Blake v. Third Nat. Bankof St. Louis

• Decision Date: 13 April 1909
• Citation: 118 S.W. 641,219 Mo. 644
• Parties: DANIEL F. BLAKE, Trustee in Bankruptcy of Estate of GEORGE Y. SALMON and HARVEY W. SALMON, Partners Under Firm Name of SALMON & SALMON, Appellant, v. THIRD NATIONAL BANK OF ST. LOUIS
• Court: Missouri Supreme Court

118 S.W. 641

219 Mo. 644

DANIEL F. BLAKE, Trustee in Bankruptcy of Estate of GEORGE Y. SALMON and HARVEY W. SALMON, Partners Under Firm Name of SALMON & SALMON, Appellant, v. THIRD NATIONAL BANK OF ST. LOUIS

Supreme Court of Missouri

April 13, 1909

Appeal from St. Louis City Circuit Court. -- Hon. Matt. G. Reynolds Judge.

Reversed and remanded.

I. P Ryland, Edward C. Crow and Mann & Daniel for appellant.

(1) A transfer of partnership property by one partner to pay his individual debt without the knowledge and consent of his copartner, is void and does not have the effect to pass the title of the partnership therein, and the property, or its value, can be recovered in an appropriate action. Flanagan v. Alexander, 50 Mo. 50; Ackley v Stachlin, 56 Mo. 558; Forney v. Adams, 74 Mo. 138; Ewart v. Tootle, 50 Mo.App. 322; Rock Island Imp. Co. v. Sloan, 83 Mo.App. 438; Hagar v. Graves, 25 Mo.App. 164; Rogers v. Batchelor, 12 Pet. 221; Daniels v. Atkinson, 124 Ill. 674. (2) The application of partnership funds or money to the payment of a debt of one member of a partnership is outside of and beyond the scope of its business, and assent to such application must be shown, or subsequent ratification proved. McNair v. Platt, 46 Ill. 213. (3) The authority of the individual partner to bind the firm by the drawing and endorsing of negotiable paper extends only to the trade or business of the firm. It is equally well settled that where one partner employs the funds of the firm in payment of his individual debt, the creditor knowing that fact will be deemed to act in bad faith and in fraud of the partnership, and when funds or the paper of the firm is taken in the payment of the private debt of one of the partners, the law charges the creditor with knowledge of the fraud and imposes on him the onus of repelling that presumption. Mecutchen v. Kennedy, 27 N. J. L. 226; Farwell v. St. Paul Trust Co., 22 Am. St. Rep. 747; Harrington v. Baker, 173 Mass. 488; Lanier v. McCabe (Fla.), 48 Am. Dec. 173. (4) There are no equities in this case in favor of defendant bank. The act of Casey, the manager, in attempting to pledge the firm of Salmon & Salmon to the payment of a debt which was not the debt of the firm, and the later act of G. Y. Salmon in giving the notes of the firm for this same debt, was a fraud on the partnership and as the defendant bank was informed of the true character of this transaction by the very form of it, it is an active participant in the fraud. Ealy v. Coal & Lumber Co. 123 Ga. 557; Huttig v. Gough, 81 Mo.App. 440; Meyer v. Withmar, 41 Mo.App. 397; see, also, cases cited under point 1. Defendant is therefore in no position to invoke the equitable doctrine, invoked in the court below, that where one of two innocent parties must suffer, the loss falls upon the one whose fraud or neglect made the loss possible. (5) The right of Casey as manager, and of G. Y. Salmon as one of the firm of Salmon & Salmon, to bind the firm, rests upon the same ground, that of agency. Neither of them had any authority to bind the firm, except as to matters within the legitimate scope of the firm business. The nature and extent of the agent's authority may be implied from circumstances, but the authority will be limited to matters of like nature with those acquiesced in. Alt v. Grosclose, 61 Mo.App. 409; Cummins v. Hurd, 49 Mo.App. 139; Harrison v. Railroad, 50 Mo.App. 332; Fougue v. Burgess, 71 Mo. 389. (6) That the request of Casey in his letter to "place the proceeds to our credit" was the selection of a method of transferring the money to Clinton and not an indication that Salmon & Salmon were the borrowers, is a matter of which the courts will take judicial notice. "Courts cannot close their eyes to the well-known course of business in the country." The transfer of money from one part of the country to another by an exchange of credits between banks is so universal and well established that courts will take judicial notice of it. President Bank of Kentucky v. Adams Express Co., 93 U.S. 185; Gibson v. Stevens, 49 U.S. 384; Lanfear v. Mestier, 89 Am. Dec. 661; State v. Metcalf (S. D.), 100 N.W. 923.

Lyon & Swarts for respondent.

(1) The notes originally discounted for Salmon & Salmon, like the subsequent notes paid by Salmon & Salmon, were, throughout the dealings between the parties, treated by all of them as representing liabilities of Salmon & Salmon, and must be considered as such. Kennedy v. Bank, 14 Fed. Cas. 313; Diermeyer v. Hackman, 52 Mo. 282; Hickman v. Kunkle, 27 Mo. 401; Wilde v. Passamaquody, 3 Monroe 505; Sun Printing Ass'n v. Moore, 183 U.S. 642. (2) Even though the notes first discounted did not carry with them a partnership obligation, yet if when their payment was demanded of the partnership by the defendant, the partnership, for purposes of its own, admitted liability thereon, there was a valuable consideration for the giving of the new notes, which the partnership ultimately paid. Cox v. Sloan, 158 Mo. 411; Stephens v. Spiers, 25 Mo. 386; Diermeyer v. Hackman, 52 Mo. 282; 1 Daniel on Negotiable Instruments, sec. 185; Rock Island Co. v. Corbin, 83 Mo.App. 438; Lincoln National Bank v. Schoen, 56 Mo.App. 160. (3) The conduct of the partnership throughout the transaction, as well as the receipt and retention by the partnership of the various collateral surrendered by the defendant to the partnership upon the payment of the notes, binds the partnership as effectually as the most formal authorization in advance or the most formal ratification afterwards. Broughton Bros. v. Sumner, 80 Mo.App. 386; Noble v. Metcalf, 20 Mo.App. 360; Hayner v. Crow, 79 Mo. 293. (4) The moneys were paid voluntarily by Salmon & Salmon with a full knowledge of the facts, and cannot be recovered by their trustee. Welday v. Jones, 79 Mo. 170; Wolfe v. Marshal, 52 Mo. 167; Morley v. Carlson, 27 Mo.App. 5; State v. Stonestreet, 92 Mo.App. 214; Union Savings Ass'n v. Kehlor, 7 Mo.App. 158. (5) This is an action for money had and received, and the plaintiff has made no showing to entitle him to recover moneys which in equity and good conscience the defendant should return. 2 Greenleaf on Evidence (16 Ed.), sec. 117; Clifford Banking Co. v. Commission Co., 195 Mo. 262; Union Savings Ass'n v. Kehlor, 7 Mo.App. 158.

GRAVES, J. Valliant, C. J., Fox and Woodson, JJ., concur. Burgess and Lamm, JJ., dissent; Gantt, J., being a creditor of the Salmon estate, does not sit.

OPINION

In Banc

GRAVES J.

For a long time prior to May 5, 1903, and on said date, there was in Clinton, Missouri, a copartnership composed of G. Y. Salmon and H. W. Salmon, engaged in the banking business as private bankers, under the firm name of Salmon & Salmon. At all the dates of the transactions involved in this suit Thomas M. Casey was the man in charge and manager of the banking business of the said Salmon & Salmon. For a long time prior to May 5, 1903, and thereafter up to October 20, 1903, there existed a copartnership, composed of G. M. Casey and W. A. Towers, under the firm name of Casey & Towers, which said firm was engaged in the cattle business.

June 26, 1905, the banking business of the said firm of Salmon & Salmon was placed in the hands of a receiver by the State court. On the same date proceedings in bankruptcy were instituted in the United States District Court at Kansas City, and later an adjudication of bankruptcy followed, and the plaintiff, Daniel F. Blake, was made trustee in bankruptcy of the estate of Salmon & Salmon, and all property, books and papers were turned over to him by the receiver of the State court.

The plaintiff in this action, as trustee as aforesaid, instituted suit against defendant to recover more than $ 40,000 as for money had and received. The petition is in thirty-four counts, but as all are practically identical, save as to the amount and dates, one count thereof will fairly state the petition. Count No. 30 reads:

"And for still other and further cause of action against defendant, plaintiff states that defendant is indebted to plaintiff, as trustee in bankruptcy of the estate of George Y. Salmon and Harvey W. Salmon, partners as Salmon & Salmon, in the sum of five thousand dollars, on account of money had and received from said banking firm of Salmon & Salmon, by defendant, on the 23d day of September, 1904, to the use of said banking firm of Salmon & Salmon, which sum of money defendant agreed to repay to Salmon & Salmon. Wherefore plaintiff prays judgment against defendant in the sum of $ 5,000, together with interest and costs."

Defendant after having unsuccessfully demurred to the petition, and after having unsuccessfully moved to make said petition more definite and certain, answered by way of general denial, with an admission of its corporate existence.

Trial was had before the court without the intervention of a jury, and the court, upon the conclusion of plaintiff's evidence, gave a declaration of law in the nature of a demurrer to the testimony, as to each count, except numbers 1, 2, 14, 16, 17, 18, 25, 26, 27, and 28, which were dismissed by plaintiff. Judgment was entered for the defendant and from this judgment after an unsuccessful motion for new trial, the plaintiff appeals to this court.

The evidence in the record is short, and in substance shows the following:

On May 5, 1903, Casey & Towers executed and delivered to G. Y. Salmon the following note:

Clinton, Mo., May 5th, 1903.

On Demand after date we promise to pay to the order of G. Y Salmon Ten Thousand & no-100 dollars for value received, and payable at the banking house of Salmon & Salmon, Clinton, Mo., with interest from date at the rate of eight per cent per annum; and if interest be not paid annually to become as principal and bear the same rate of...