Holt v. Simmons

• Decision Date: 24 June 1884
• Citation: 16 Mo.App. 97
• Parties: JAMES R. HOLT, Respondent, v. W. J. SIMMONS ET AL.; A. JUDLIN, Appellant.
• Court: Missouri Court of Appeals

16 Mo.App. 97

JAMES R. HOLT, Respondent,

v.W. J. SIMMONS ET AL.; A. JUDLIN, Appellant.

St. Louis Court of Appeals, Missouri.

Jun. 24, 1884.

APPEAL from the St. Louis Circuit Court, LINDLEY, J.

Reversed and remanded with directions.

DYER, LEE & ELLIS, for the appellant: It is a legal consequence in every commercial partnership--every partnership engaged in buying, selling or exchanging, that each partner is the general agent of the firm; and has power to act for it and bind it in all matters within the scope of the partnership business, and it is within the scope of such business to borrow money, to draw money, accept, or indorse bills of exchange or promissory notes. These are the means of conducting such business, and they are common alike to all partnerships engaged in the sale of merchandise.-- Wagner v. Simmons, 61 Ala. 146; Howze v. Patterson, 53 Ala. 205; Pohlman v. Taylor, 75 Ill. 629; Zuel v. Bowen, 78 Ill. 324; Johnson v. Barry, 95 Ill. 483; Leffer v. Rice, 44 Ind. 103; Faler v. Jordan, 44 Miss. 283; Porter v. White, 39 Ind. 613; Hoskinson v. Elliott, 62 Pa. St. 393; Roney v. Buckland, 4 Nev. 45; Ford v. McBride, 45 Texas, 498; Smith v. Collins, 115 Mass. 388; Dowe v. Moore, 47 N. H. 419; Silverman v. Chase, 90 Ill. 37; Wells v. Miller, 66 N. Y. 255; Ditts v. Lonsdale,44 Ind. 521; Johl v. Fernberger, 10 Heisk. 37; 1 Am. Ld. Cas. 442; Hunt v. Clarke, 56 Ala. 19. The implied authority of a partner having power to borrow money to pledge the personal property of the firm for money borrowed is beyond dispute.--1 Lindley on Part. 285, and cases cited. One partner has power without any special authorization for that purpose to execute a mortgage on the personal property of the partnership to secure all partnership debt.-- Keck v. Fisher, 58 Mo. 532; Flanagan v. Alexander, 50 Mo. 50. A trading copartnership is one in which the business thereof, according to the usual mode of conducting it, imports in in its nature the necessity of buying and selling; and such a copartnership is invested with all the powers and subject to all the obligations incident to a trading partnership.-- Kimbro v. Bullitt et al., 22 How. (U. S.) 256; McGregor v. Cleveland, 5 Wend. 475; Winship Bank v. U. S., 5 Pet. 529; Baker v. Wheeler, 8 Wend. 505; Coles v. Coles, 15 Johns. 160; Johnson v. Dutton, 27 Ala. 245; Hedley v. Bainbridge, 3 Q. B. 321; Cagill v. Cosby, 15 Miss. 425.

A. MOORE BERRY, CHAS. B. STARK and THOS. METCALFE, for the respondent: Persons who, with knowledge of the character and scope of a partnership business, deal with one partner, do so with notice of the limitations which the nature and customs of that business place upon the power of each partner to bind the firm.--Pars. on Part. 99; Pooley v. Whitmore, 10 Heisk. 638. Persons who deal with a partner are bound to know the extent of his authority.-- Davis v. Richardson, 45 Mo. 510; Waller v. Keys, 6 Vt. 257; Prince v. Crawford, 50 Miss. 358; Cocke v. Bank, 3 Ala. 180. The power of one partner to bind his copartner by the execution, in the firm name, of negotiable paper, is confined strictly to trading or commercial partnership.-- Davis v. Richardson, 45 Miss. 508; Smith v. Sloan, 37 Wis. 285; Prince v. Crawford, 50 Miss. 344; Hunt v. Chapin, 6 Lans. 139; Gray v. Ward, 18 Ill. 33; Deardorf v. Thacher, 78 Mo. 128 (advance sheet); Third National Bank v. Snyder, 10 Mo. App. 211; Graves v. Kellenberger, 51 Ind. 66; Cocke v. Bank, 3 Ala. 178; Judge v. Braswell, 13 Ky. (Bush) 75; Hedley v. Bainbridge, 3 Ad. & El. (N. S.) *321; Story on Part., sect. 102 a; Pars. on Con. 208. Neither partner in a non-trading firm has any implied power to bind his copartner by negotiable notes signed in the firm name.-- Third National Bank v. Snyder, 10 Mo. App. 211, and authorities cited; Deardorf v. Thacher, 78 Mo. 128. To constitue a custom or usage of a firm, both partners must be cognizant of the course of dealing; the habit of one partner to execute or indorse negotiable paper is not, of itself, sufficient to bind the copartners on the ground that such was the custom or usage of the firm.-- Andrews v. Bank, 7 Smed. & M. 192-196; Prince v. Crawford, 50 Miss. 359. The mere fact that the money borrowed by one partner has been in good faith applied to partnership purposes is not sufficient to render the firm liable to repay it if there was no actual or implied authority to borrow, and there has been no ratification of the loan.--Collier on Part. 666, citing Galway v. Matthews, 10 East, 264; Bannister v. Morris, 6 Exch. 796; Picketts v. Bennett, 4 C. B. 686; Hawtayne v. Bourne, 7 M. & W. 595.

THOMPSON, J., delivered the opinion of the court.

This is a suit brought by one partner against his copartners and the firm creditors for the purpose of winding up the concern. There was an injunction, which was afterwards dissolved except as to defendant Simmons, who was the plaintiff's copartner. By consent of parties a referee was appointed “to take proof, audit and allow or reject all claims of the defendants and all others,” against the firm, and to “adjust the partnership accounts as between plaintiff and defendant Simmons, partners in said late firm.” The referee heard the parties and filed an elaborate report, stating certain general conclusions of fact and of law, and then passed specifically upon each claim.

The only question which arises upon this record relates to the claim of the defendant Asbury Judlin, upon a promissory note for $400, which, together with two other notes held by the defendant Delehanty, had been secured by a chattel mortgage of all the tangible assets of the firm. The plaintiff Holt resisted the allowance of this claim, on the ground that the note and the mortgage securing it had been given by his copartner, the defendant Simmons, after the dissolution of the partnership, without the plaintiff's knowledge, consent, or authority, express or implied. The referee found that this defence had been made out and rejected the claim, including the mortgage, which of course fell with the note.

The referee based his conclusion upon certain findings of fact, which will be set out. The plaintiff argues that, in respect of this claim, the case is to be deemed an action at law, and that the findings of the referee are therefore conclusive, there being substantial evidence to support them. We do not understand that this is an action at law. We understand that this is a well recognized proceeding in equity, known in the English chancery practice as a ““winding up bill,” the general purpose of which is to wind up and settle affairs of an insolvent partnership, not only as between the firm and its creditors, but as between the partners inter se; that, according to the English chancery practice, those having claims against the firm intervene pro interesse suo before a master, who hears proof and passes upon their claims, his findings being subject to review by the court upon exceptions, both as to law and fact. By anology to this practice, the claims in this case were sent to a referee; and we understand that, upon exception to his conclusions of fact, the court will re-examine the same upon the testimony reported by him, just as in the corresponding proceeding in chancery, and overrule his findings, if contrary to a clear preponderance of evidence.

With this understanding of the practice we have looked carefully through the record and have come to the conclusion that the following findings of the referee are well supported by the evidence: That the plaintiff and the defendant Simmons became partners in business on the 28th of October, 1879, under the firm name and style of the Simmons Refrigerator Company; that their agreement of copartnership was in writing; that it expired by limitation on the 28th of October, 1880, and that they ceased to be partners on that day; that the business conducted by them as copartners was the manufacture and sale of refrigerators, ice boxes or coolers, and butcher boxes, and the fitting up of saloons with counters, shelving, sinks, and perhaps some other appliances used in saloons; that the nature, scope, and character of the business thus conducted by them as copartners was known to the defendant Judlin, at or before the time when the debt was contracted, which forms the basis of his claim; that Simmons contributed to the capital of the concern a lot of stock, manufactured goods, contracts for work, and also his personal services and skill, and that Holt contributed cash from time to time amounting in the aggregate to more than $3,000; that Simmons assumed the active management of the business, and that Holt became the office man and book-keeper of the concern; that on or about October 28, 1880, the date at which the partnership expired by limitation, the firm closed its office and salesroom at No. 1222 Olive Street, where the firm name had hitherto appeared on the window and on the sign over the door, and removed all its stock to a place on Twelfth Street, about two or three blocks further over, which place had been used as a factory by them, but which had no sign to indicate to the public by whom, or what business was done there; that after this removal to the place on Twelfth Street, the stock was stored away at such place, a room was then fitted up with a stove and office desk, and that some material on hand, which otherwise would have been valueless and lost, was worked up into two or three ice-boxes, which work occupied about the first three weeks of November, 1880, and was the last work done by the firm; that at this time the stock on hand belonging to the firm was worth about $1,800, and the indebtedness of the firm, exclusive of claims which are contested by the plaintiff Holt, amounted to about $250 or $300; that during the months of November and December, 1880, and January, 1881, Simmons employed men and did some work at this place on Twelfth Street on his own account, of a character similar to the work which had been done by the firm; that...