Cochran v. Anderson County Nat. Bank

• Decision Date: 15 November 1883
• Citation: 6 Ky.L.Rptr. 168,83 Ky. 36
• Parties: Cochran & Fulton v. Anderson County National Bank, & c.
• Court: Kentucky Court of Appeals

83 Ky. 36

6 Ky.L.Rptr. 168

Cochran & Fulton v. Anderson County National Bank, & c.

Court of Appeals of Kentucky.

November 15, 1883

APPEAL FROM ANDERSON CIRCUIT COURT.

GEO WEISSINGER FOR APPELLANTS.

1. The active, visible partner in a dormant partnership has in the eye of the law, as to creditors and purchasers, no partner at all, and has a right to dispose of the partnership effects or securities in any manner, and to bind his partners by his acts. (Cammack v. Johnson, 1 Green's Ch'y, 163; Lord v. Baldwin, 6 Pick., 348; French v Chase, 6 Greenleaf, 166; Talcott v. Dudley, 4 Scammon (Ill.)

2. To constitute one a dormant partner, it is not necessary that he should wholly abstain from actual participation in the business of the firm, or be universally unknown as having a connection with it. (North v. Bloss, 30 N.Y. 374; Kelly v. Hurlbut, 5 Cowen, 534; Mitchell v Dall, 2 Harris & Gill, 171; Gow on Partnership, p. 12.)

JAMES SPEED ON SAME SIDE.

The purchaser of goods from one in possession of them has no possible means of knowing the rights or interests of dormant partners of the person in possession, and, therefore acquires title as against such partners.

YOUNG & TRABUE ON SAME SIDE, IN PETITION FOR REHEARING.

1. A partnership may exist in a single transaction as well as in a series; if there is a joint purchase with a view to a joint sale and communion of profit and loss it is a partnership trade, although it is confined to a single thing. (In re Warren, Daveis, 323; Ripley v. Colby, 3 Fost. (N. H.), 443.)

2. A partner may borrow money and pledge the partnership effects as collateral security therefor, and bind the firm to an innocent lender, though the borrowed money be subsequently misapplied; and this is true of a special partnership in a particular venture, as well as of a general partnership. (Reid v. Hollinshead, 4 Barn. & Cress., 837; Story on Partnership, sections 94, 104, 105; Winship v. Bank of United States, 5 Pet., 529, 561; Livingston v. Roosevelt, 4 John., 251; Lindley on Partnership, 269; Bank of Kentucky v. Booking, & c., 2 Litt., 45; McGowan, & c., v. Bank of Kentucky, 5 Litt., 271; Burgess v. Northern Bank of Kentucky, 4 Bush, 600.)

D. W. LINDSEY FOR APPELLEES.

1. A warehouseman's receipt for goods not in his warehouse at the time of the execution and delivery of the receipt does not pass any right or title to the holder. (Cochran & Fulton vs. Ripy, Hardie & Co., 13 Bush, 496); and a mere redrafting of the original receipts after the property has been removed to his warehouse amounts only to a ratification of the original contract, and can not add to its efficacy.

2. A partner can not pledge the partnership property for his individual debt. (Story on Partnership, section 94; Smith's Mercantile Law, p. 71; 18 B. M., 199; Wagnon v. Clay, 1 Mar., 257.)

3. A factor or commission merchant or agent can not pledge or mortgage the goods of his principal. (2 Kent's Com., section 41.)

4. In a non-commercial partnership, in order to make out the liability of the firm, it must be made out affirmatively that the partner who made the contract in question had the power to make it. (Judge, & c., v. Braswell, & c., 13 Bush, 75.)

5. A joint purchase for a particular adventure, upon an agreement to share jointly in the profit and loss, constitutes a limited partnership. (Crompston v. McNair, 1 Wend., 457; Bentley v. White, 3 B. M., 266.)

6. Appellees were not dormant partners, but, even if they were, the law with regard to dormant partners extends only to commercial partnerships, and has no application to dormant partners in special adventures. (Pitts v. Waugh, 4 Mass. 421; Smith v. Burnham, 3 Sumner, 435; Rodgers v. Batchelor, 12 Peters; Binney v. The Banks, 5 Mason.)

P. B. THOMPSON, JR., ON SAME SIDE.

1. A partner can not pledge the assets of the firm on his individual account, and, if he does so, the pledgee risks title and holds subject to the superior title of the firm, although he may not have known that the property was that of the partnership. (Binney v. U. S. Bank, 5 Mason; Rogers v. Batchelor, 12 Peters, 229.)

2. A warehouseman's receipt for property not in his warehouse does not pass any title thereto. (Cochran & Fulton v. Ripy, Hardie & Co., 13 Bush, 496.)

3. A plaintiff claiming title under a warehouse receipt alleged to have been issued at a certain time can not recover upon proof of a warehouse receipt issued at a subsequent date, the time being material. (3 Litt., 419.)

T. C. BELL ON SAME SIDE.

1. Under the warehouse law a warehouseman has no authority to issue receipts in his own name on property not his own, and, therefore, a receipt issued by him on property which he owns jointly with another is illegal and void.

2. A secret partner is bound by the act of the ostensible partner only where the credit was given to the ostensible partner in the course of the business of the partnership and for the common benefit. The power to sell does not include the power to pledge for the individual debt of the ostensible partner. (Bank v. Binney, & c., 5 Mason, 188; Rogers v. Batchelor, 12 Peters, 232; Bentley v. White, 3 B. M., 263.)

3. A partnership in a single adventure is not a commercial partnership, and, therefore, the general doctrine applicable to dormant partners in commercial partnerships does not apply here. The rule of caveat emptor applies.

THOMAS H. HANKS ON SAME SIDE.

One partner can not apply the partnership funds or property to the payment of his private debts, and the title of the other partners is not thus divested in favor of the private creditor, even if the latter was ignorant that the funds or property belonged to the partnership. (Rogers v. Batchelor, 12 Peters, 221; Daniel v. Daniel, 9 B. M., 196; Bank of Kentucky v. Herndon, 1 Bush, 359; Conwell v. Sandidge, 8 Dana, 279.)

JOHN B. LINDSEY, ON SAME SIDE, FILED REPLY TO PETITION FOR REHEARING.

OPINION

PRYOR JUDGE:

It is unnecessary to notice the preliminary questions raised by counsel for the appellee on the last hearing, and in the consideration of this case it will be treated as if all the actions had been consolidated and heard with the action in which Shipman was adjudged to have made a fraudulent preference as between creditors, bringing the case within the act of 1856. It was a case in which the entire estate of Shipman passed to creditors for distribution. It was so considered by the court below, and the only question to be settled here arises as to the conflicting liens or priorities in right in the distribution of the fund arising from the sale of Shipman's property.

The evidence conduces to show that Shipman was a private warehouseman, engaged largely in buying and selling whisky on his own account and for others. The appellants, Cochran & Fulton, became the indorsers of Shipman for a considerable sum of money, and in order to secure them in their liability he pledged to them as collaterals certain warehouse receipts for many barrels of whisky, with the serial numbers inserted; and if this controversy was alone with the appellants and Shipman, there could be no question as to the former's right to subject the whisky to the payment of the debt for which they were bound, and which they were compelled to pay. The rights of other parties intervened and they claimed the whisky that had been pledged to Cochran & Fulton as theirs, and were adjudged to have priority in the distribution of the proceeds of the sale of the whisky by the judgment below.

The firm of Cochran & Fulton, as the proof shows, had many transactions with Shipman in the purchase and sale of whisky; and Shipman at one time purchased for the firm one thousand barrels of whisky in his, Shipman's, name, with the agreement that he, Shipman, was to have part of the profits. This was some time prior to the bankruptcy of Shipman, and has no connection with this case except to show the manner in which Shipman was conducting his business.

It is well established that he purchased and sold whisky for others as well as himself, and that he had no partner connected with him in his general business, but now and then became jointly interested with others in the purchase and sale of specific lots of whisky, the whisky being identified by serial numbers, as is usual in the trade.

Vandyke, Powell, Monroe Walker & Son, and the Anderson County National Bank, are appellees here, and the three first named claim to have purchased, jointly with Shipman, certain specified lots of whisky that were deposited in his warehouse, and placed in each case to the account of the particular joint adventure.

Shipman and Vandyke entered into a writing evidencing their purchase of one hundred barrels of whisky, or their joint interest in the one hundred barrels. This whisky was identified by numbers and removed to the warehouse of Shipman, and there placed to the account of Vandyke & Shipman. Powell had purchased two or more specified lots jointly with Shipman, with the whisky identified in and out of the warehouse in the same manner as Vandyke, and so with Monroe Walker & Son. These transactions did not constitute the bulk of the business conducted by Shipman, but were small lots of whisky purchased on joint account, and openly held and claimed by the parties when in the warehouse, and before it reached the warehouse, as the joint property of the parties making the purchase. Shipman disposed of most of this whisky held on joint account, not leaving enough to pay to the other joint owners their proportion of the whisky or its proceeds. They claim that in a court of equity their claim is superior to that of the appellants.

The whisky, or the several lots, was purchased for the purpose alone of being sold, and the profits, if any, divided. It is not insisted...