Mechanics' Bank of Detroit v. Barnes

• Decision Date: 28 July 1891
• Parties: MECHANICS' BANK OF DETROIT v. BARNES et al.
• Court: Michigan Supreme Court

49 N.W. 475

86 Mich. 632

MECHANICS' BANK OF DETROIT v. BARNES et al.

Supreme Court of Michigan

July 28, 1891

Error to circuit court, Wayne county; HENRY N. BREVOORT, Judge.

Action on a promissory note by The Mechanics' Bank of Detroit Mich., against William H. Barnes, Cyrus B. Barnes, Charles O Barnes, impleaded with Ephraim K. Roberts. Judgment for plaintiff. Defendant William H. Barnes brings error. Reversed.

Wm. F. McCorkle, (Griffin Warner & Hunt, of counsel,) for appellant.

Bowen, Douglas & Whiting, for appellee.

LONG J.

This action was brought in the Wayne circuit court upon the following promissory note: "$2,000. Detroit, Aug. 21, 1889. Three months after date I promise to pay to the order of Barnes Bros. two thousand dollars, at the Citizens' Savings Bank, value received. [Signed] E. K. ROBERTS. Indorsed: BARNES BROS." William H. Barnes and Cyrus B. Barnes filed separate pleas, with affidavits attached, denying the execution of the note, and averring that, if the note was indorsed by Barnes Bros., it was indorsed and delivered by one of said copartners without the authority, expressed or implied, of these defendants, and against the express agreement upon which the copartnership was created, and without the knowledge or consent of said defendants, and for purposes outside the partnership business. It appears that after the note was indorsed by Barnes Bros. it was presented to the Mechanics' Bank by Roberts, the maker, and was discounted by that bank for Roberts, on August 29, 1889, the avails being paid directly to Roberts; the note having been indorsed by Barnes Bros. purely for the accommodation of Roberts. The cause was tried before a jury, who rendered a verdict in favor of the plaintiff for the amount of the note and the interest, upon which judgment was entered. Defendant William H. Barnes alone brings the case to this court by writ of error. On the trial it was practically conceded that Cyrus B. Barnes was liable with Charles O., who indorsed the firm name on the note, as Cyrus was shown to have full knowledge of the note, and its indorsement, and had promised to pay it. It appears that Barnes Bros. carried on a wholesale paper business in Detroit for many years. They also had a paper-mill at Rochester, this state. Cyrus B. and Charles O. conducted all the business in Detroit, handled all the money, paid all the bills, borrowed money when necessary, and apparently had full authority in the conduct and charge of the Detroit business. William H. Barnes looked after the mill at Rochester, and occasionally went to Detroit to look after the business there. Upon that subject William H. Barnes testified as follows: "I live in Rochester, and have lived there for about 20 years. I look after the mill; run the paper-mill. The mill belongs to Barnes Bros. I have been running it. Some portion of it has been running all the time. I take general charge of the mill. The title to the mill has been in the name of Barnes Bros. Cyrus B. resides in Detroit; Charles O., in Ypsilanti. Cyrus B. and Charles O. have been in Detroit running the store. I sometimes came every two or three months, and perhaps every week, and sometimes perhaps six months. My part of the business has been principally in looking after the mill. The books have been kept at the store. I suppose you might say that Cyrus B. and Charles O. have almost the entire charge of the financial part of the business, as the books were kept there, and the money taken in on collections and sales. I presume the firm has borrowed herein. I do not know about it. Cyrus B. and Charles O. had full authority to borrow money to run the business. I did not know anything about it. They had authority for borrowing money, if they did borrow it, so far as running the business is concerned. I do not know of any notes they have made within the last five years. I do not know of any instances where they have indorsed the firm's name within the last five years, except the cases that have been presented here. I do not know of any other case of any character, where they have indorsed the firm name either for my benefit or otherwise. I did not keep the books, and had nothing to do with them. I very seldom examined them. I have not examined them within the last five years. I have taken and looked into them sometimes to look up some particular account. But to examine the books they have a regular book-keeper there. I relied upon them in the conduct of the business to a certain extent. I have the fullest confidence in Cyrus B. and Charles O. I always thought they were straight in regard to that, to carry out our agreement and arrangement. Cyrus never had authority to do anything outside of the firm, not from me. I never knew anything about the firm raising any money by making paper and getting indorsements from anybody else. I never knew of the firm getting any money by their own indorsement of some other person's paper. I have not examined the books at any time to see if they were doing that or not, and within the last five years I have only examined particular accounts. In 1875 I was told that they had indorsed some paper for somebody else. I did not know the party that was indorsed for, or the bank, and never heard of it afterwards, but was told what had been done. I did not know whether it was ever put in circulation, or whether it was ever released, but I was told by outside parties. So I wrote them a letter, and asked them about it afterwards. I did not look on the bills-payable book, to see what it was. They claimed that they did not indorse any at that time. I did not go around to the banks, and attempt to find out what the paper was. I do not know that there was any paper. I was simply told that by outside parties. In 1889, I think the firm was banking at the Dime Savings Bank. I can't tell where the firm was banking in 1888. It might have been at the Dime Savings Bank, or it might have been at some of the others. I presume, if a note had been protested upon which the firm were the indorsers, taken in the usual course of business, and otherwise, and a notice had been sent, it would come to the firm here in Detroit, and, if it was delivered at the store, either Cyrus B. or Charles O. would take care of it. I do not know that it would be very likely to come to my attention. I suppose if a protest was received on a note it would be likely to go to the firm of Barnes Bros. at their place of business, and I would not be very likely to see it. In 1889, I presume there were four or five months, and perhaps six months, I was not in. I was sick at that time. I have been out of health a good deal. I did not come to Detroit in from one to six months. During that time I attended to the business out there,-manufacturing of paper. I do most of the business of buying of stock for the mill. I pay no attention to the paper stock, and the collection of accounts. I paid no attention to the banking of paper in the course of trade, and the taking care of the paper when it became due. Redirect: I had confidence in my brothers to attend to the firm business in Detroit. I did not mean to say that I understood they had any authority, or that I intended to give them any authority, to do anything outside of the firm business. Question. I call your attention to letter under date of January 19, 1875." The letter is produced and shown to the witness, and the witness says that said letter was transmitted to his brothers. Said letter was thereupon offered and admitted in evidence, and marked "Exhibit D," and is as follows: "Rochester, January 19, 1875. Messrs. Barnes Bros.-Gents: When I was out to Ypsilanti last week I was told by Lambert that you were exchanging checks and notes with parties in the city. If that is the case, it has got to be stopped at once. I suppose you know what our agreement is, and, if you will do it, I shall withdraw from the firm, for I will not allow anything of the kind. Not but what the parties may be all right, but it is no way to do business, and it must be stopped. Yours, W. H. BARNES."

It is claimed by counsel for the plaintiff that it is thus made apparent that W. H. Barnes gave up the financial end of the business to his brothers, and, if the necessities required it, Cyrus B. and Charles O. had full power to do whatever they chose towards raising money. It is also contended that Barnes Bros. were under obligations to Roberts to indorse his paper, for the reason that Roberts had been accustomed to indorse for Barnes Bros.; that is, that the parties had been exchanging credit by indorsing for each other. Roberts was president of the Citizens' Savings Bank. He testifies that Cyrus B. Barnes made a note of $1,000 to his order. Charles O. was present, and they asked him to indorse it and get the money on it, which he did, of Mr Butler, at the Mechanics' Bank of Detroit. The Barnes firm took their business thereafter to the Dime Savings Bank. In 1888 they made another note of $10,000, which Roberts indorsed, and the money was got by the Barnes Bros. In 1889 two $500 notes were made by Barnes Bros., indorsed by Roberts, and taken by him to the Mechanics' Bank, and discounted, and the money paid over to Barnes Bros. These indorsements were made at the request of Cyrus B., but it appears with the full knowledge of Charles O., and there is no question but that the moneys were all used in the partnership business. The note in suit was made on August 21, 1889, by Roberts, and indorsed by Barnes Bros., and presented by Roberts to plaintiff, the Mechanics' Bank of Detroit, for discount on August 29th. At the time the note in suit was presented for discount, the two $500 notes indorsed by Roberts were then held by plaintiff, not having yet matured. They were subsequently paid by Barnes Bros. ...