Monmouth College v. Dockery

• Decision Date: 09 February 1912
• Citation: 145 S.W. 785
• Parties: MONMOUTH COLLEGE v. DOCKERY.
• Court: Missouri Supreme Court

145 S.W. 785

MONMOUTH COLLEGE v. DOCKERY.

Supreme Court of Missouri.

February 9, 1912.

Motion to Modify Overruled March 28, 1912.

1. PARTNERSHIP (§ 153)—FRAUD OF PARTNER— LIABILITY OF ASSOCIATE.

Defendant member of a real estate loan partnership is liable for fraud of his absconded associate in inducing plaintiff to make a loan, under a transaction with the firm; defendant having impliedly held his associate out as deserving confidence, and having expressly held him out as having exclusive charge of that particular branch of the business.

2. PARTNERSHIP (§ 153)—FRAUD OF PARTNER— LIABILITY OF ASSOCIATE—DEFENSES.

Defendant member of a real estate loan firm cannot avoid liability for his absconded associate's fraud against plaintiff in a partnership transaction, on the ground that plaintiff was negligent in failing to require a complete abstract of title and a legal opinion, where the loss resulted from defendant's implicit confidence in his associate and negligent failure to discover his misdealings.

3. PARTNERSHIP (§ 217—FRAUD OF PARTNER— LIABILITY OF ASSOCIATE—DEFENSES.

In an action to charge defendant for his absconded partner's fraud in a partnership transaction in inducing plaintiff to make a real estate loan, evidence held insufficient to show an agreement requiring plaintiff to obtain an abstract of title, and to have the title approved.

4. PARTNERSHIP (§ 153)—FRAUD OF PARTNER—LIABILITY OF ASSOCIATE.

Any agreement between plaintiff and a real estate loan firm, composed of defendant and his absconded associate, that loans should be made on approved abstracts of title was subject to waiver, precluding nonobservance of the requirement as a defense to defendant's liability for his associate's fraud.

5. LIMITATION OF ACTIONS (§ 100)—DISCOVERY OF FRAUD.

It is no defense to suit against defendant member of a real estate loan firm for his absconded associate's fraud in a partnership transaction, brought within the period of limitations, after actual discovery of the fraud, that plaintiff was negligent in failing to discover the fraud earlier.

6. APPEAL AND ERROR (§ 193)—OBJECTIONS BELOW—PLEADING.

A complaint against defendant member of a real estate loan firm for his absconded associate's fraud in a partnership transaction, stating that the fraud was not discovered until a certain time within the statute of limitations, is not bad on appeal for want of allegation of diligence to earlier discover the fraud, where the objection was not specifically raised below.

7. APPEAL AND ERROR (§ 193) —REVIEW— OBJECTIONS NOT RAISED BELOW.

It is only when a pleading fails to state a cause of action or a defense, or fails to show jurisdiction in the court, that the defect can be complained of for the first time in an appellate court.

8. TRIAL (§ 404)—FINDINGS—NATURE.

A finding that a partner acted outside the scope of his authority is a conclusion of law, and not a finding of fact.

Woodson, Graves, and Brown, JJ., dissenting.

In Banc. Appeal from Circuit Court, Adair County; Nat M. Shelton, Judge.

Action by Monmouth College against Thomas J. Dockery. Judgment for defendant, and plaintiff appeals. Reversed and remanded.

M. D. Campbell, S. H. Ellison, and Gage, Ladd & Small, for appellant. Higbee & Mills, for respondent.

VALLIANT, C. J.

Plaintiff, an Illinois corporation, sues to recover $12,000, with interest, which, it alleges, was obtained from it by defendant through fraud and deceit. It is not disputed that the money was obtained from the plaintiff by fraud and deceit; and it is not charged that defendant, Dockery, was, in person, guilty of any of the fraud or deceit that the practiced in the transaction, or that he did, in person, obtain any of the money in question. But defendant was a member of a business firm or copartnership, doing business under the name and style of Dockery & Hilbert, and the fraud was practiced in the name of the firm by Hilbert, defendant's partner; and the money was obtained by Hilbert in the name of the firm, without the knowledge of defendant, Dockery. It is therefore a case in which one of two innocent parties must suffer, and the question is: Must the defendant suffer for the wrongdoing of his partner, or must the plaintiff suffer from the wrong-doing of defendant's partner?

There is no dispute about the main facts in the case. At the time of this transaction and for several years prior, defendant and Edwin L. Hilbert were partners in trade under the style and firm name of Dockery & Hilbert. Their business was dealing in real estate, making and negotiating loans on real estate, etc. They did the largest business of that kind that was done in Kirksville, Mo., where they lived. Their personal and commercial reputation was of the very best; even Hilbert, for integrity and financial strength, was, at that time, and for two or three years thereafter, highly esteemed among business people in Kirksville.

They also conducted a title abstract business in the name of the Dockery & Hilbert Abstract Company, a corporation in which they owned practically all the stock, and of which defendant, Dockery, was president and Hilbert was secretary. The business of that concern was conducted in the office of the firm. In the name of that corporation, abstracts and certificates of title were issued and used by the firm in their business of dealing in real estate and making loans.

They also allowed an insurance business to be conducted in their office, and in the name of their firm, by a young lady, who was an employé of theirs; and the bank account, relating to that business, was kept in the firm name, the deposits and checks being made by Hilbert in the firm name; but the business was owned by the employé, who conducted it, and they had no interest in it.

They advertised their business as real estate, loans, insurance, law, and abstracts. The plaintiff began having money-lending transactions with the firm of Dockery & Hilbert as early as 1899, and had made several loans through them before the loan in question in this case. By these previous transactions, the plaintiff's confidence in the firm seems to have been so well established that it made them its exclusive agents for placing loans in Adair and other counties, as the following letter from the firm to the then treasurer of the college indicates:

                                "Kirksville, Mo. 7/21/1899
                

"Mr. R. A. Wilson, Monmouth, Ill.—Dear Sir: We are in receipt of your communication of the 20th inst., in which you state to us that you were somewhat disappointed on failure to receive money due the Monmouth College and that the same will not be in readiness for you before the 30th of this month. In answer to your inquiry will say that it will be no inconvenience for us to advance the money in this loan and then we can assign the papers to you. We thank you for the invitation to continue to forward to you good applications, which we will do. We will give you a $2,200 loan on the early part of this coming week. We also have several other loans which we hope to close for you in the near future. We would like, if agreeable to you, to enter into an arrangement by which we could become your financial agents for Adair and adjoining counties. It appears to us that it would be more satisfactory to both ourselves and you to have an arrangement of this kind, as we could understand each other better, and on our part of it it would do away with the embarrassment of having to compete with several agents working for the same firm, as ours. If you can see your way clear to make us your exclusive agents for Adair and adjoining counties, we will guarantee you that we will loan your money in a very short time and on the most desirable securities for the rate obtained. Hoping we will be able to complete an arrangement such as suggested by this letter, we will now close our remarks and await your reply. Very respectfully, Dockery & Hilbert."

The firm really enjoyed a high reputation; it had the confidence of the community, and, so far as this records shows, its business transactions, until the occurrence of this transaction, were of a character to inspire confidence. For use in their loan-negotiable business they prepared a printed form of an application, to be signed and sworn to by the applicant for the loan, which application became the basis of the negotiations. This form was so drawn that it showed the utmost care to disclose all the facts that a cautious lender would desire to know. In the usual course of business, this application, when signed and sworn to by the applicant, would be shown to the prospective lender, and, if the loan was made, would be delivered to him with the other papers. This form of application was used in the loan which is the subject of this suit, and, although it is long, we deem it of sufficient significance to copy it in full:

"Application to Dockery & Hilbert, Kirksville, Mo., or Their Assigns, for a Farm Loan. It will be absolutely necessary to fill all the following blanks and answer each question fully or the application will be returned therefor.

"1. Applicant's full name is Frank Pierce Smith.

"2. Age is 35 years.

"3. Wife's full name is (single).

"4. Age is

"5. P. O. address, Kirksville, in Adair county, Missouri.

"6. Amount of loan wanted is twelve thousand dollars ($12,000.00) for a term of five years, with interest at the rate of 5½ per cent. per annum, to be paid annually; notes and mortgage to be drawn upon your customary form of blanks. The security offered is described as follows: Show position on diagram. Show any exceptions, such as school lot, church lot, burial ground, railroads, rights of way, etc.

"7. The west three-fourths (¾) of section twenty-seven, and the northeast quarter (¼) of section twenty-eight (28), (excepting one hundred feet off of the entire west side of the last mentioned quarter section, which is reserved for railroad right of way. All in township sixty-four (64) north of range...