Samuel Smyth, Plaintiff In Error v. Daniel Strader, James Perrine, and John Woodcock, Late Partners, Under the Firm of Strader, Perrine Co

• Decision Date: 01 January 1846
• Citation: 45 U.S. 404,4 How. 404,11 L.Ed. 1031
• Parties: SAMUEL SMYTH, PLAINTIFF IN ERROR, v. DANIEL P. STRADER, JAMES PERRINE, AND JOHN H. WOODCOCK, LATE PARTNERS, UNDER THE FIRM OF STRADER, PERRINE, & CO
• Court: U.S. Supreme Court

45 U.S. 404

4 How. 404

11 L.Ed. 1031

SAMUEL SMYTH, PLAINTIFF IN ERROR, v. DANIEL P. STRADER, JAMES PERRINE, AND JOHN H. WOODCOCK,

LATE PARTNERS, UNDER THE FIRM OF STRADER, PERRINE, & CO.

January Term, 1846

THIS case came up, by writ of error, from the Circuit Court of the United States for the Southern District of Alabama.

The facts in the case are stated in the commencement of the opinion of the Court, which the reader is requested to turn to and peruse, before reading the argument of counsel.

The case was argued by Mr. Parke, for the plaintiff in error, and Mr. Sherman, and Mr. Willis Hall, for the defendants in error.

Mr. Parke, for the plaintiff.

The admission of Strader as a witness was an error. A portion of the funds of the firm belonged to him, and he was liable to a contribution if they fell short. 1 Esp. N. P. Rep. 103; Ryan & Moody, 31; 21 Com. Law Rep. 334; 2 Peters, 186. He could not even be made a good witness by a release. 1 Wharton, 392, 398; 2 Penn. Rep. 138; 2 Watts, 347, 351. He was not only interested, but a party to the suit on the record.

There is also an error in the opinion of the court below, that whatever would be a good defence to a suit brought by the first indorser was also to one brought by the second indorser; that all equities passed with a note as if it were a bond. But previous errors do not affect an innocent holder, where the note is taken in the ordinary course of commercial business. The free circulation and transmission of promissory notes is indispensable to commercial operations. If any loss should happen it ought to fall upon the party who is negligent. Collyer on Partnership, 241, 242. A declaration of partnership implies confidence in the mutual integrity of the parties. 3 Kent's Comm. 46.

Partners are bound, as respects third persons, even by the fraudulent acts of a copartner. Story on Part. § 108, 160; Collyer on Part. 241-243.

In this case the evidence shows that the notes in question were transferred to Smyth for goods sold by him.

But the court say, that if Stinson & Campbell knew the circumstances attending the making and first indorsement of the note the plaintiff, who is an innocent indorsee, shall not recover. We do not deny that these circumstances would constitute a valid defence, if the drawers were sued by Stinson & Campbell; but that is not the case. If the fraud were proved, it would not defeat our right to recover; but the only proof of fraud is in Strader's evidence, and he ought to be rejected as an incompetent witness. The court below must have founded its instructions upon his evidence. Gould says, in his testimony, that notice of the dissolution of the partnership was not published until the 23d of April, 1836, which was after the date of the notes in question. Smyth was not bound to discredit paper which bore date anterior to a public notice of the dissolution of the partnership.

Mr. Sherman and Mr. Willis Hall, for defendants in error. (The arguments of these two gentlemen are consolidated.)

The principle of this case has been stated by the plaintiff's counsel to be the highly equitable one, that, 'of two innocent persons, the one whose laches occasioned the loss must bear it.' But here the equity is all the other way; here there is no loss. Nobody has given credit to false paper. It is a bold attempt to make our client, Perrine, pay the plaintiff a debt of $20,000, due him by Stinson & Campbell, men with whom our client never had the remotest connection. The evidence in the case warrants me in saying it is a gross fraud, from beginning to end, and all that is required to make it a successful one, is a decision of this court favorable to the plaintiff.

This high court will struggle hard, before it will be made a link in this iniquitous chain,—before it will be used as an instrument to effect one of the most palpable frauds ever exposed to the light.

The suit, though nominally against Strader, Perrine, & Co., is really against Perrine alone. It is true he was a member of this unfortunate concern for 'one little month,'—from the 1st of November to the 5th of December, 1835,—months before the notes on which this suit is brought are pretended to have been made. These notes are ostensibly dated in March, 1836, although really made by Stevenson, one of the partners, after the partnership was finally dissolved, and so advertised in the Mobile papers of the 23d of April, 1836. This quondam partner had then no more authority to sign the partnership name than any other person; but he antedated them to a time when the partnership was in existence, and he was authorized to sign the partnership name. This presents a case 'on all fours,' as the lawyers say with the case of Wright v. Pulham, 2 Chit. Rep. 121, where, in a precisely similar case, the court hold unanimously that the partnership is not bound by the note.

In the printed case, the plaintiff's only witness states that the notes sued upon were received on account of a debt which accrued in 1831, five or six years before the notes purport to be made. Other evidence shows clearly that they were received not in payment and extinguishment of the preceding debt, but for collection, the proceeds to be credited when received. This brings it within the case of De la Chaumette v. The Bank of England, 9 Barn. & Cressw. 208, where, under similar circumstances, the property of a note was held in fact to be in the assignor, and to be affected, in the hands of the assignee, with all the equities which existed against the assignor. On the strength of this admission by the plaintiff, we had prepared to submit an argument to the court almost exclusively on this point; not by any means because this was the only ground on which a conclusive defence could be made, but because the other grounds were too obvious to require comment.

But it now appears, on examining the original record, that 1831 is a misprint for 1836. The plaintiff has made no admission that the notes were received for a pre existing debt, and though the evidence on that point is abundant, yet, the fact not being admitted by the plaintiff, it should have been submitted to a jury, and passed that ordeal, before it can properly be urged upon the consideration of this court. We are compelled, therefore, at this late moment, to abandon our brief, and employ the few moments allowed us, at the close of the session, in commenting on the two points made by the plaintiff's counsel;—1st, the admissibility of Strader's testimony; 2d, the charge of the judge.

First. Strader is worth nothing, and resides in the State of Ohio. Under these circumstances, the great anxiety manifested by plaintiff, as admitted by his counsel, and disclosed by the numerous writs on the record, to make him a party to the suit, could have been stimulated by no motive but to deprive the defendant of the benefit of his testimony. Not having succeeded in that object, he now contends that his testimony was inadmissible.

1st. On the ground that he was one of the makers, and no man can be admitted to impeach his own name. To which it is replied, that he was in no sense a make. The paper was, in fact, forged by one of the partners, after the partnership was dissolved. Again, it is replied, that Strader is not introduced for the purpose of discrediting the paper against the actual members of the firm at the date of the notes, but to show that Perrine had previously retired, and was in no respect liable.

2d. A second ground of objection to Strader's testimony is, that he was a partner in the firm of Strader, Perrine, & Co., and that 'one partner cannot be admitted as a witness for or against his firm.'

That is certainly the general rule; but one of the exceptions is where, as in this case, it is proved by other witnesses, that the transaction is by one of the partners, without the knowledge of the partnership, on his individual account, and the copartners are not liable, as among themselves, to contribution, then they may be witnesses for the firm. Story on Part. 386; Phil. Ev. (3d ed.) 55; Ridley v. Taylor, 13 East, 175; Le Roy et al. v. Johnson, 2 Peters, 198.

Besides, Strader was not a copartner of Perrine (the sole defendant) at any time during any part of this transaction. The rule is, that instantly, on the dissolution of a firm, the copartners become witnesses, the one for the other, like other persons. Gow on Part, 202.

Although, after the withdrawal of Perrine, the name continued the same, yet, by that act, the partnership was dissolved, and subsubsequently a new partnership, under the same name, was formed. Strader, Perrine, & Co. represented very different firms in November, 1835, and in March, 1836.

But the great question which decides the competency of witnesses in our days is, 'Has he an interest in the event?' To ascertain this, the test universally applied is, 'Can the judgment be used in any other case for or against the witness?' Willings et al. v. Consequa, Peters's C. C. Rep. 322; Chitty on Bills, 669; Gow on Part. 80.

Suppose Smyth fails in this suit. It is no bar to another suit against Strader, nor can it be given in evidence by either party in any possible way. On the other hand, suppose Smyth gains this suit, Perrine has to pay the money. There is no principle which will enable Perrine to recover of Strader, or of any member of the firm of Strader, Perrine, & Co. He cannot make them contribute for they are not his partners; nor is there any privity between them. It is as if his house were burnt down; it is his misfortune, and he cannot divide it with his neighbours. He cannot make them pay the whole, for the recovery is had against him, if at all, on account of his laches, in not publishing his withdrawal to the world,—a matter with which his quondam partners have nothing whatever to do. But granting that Perrine, if compelled to pay the note, can recover of the firm, it can only be on the ground of its being a genuine note, which they would...