Chatham Nat'l Bank v. Gardner

• Decision Date: 23 May 1906
• Docket Number: 16-1096
• Citation: 31 Pa.Super. 135
• Parties: Chatham National Bank, Appellant, v. Gardner
• Court: Pennsylvania Superior Court

31 Pa.Super. 135

Chatham National Bank, Appellant, v. Gardner

No. 16-1096

Superior Court of Pennsylvania

May 23, 1906

Argued March 7, 1906

Appeal by plaintiff, from judgment of C.P. Elk Co., April T, 1903 No. 230, on verdict for defendants in case of Chatham National Bank v. J. K. Gardner, A. M. McClain and George A McClain, trading as the Gardner Shingle Company, Limited.

Assumpsit on promissory notes. Before Mayer, P. J.

The facts are stated in the opinion of the Superior Court.

The court gave binding instructions for defendants.

Verdict and judgment for defendants. Plaintiff appealed.

Error assigned was in directing a verdict for defendants.

Fred H Ely, for appellant. -- The defendants were liable as general partners and the act of June 2, 1874, does not apply Eliot v. Himrod, 108 Pa. 569; Van Horn v. Corcoran, 127 Pa. 255; Haslet v. Kent, 160 Pa. 85; Blumenthal v. Whitaker, 170 Pa. 309; Sheble v. Strong, 128 Pa. 315; Lee v. Burnley, 195 Pa. 58.

The two partners had a right to issue the notes in suit and Gardner is bound by their action: Sedgwick v. Lewis, 70 Pa. 217; Investment Co. v. Russel, 148 Pa. 496; Haldeman & Grubb v. Bank of Middletown, 28 Pa. 440; Lancaster County Bank v. Garber, 178 Pa. 91; Moorehead v. Gilmore, 77 Pa. 118; Miller v. Consolidation Bank, 48 Pa. 514; Hoskinson v. Eliot, 62 Pa. 393; Phelan v. Moss, 67 Pa. 59; Hogg v. Orgill, 34 Pa. 344; Knight v. Pugh, 4 W. & S. 445; Hey v. Frazier, 1 Mona. 759.

The notes in suit are those of the Gardner Shingle Company, Limited: Sharpe v. Bellis, 61 Pa. 69; DeRoy v. Richards, 8 Pa.Super. 119; Falk v. Moebs, 127 U.S. 597 (8 S.Ct. 1319); Hitchcock v. Buchanan, 105 U.S. 416; Slawson v. Loring, 87 Mass. 340; Tripp v. Swanzey Paper Co., 30 Mass. 291; Fuller v. Hooper, 69 Mass. 334; Second Nat. Bank v. Midland Steel Co., 155 Ind. 581 (58 N.E. 833); Means v. Swormstedt, 32 Ind. 87; Hood v. Hallenbeck, 7 Hun (N.Y.), 362; Aggs v. Nicholson, 1 H. & N. 165.

Harry Alvan Hall, with him W. W. Barbour and Eugene H. Baird, for appellees. -- A note or bill signed by an individual who adds to his name the title " administrator," " executor" or " guardian" will be considered his personal contract, and the addition a mere description personae: Tassey v. Church, 4 W. & S. 346.

Before Rice, P. J., Porter, Henderson, Morrison, Orlady, Head and Beaver, JJ.

OPINION

MORRISON, J.

This is an action of assumpsit brought to recover the amount of two certain promissory notes, against the defendants as general partners.

On September 26, 1900, the defendants attempted to form a limited partnership, under the provisions of the Act of June 2, 1874, P. L. 271, and the supplements to the said act. The defendants entirely failed to sign, acknowledge, and record a statement in writing in accordance with the provisions of said act. Subsequently, on February 28, 1901, an attempt was made to amend the articles of association by increasing the capital from $ 12,000 to $ 30,000, but this statement was not signed by any of the partners, except A. M. McClain. On account of the palpable defects in both statements in not sufficiently describing the property contributed by the partners, and because the amended statement was not signed as required by law, the learned court below correctly held that the defendants were liable as general partners.

In Eliot v. Himrod et al., 108 Pa. 569, the Supreme Court, Mr. Justice Trunkey, p. 580, said: " Each partner is liable, unless saved by statute. If the partners have not complied with the statutory requirements, a limited partnership association has not been formed. Where there is no record of a proper statement, there is no statutory association. Where the chief requisite in the recorded statement is false, the partners who misstated the fact have no shield against the rule at common law respecting their liability for debts."

In Vanhorn v. Corcoran, 127 Pa. 255, it is held as stated in the syllabus: " Parties doing business as a limited partnership under a defective certificate of organization, are liable as general partners to a common-law action, and creditors are not confined to the remedy provided by section 2, of the act of June 2, 1874." See also Hill v. Stetler, 127 Pa. 145.

In Haslet et al. v. Kent et al., 160 Pa. 85, the members of a so-called limited partnership were held liable as general partners because their property contributed had not been scheduled and valued as the act of May 1, 1876, directs.

In Maloney et al. v. Bruce et al., 94 Pa. 249, it was held as stated in the syllabus: " If partners seek to have all the advantages of a partnership, and yet limit their liability to creditors, they must comply strictly with the act of June 2, 1874." See also Blumenthal Bros. & Co. v. Whitaker, 170 Pa. 309.

In First Nat. Bank v. Creveling, Miles & Co., 177 Pa. 270, members of an attempted limited partnership were held liable as general partners on account of a defective certificate under the act of 1874 and its supplements.

In Lee & Bacchus v. Burnley et al., 195 Pa. 58, it was held: " Each partner of a limited partnership association is liable unless saved by statute. If the partners have not complied with the statutory requirements, a limited partnership has not been formed."

We might multiply the citation of decisions upon this question but it is unnecessary as it clearly appears, from the record, and it was conceded at the argument, that these defendants had not complied with the act of 1874, and that they were liable as general partners to bona fide creditors of the Gardner Shingle Company, Limited.

The learned court flatly held that the defendants were liable as general partners and then fell into error in measuring the rights and liabilities of the parties to this suit as if the defendant was a legal limited partnership. Upon this question the learned court said: " So we say in this case, the bank was bound to know that in order to create a valid debt or obligation of the company, the debt must have been contracted by a manager as provided in the act of May 10, 1889."

" We are of the opinion that these notes were the individual notes of A. M. McClain and George A. McClain. The association's name does not appear in them, and in order to bind it the name of the association must appear in the body of the notes, or the name of the association should have been signed to the notes."

This ruling of the court is, we think, clearly erroneous. First, the suit was upon two several promissory notes, each one of which was less than $ 500. Second, the notes were signed by George A. McClain, secretary, and A. M. McClain, treasurer, and it is conceded that both of these partners had been appointed managers of the Gardner Shingle Company, Limited. We will here copy one of the notes and they are both precisely alike, except as to amount and time of payment:

" $ 215.75 Ridgway, __ Pa. __, Nov. 26, 1902.

" Gardner Shingle Company, Ltd.

" Three months after date we promise to pay to the order of The Abbey Press Two hundred and fifteen 75-100 dollars, at Elk County National Bank, without defalcation, value received.

" George A. McClain A. M. McClain,

" Secretary. Treasurer."

The 20th section of the Act of May 16, 1901, P. L. 194, provides: " Where the instrument contains or a person adds to his signature words indicating that he signed for or on behalf of a principal, or in a representative capacity, he is not liable on the instrument if he was duly authorized; but the mere addition of words describing him as an agent or as filling a representative character, without disclosing his principal, does not exempt him from personal liability."

In our opinion, the notes in suit plainly indicate upon their face that they were the notes of the Gardner Shingle Company, Limited, and being in writing, and signed by two of the partners, one as secretary and the other as treasurer, conclusively indicate that these persons did not make and execute the paper in their individual capacity. The note being that of the Gardner Shingle Company, which we have already seen was in law a general partnership, and the signatures being George A. McClain, secretary, and A. M. McClain, treasurer, the question at once arises, of what were they secretary and treasurer? Upon the face of this note but one answer can be made: that they were secretary and treasurer of the Gardner Shingle Company. Now, having found that the three members of that company were liable as general partners, it follows under well settled rules of law, that one or more of these partners could execute and deliver valid promissory notes within the apparent scope of the business of the partnership. It is not necessary to cite cases sustaining the proposition that each member of a general partnership is the agent of the firm in the transaction of business in which the firm is engaged. It is a conceded fact that the notes in suit are negotiable, and that the plaintiff is a holder of the same, bona fide for value, and without notice. Nothing but clear evidence of knowledge or notice, fraud or mala fides, can impeach the prima facie title of the holder of negotiable paper taken before maturity: Moorehead v. Gilmore, 77 Pa. 118; Lancaster County National Bank v. Garber, 178 Pa. 91.

" A partner may enter into contract in the ordinary business of the firm, sell or pledge goods, draw, negotiate, indorse or accept bills or other negotiable securities, and do any other acts incident or appropriate to such trade:" Hoskinson v. Eliot et al., 62 Pa. 393; Rice v. Jackson et al., 171 Pa. 89.

In Phelan v. Moss, 67 Pa. 59, it was held as stated in the syllabus: " A holder of a negotiable note, bona fide for value, without notice, can recover it, notwithstanding he took it under...