Megunticook Nat. Bank v. Knowlton Bros.

• Decision Date: 27 November 1926
• Parties: MEGUNTICOOK NAT. BANK v. KNOWLTON BROS.
• Court: Maine Supreme Court

135 A. 95

MEGUNTICOOK NAT. BANK

v. KNOWLTON BROS.

Supreme Judicial Court of Maine.

Nov. 27, 1926.

Exceptions from Supreme Judicial Court, Knox County, at Law.

Action by the Megunticook National Bank against Knowlton Bros., a partnership. On defendant's exceptions to the presiding justice's special findings and ruling. Exceptions sustained.

Argued before WILSON, C. J., and PHILBROOK, DEASY, STURGIS, BASSETT, JJ., and MORRILL, A. R. J.

William R. Pattangall, of Augusta, and Alan L. Bird, of Rockland, for plaintiff.

Z. M. Dwinal and O. H. Emery, both of Camden, for defendant.

MORRILL, A. R. J. Action of assumpsit by an indorsee, upon a promissory note dated January 26, 1921, for $5,000, signed by R. L. Bean, payable to the order of Knowlton Bros 90 days after date, and indorsed "Knowlton Bros."

The case was heard, without the intervention of a jury, by the presiding justice, who found for the plaintiff, reserving the right of exception in matters of law to the defendants.

The defendants present three exceptions to special findings of the presiding justice. They also except generally to the ruling that they are liable on the note.

Upon the record before us the facts are few and not in dispute; there is no conflict of evidence. R. L. Bean, the maker of the note, was at its date the cashier of the plaintiff bank, and continued to hold that position for a month or more thereafter. At the date of the note Knowlton Bros, was a firm composed of John D. Knowlton, Willis D. Knowlton, and E. Frank Knowlton, doing a general foundry and machine business in Camden, where the plaintiff bank was located. The firm did business at the plaintiff bank, and as occasion required discounted there its customers' notes, such notes being indorsed in the firm name, quite frequently by E. Frank Knowlton; sometimes by other members of the firm. The indorsement on the back of the note in suit—"Knowlton Bros."—was written by E. Frank Knowlton, who died January 24, 1925, while the action has been pending, and before trial. The testimony of Willis D. Knowlton that the firm received no consideration for the note is positive and uncontradicted. Neither of the surviving partners knew at the time, nor until some time thereafter, of the making of the note. There is no evidence that R. L. Bean was indebted to Knowlton Bros. The parties stipulated, and the presiding justice found in accordance therewith, that the proceeds of the note were credited by the bank to the account of R. L. Bean before maturity thereof. The record does not show that the note was presented to the directors or any committee of the bank for discount, or seen by any officer of the bank, other than Mr. Bean, before it was discounted and the proceeds credited to Mr. Bean's account. The only inferences to be drawn from the facts presented in the record are that the indorsement was an accommodation indorsement made for the benefit of R. L. Bean by one partner of Knowlton Bros, without the knowledge, consent, or ratification of his copartners, and that R. L. Bean was the only officer of the bank who had any part in discounting the note at the bank and in crediting the proceeds to Mr. Bean's account.

Counsel for plaintiff upon the brief do not seriously dispute that the note was an accommodation note, and claim to recover against ail the partners upon the authority of certain well-considered cases, which are noted hereafter. The absence of any record or of any testimony by any officer, director, or employee of the bank to the contrary renders unavoidable the conclusion from the facts upon the record that Bean was the only officer of the bank who had any part in the discounting of the note and in the crediting of the proceeds to his account. Neither Bean nor any officer, director, or employee of the bank was called as a witness.

It is familiar law that one partner has no authority to thus use the name of the firm, out of the scope of the partnership business, unless the consent or subsequent ratification of the others is obtained. Rollins v. Stevens, 31 Me. 454. Such consent or knowledge may be shown by a course of business dealing, as where there has been a frequent exchange of accommodation paper (Darling v. March, 22 Me. 184, 188); or, where it appears that one firm has been in the habit of indorsing at the bank or elsewhere for another, such general course of dealing would be evidence of authority from all members of the firm, and such use of the firm name would bind all (Sweetser v. French, 2 Cush. [Mass.] 309, 48 Am. Dee. 666; Gansevoort v. Williams et al., 14 Wend. [N. Y.] 133, 139). There is no evidence of such course of action in the case. One of the surviving partners testified that he had never known the firm to become an accommodation party to any other note. The members not in fact consenting to, nor having knowledge of, the indorsement are unaffected by any inference deducible from the face of the note or the representations of any other member, unless the plaintiff is a bona fide holder. Gansevoort v. Williams, supra. But where, as urged by counsel for plaintiff, the indorsee purchases the note in good faith, for an adequate consideration, before maturity, without, knowledge of any circumstances affecting its validity, the firm will be liable therefor (Redlon v. Churchill, 73 Me. 146, 40 Am. Rep. 345; Waldo Bank v. Lumbert, 16 Me. 416), and the plaintiff is not obliged, In the first instance, to show that the note was given for a partnership transaction (Waldo Bank v. Greely et al., 16 Me. 419).

The counsel for plaintiff rely upon the last three cases cited, and upon Wait v. Thayer, 118 Mass. 474, and Parker v. Burgess, 5 R. I. 277. In all these cases the note or bill was indorsed for the benefit of a member of the firm and bore his name, and the holder had no knowledge that the partnership name...