Story Case

Howard Fogle, John Church and Robert Curdy had been partners in the grain business, known as the firm of Fogle and Company. On January 1, 1914, Curdy ceased to be a member of the firm and the other two continued as Fogle & Company. Curdy published a notice of the dissolution in the local newspaper, but did not send actual notice to those who had had prior dealings with the firm. James Nally had done business with the firm, before the year 1914, and, in February of that year, accepted a promissory note from Fogle signed by the firm name. This note was not paid at maturity and Nally brought suit against Fogle, Church and Curdy. Nally contended that, although he had seen the newspaper announcement of the dissolution, Curdy was, nevertheless, bound on the note because actual notice of the dissolution was not sent to Nally; that this was necessary, since Nally had dealt with the firm before Curdy stepped out. Is this a correct statement of the law?

Ruling Court Case. Austin Vs. Holland, Volume 69 New York Reports, Page 571; Same Case, Volume 25 American Reports, Page 246

The firm of Dillon, Beebe & Co. was composed of Dillon, Beebe and the defendant, Holland. The firm was engaged in the business of the purchase, shipment and sale of lumber with its principal office at Toledo, in the state of Ohio. The defendant Holland withdrew from the firm, and on the 29th day of March 1869, notice of the dissolution was published in the newspapers at Toledo and a copy was addressed to the plaintiff at Detroit. The plaintiff had been in the employ of the firm and, at Detroit, was engaged in purchasing lumber, in the western states and in Canada. On August 31, of the same year, and after the dissolution of the firm, and notice published, a promissory note was made in the name of the firm of Dillon, Beebe & Co.; this was later transferred to the plaintiff.

When the note was not paid at maturity, he brought this action against the defendant, seeking to hold him as a partner in the firm. The defendant contended that notice had been given of the dissolution and that he was thereby relieved of further liability. The plaintiff, however, contended that he was entitled to actual notice, and that, as he did not receive the paper mailed to him, nor receive the information in any other manner, that he was entitled to hold the defendant as a partner.

Mr. Justice Andrews delivered the opinion of the Court: "The publication of notice of dissolution of a partnership in a newspaper at the place where the business was carried on is notice to all persons who had not had prior dealings with the firm; and, if therefore, one of the partners enters into a contract in the firm name with a new customer or dealer, the other partner will not be bound. The rule is different in respect to persons who have dealt with the firm beiore dissolution. The rule in such cases in this state requires that, to relieve a retiring partner from subsequent transactions in the partnership name, notice of the dissolution must be brought home to the person giving credit to the partnership. If in any way by actual notice served, or by seeing the publication of the dissolution, or by information derived from third persons, the party, at the time of the dealing, is made aware of the fact that the partnership has been dissolved, the contract will not bind the firm. It is sufficient to exempt the firm from liability that the person so contracting with a partner in the firm name knew or had reason to believe that the partnership had been dissolved, but this must appear and be found by the jury, or else the contract will be treated as the contract of the partnership." Upon the finding of fact that the plaintiff had no actual notice of the dissolution, it was held that he might recover from the defendant upon the note in question.

Ruling Law. Story Case Answer

Assuming that a partnership has been engaged in business for a considerable length of time, if it could dissolve the firm secretly or at least without making any efforts to give notice to the public and to those with whom it has dealt, and to those who have dealt with it, great fraud and injustice might be wrought. Thus, it is not surprising to find that it is required that notice should be given upon the dissolution of a firm. Only by giving this proper notice can one member of the firm be relieved from further liability as a partner.

As regards those who have never dealt with the firm, it is generally held sufficient to make a general publication in some paper at the place where the business has been carried on. As to those who have dealt with the firm, and as to those with whom the firm has dealt, generally, actual notice must be impressed upon them. The method of receiving this notice, whether directly from the firm or members thereof, or from a general publication, or from some third person is not significant. Nally, in the Story Case, had read the newspaper announcement of the dissolution. He could not, thereafter, hold Curdy, although Curdy had not sent actual notice to those who had dealt with the firm.