Brobston v. Penniman

• Decision Date: 02 December 1895
• Citation: 25 S.E. 350,97 Ga. 527
• Parties: BROBSTON v. PENNIMAN et al.
• Court: Georgia Supreme Court

25 S.E. 350

97 Ga. 527

BROBSTON v. PENNIMAN et al.

Supreme Court of Georgia

December 2, 1895

Syllabus by the Court.

1. Where the president and cashier of a bank, being also members of a partnership composed of themselves and another person to the capital stock of which they had, under the partnership articles, agreed to contribute a given sum, without the knowledge or consent of that person executed and delivered to the bank a promissory note in the name of the partnership for the purpose of raising the money they had so agreed to put into the partnership business, although the money obtained from the bank upon such note was in fact used for the purpose stated, the transaction was one for the private benefit alone of the two members of the partnership who thus raised the money, and in no sense for the benefit of the partnership itself.

2. Under these circumstances, the knowledge of the president and cashier of the facts above mentioned was the knowledge of the bank itself; and neither the partnership, as such, nor the remaining member, was liable to the bank upon the note in question.

Error from superior court, Glynn county; J. L. Sweat, Judge.

Action by Edwin Brobston, receiver of the Brunswick State Bank against E. A. Penniman and others on a note. There was a judgment for defendants, and plaintiff brings error. Affirmed.

Goodyear & Kay, for plaintiff in error.

Johnson & Krauss and Harrison & Peeples, for defendants in error.

LUMPKIN J.

An agreement for the formation of a partnership under the name and style of the "Union Warehouse & Commission Company" was entered into between Mrs. Penniman, Charles B. Lloyd, and Frank E. Cunningham, by the terms of which Mrs Penniman was to convey 25 acres of land to the firm, and Cunningham and Lloyd were each to contribute to it the sum of $2,500 in cash. Lloyd was president, and Cunningham cashier, of the Brunswick State Bank. In order to raise the $5,000 which they were to pay into the partnership, they, without the knowledge or consent of Mrs. Penniman, borrowed that sum from the bank, and gave for it a note executed in the partnership name. Mrs. Penniman conveyed to the partnership the 25 acres of land, in accordance with her agreement. Afterwards an action upon the $5,000 note was brought by Brobston, as receiver of the bank, against the partnership; and the question presented for determination is whether it is liable upon the note. If it is, it would, of course, follow that Mrs. Penniman would be liable also.

We have no difficulty whatever in holding that the plaintiff was not entitled to a recovery in this case. It was the duty of Lloyd and Cunningham to raise on their own account the money which they had agreed to contribute to the partnership business. It is perfectly obvious that the partnership itself had no immediate concern in this matter, it not being in any sense a transaction for its benefit, but one exclusively for the benefit of the two members who contracted for the loan. The debt created by the giving of the note was not a partnership debt, and therefore, upon general principles, it should not be made liable for its payment. It was insisted, however that as the note was executed by a member of the firm who had authority, as a partner, to make and deliver notes in the partnership name, the bank ought to be protected, because it in good faith advanced its money upon the note, in ignorance of the fact that the note was not really given to raise money for the partnership, but for the private benefit of two of its members, to enable them to meet their obligations to it in accordance with their agreement with Mrs. Penniman. If this proposition had any foundation in truth, the position of the plaintiff would be unanswerable; but it is...