Knaus v. Givens

• Decision Date: 23 May 1892
• Citation: 19 S.W. 535,110 Mo. 58
• Parties: Knaus et al., Appellants, v. Givens et al
• Court: Missouri Supreme Court

19 S.W. 535

110 Mo. 58

Knaus et al., Appellants, v. Givens et al

Supreme Court of Missouri, First Division

May 23, 1892

Appeal from Cooper Circuit Court. -- Hon. E. L. Edwards, Judge.

Reversed and remanded.

R. C Clark and Cosgrove & Johnston for appellants.

(1) While the notes in suit were held by W. A. Dudgeon he could not maintain a suit upon them against W. A. Dudgeon & Co. because he could not be both plaintiff and defendant in the same suit. The difficulty vanishes on indorsement to a third person for value. Appellants, although the notes were transferred to them after due and after the dissolution of the firm of W. A. Dudgeon & Co., can maintain this suit, and the trial court committed error in holding the contrary. 2 Bates on Partnership, sec. 884; Young v. Chew, 9 Mo.App. 387; Pitcher v. Barrows, 28 Am. Dec. 306; 17 Pick. 361; Smith v. Strader, 4 How. (U.S. Sup. Ct.) 403; Richardson v. French, 4 Met. 577, note in 1 Parsons on Contracts [6 Ed.] p. 182; Kipp v McChesney, 66 Ill. 460. (2) The notes in the hands of appellants were subject only to such equities and defenses as grew out of and were connected with the notes themselves. Henley v. Holzer, 19 Mo.App. 245; Barnes v. McMullin, 78 Mo. 260; Cutler v. Cook, 77 Mo. 388; Gullett v. Hoy, 15 Mo. 398. The fact that, while Dudgeon owned and held the notes, he could not maintain a suit upon them is not a defense that can be made against appellants. "A mere personal disability in the payee to sue cannot negative the maker's duty to pay, and, therefore, such a disability is not to be reckoned among the possible equities of which the indorsee assumes the risk." Young v. Chew, supra. (3) If the firm of W. A. Dudgeon & Co. owed Dudgeon the amount of the notes sued on, then his indorsees could recover, although the indorsements were made after the notes became due and after the firm of W. A. Dudgeon & Co. had dissolved. Chappell v. Allen, 38 Mo. 224.

A. J. Herndon, S. C. Major and Draffen & Williams for respondents.

(1) A note by a partnership to one of the partners is like a promissory note, payable to one's own order, and does not become enforceable as a legal contract, until delivery to a third person. Gale v. Miller, 54 N.Y. 536; Thompson v. Lowe, 9 W. Rep. 671; Davis v. Merritt, 51 Mich. 480; Young v. Chew, 9 Mo.App. 387; Pitcher v. Barrow, 28 Am. Dec. 306; s. c., 17 Pick. 361; Parker v. Macomber, 18 Pick. 505. (2) The court below properly held that, as it stood admitted that the instruments were not issued to a third party until after the dissolution of the partnership, they could not be sued upon as the notes of said firm. Gale v. Miller, 54 N.Y. 536; 1 Randolph on Commercial Paper, sec. 221, p. 339; Collyer on Partnership, p. 1039; Smyth v. Strader, 4 How. (U.S.) 418. (3) The instruments were in legal effect mere vouchers for advances by the partner to his firm, to be taken into the final settlement. They were not notes, but mere certificates or memoranda of such alleged advances. "Such notes in the hands of one who stands in the shoes of the original payee cannot be made the basis of an action at law against the firm or as the remaining partners." Thompson v. Lowe, 9 W. Rep. 671; Davis v. Merritt, 51 Mich. 480; Stoddard v. Wood, 9 Gray, 90; Lyons v. Murray, 95 Mo. 23; Hill v. McPherson, 15 Mo. 204; Calhoun v. Albin, 48 Mo. 304. While upon this point the authorities are not in accord, the supreme court of Missouri concurs in the rule laid down in Thompson v. Lowe, supra; Hill v. McPherson, supra; Calhoun v. Albin, 48 Mo. 304.

OPINION

Sherwood, P. J.

Action on six promissory notes. There are six counts to the petition, and it is in the ordinary form. Plaintiffs sue as the indorsees of these notes, which are alleged to have been executed by W. A. Dudgeon & Co., a firm composed of said Dudgeon and defendants, Givens and Talbot. The notes are variously dated during the year 1884, are drawn one day after date, etc., are made payable to said Dudgeon, or order, and purport by him to be transferred to plaintiffs March 12, 1885.

The notes are alike in form, and the first note is as follows:

"$ 110.00. 1-3-1884.

"One day after date, we promise to pay to the order of W. A. Dudgeon, treasurer, $ 110. For value received, negotiable and payable without defalcation or discount, and with interest from date, at the rate of eight-per-cent. per annum, and if the interest be not paid annually to become as principal and bear the same rate of interest without exemption from appraisement, valuation or homestead laws.

"No. , due. W. A. Dudgeon & Co.

"(Indorsement on back) W. A. Dudgeon,

"Treasurer."

Dudgeon defaulted; the other defendants pleaded non est factum. They also pleaded that Dudgeon signed the partnership name to the notes without their knowledge; that the notes were without consideration, and that they were transferred to plaintiffs after maturity and after the dissolution of the firm, etc.

The reply admitted the allegations of the answer that Dudgeon was the managing partner of the concern, a drugstore, and that he signed the partnership name to the litigated notes, and held them until after their maturity, and until after the dissolution of the firm, and that they were not transferred to the plaintiff until the notes were past due and said firm was dissolved. Thereupon the defendants filed their motion for judgment on the pleadings on the ground that, upon the facts admitted by the pleadings, the plaintiffs were not entitled to recover, and this without reference to contested questions of fact. The lower court granted the motion and entered judgment for defendants; hence, this appeal, and the cause has been transferred by the Kansas City court of appeals to this court, in obedience to the constitutional mandate.

OPINION.

I. The merits of this cause cannot be discussed in this opinion. The discussion will, therefore, be confined to the correctness of the action of the circuit court in entering judgment on the pleadings.

It will be observed that there is neither allegation nor admission in the pleadings that the plaintiffs were notified of the dissolution of the partnership at the time of the purchase of the notes. Without such notification in some form, the power of a partner to bind the firm as to third persons, though inter sese gone, remains as it was before. It scarcely seems necessary to cite authorities on so plain a proposition. On this point Collyer says: Sec. 578. "Subject to two exceptions, which will be examined hereafter, notice of dissolution of a firm, or the retirement of a partner duly given, determines the power previously possessed by each partner to bind the others. Hence, after the dissolution of a firm or the retirement of a member, and notification of the fact, no member of the previously existing firm is, by virtue of his connection therewith, liable for goods supplied to any of his late partners subsequently to the notification, nor is he liable on bills or notes subsequently drawn, accepted or indorsed by any of them in the name of the late firm, even although they may have been dated before the dissolution, or have been given for a debt previously owing from the firm by the partner expressly authorized to get in and discharge its debts." 2 Collyer on Partnership [6 Ed.] sec. 578; 1 Lindley on Partnership [2 Am. Ed.] 215.

Story says: "In the next place, such a dissolution will not absolve the partners from liabilities to third persons for the future transactions of any partners, acting for or on account of the firm, unless some one or more of the following circumstances occur: First. That the third persons dealing with or on account of the firm have due notice of the dissolution; or, second, that they have had no transactions whatsoever with the firm until after the dissolution; or, third, that the partnership was not general, but limited to a particular purchase, adventure or voyage, and terminated therewith before the transaction took place; or, fourth, that the new transaction is not within the scope and business of the original partnership; or, fifth, that it is illegal or fraudulent, or otherwise void from its defective nature or character; or, sixth, that the partner sought to be charged is a dormant partner, to whom no credit was actually given, and who retired before the transaction took place." Story on Partnership [7 Ed.] sec. 334.

An author already cited says: "So, if a partnership is dissolved, or one of the known members retires from the firm, until the dissolution or retirement is duly notified, the power of each to bind the rest remains in full force, although as between the partners themselves a dissolution or a retirement is a revocation of the authority of each to act for the others. Thus, if a known partner retires, and no notice is given, he will be liable to be sued in respect of a promissory note made since his retirement by his late partner, even though the plaintiff had no dealings with the firm before the making of the note." 1 Lindley on Partnership, 213, 214.

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