and other claims against it. It further states that the Rhode Island administrator claims for the estate both in Rhode Island and Massachusetts that it is entitled to share in the proceeds of the assignment in respect of said notes. The fourth question is whether it is so entitled. Our answer is that it is not so entitled, it being conceded that there will be no surplus remaining after the payment of the creditors under the assignment. The bill sets forth that certain persons make claim against the partnership fund to the amount of about $265, for the proceeds of goods left with the firm to be sold at auction for their account, and claim to be entitled to payment in full in preference to other creditors. The fifth question is whether their claim is tenable. The claimants do not appear to support this claim; and, merely on the statement in the bill, we do not see that they are entitled to any preference. We do not think that Edwin L. Spink, George P. Baker, and Fred L. Marcy are entitled to the set-off claimed, as stated in the bill. The debts which are due to them are due from George W. Elliott; and the partnership cannot be required, either by way of set-off or otherwise, to pay the individual debts of the copartners. |