Muir v. Samuels

• Decision Date: 23 April 1901
• Citation: 62 S.W. 481,110 Ky. 605
• Parties: MUIR v. SAMUELS et al. [1]
• Court: Kentucky Court of Appeals

62 S.W. 481

110 Ky. 605

MUIR v. SAMUELS et al. ^[1]

Court of Appeals of Kentucky.

April 23, 1901

Appeal from circuit court, Nelson county.

"To be officially reported."

Action by L. B. Samuels and Charles Edelen against Joseph Muir to recover money paid for defendant. Judgment for plaintiffs and defendant appeals. Reversed.

John D Wickliffe, for appellant.

R. C Cherry and John S. Kelley, for appellees.

BURNAM J.

The appellant, Joseph Muir, and the appellees, L. B. Samuels and Charles Edelen, entered into a partnership to erect and operate a steam laundry at Bardstown, Ky. under the style of the "Nelson Steam Laundry." The cost of the laundry was about $2,000. $1,400 of this sum was borrowed from the People's Bank of Bardstown, Ky. and a note dated May 30th of 1898, due on the 30th of September thereafter, was executed to the bank, signed by the Nelson Steam Laundry, by Joseph Muir, treasurer, and by each of the partners. The balance of the capital necessary to pay for the plant was advanced to the firm by appellant, and a note executed to him, which was signed in the same way. On the 15th day of August thereafter appellees sold their interest in the laundry plant to appellant, and assigned and transferred to him all their right, title, and interest in the accounts and bills receivable due the firm. In consideration of this sale appellant assumed to pay the debts and liabilities of the laundry firm, including the note for $1,400 due to the People's Bank. It was further stipulated and agreed as part of the condition of the sale that appellees should sign a renewal of the $1,400 note as sureties for appellant in the event he was not ready to pay same at the maturity thereof. The firm was, by reason of the contract and agreement dissolved. On the succeeding day, August 16th, the appellant, Muir, sold and conveyed one-half interest in the property to John J. Cannon, a practical laundryman, and they continued to operate the plant until December, 1898. On the 16th of December appellees paid off the $1,400 note to the bank, and had it assigned to them by a written indorsement on the back thereof, and on the following day instituted this suit in equity against appellant to recover the amount so paid by them in accordance with the terms of the contract of dissolution, and at the same time sued out an attachment against appellant and Cannon upon the ground that they did not have property in the state subject to execution sufficient to satisfy their demand, and that the collection of same would be endangered by delay in obtaining judgment and return of no property found. To this petition Muir filed an answer containing six paragraphs setting up various grounds of defenses. A demurrer was sustained to the first, second, and third paragraphs, and to all of the fourth and fifth except so much as controverted the grounds of the attachment; and judgment was given plaintiffs for the amount of the $1,400 note, and their attachment sustained. Certain laborers employed by the laundry company also filed an answer setting up the amounts due them for labor, and pleaded that under section 2487 of the Kentucky Statutes they were prior liens.

We will first consider the propriety of the court's ruling upon the demurrer of appellee to the various paragraphs of appellant's answer. In the first paragraph it is substantially alleged that the plaintiffs knew the amount of indebtedness of the firm, and that appellant did not; and that they falsely represented to him that the laundry company only owed $150 in addition to the $1,400 note executed to the bank, while as a matter of fact this outside indebtedness amounted to $840; and that this fraudulent representation was made to induce appellant to buy the interest of appellees. It will be admitted that, as a general rule, the law requires prudence and vigilance on the part of persons in their business transactions, and will not relieve one who blindly closes his eyes to the facts. And where the means of knowledge are equally available to both parties to a transaction, and one of them does not avail himself of these means and opportunities, he will not be heard to say that he has been deceived by the other's misrepresentations. But this rule is not universal, and does not apply where the parties occupy a relation of trust or confidence,--as, where a trustee makes a false representation to his cestui que trust, or an agent makes such representation to his principal, and thereby obtains an advantage, or an attorney to his client; nor does the general rule apply where the parties occupy the relation of partners. See Pomeroy v. Benton, 57 Mo. 531, and Davenport v. Buchanan, 6 S. D. 376, 61 N.W. 47. The law imposes upon partners the duty of fair and open dealing with each other, and each has a right to rely explicitly upon the statements of the other concerning matters pertaining to their business relations. Each member of a partnership is authorized to incur debts and make contracts within the scope of the partnership, which would be binding upon them all. In this way one partner might have knowledge of a liability due by the firm which would not be known to all the members thereof;...