Page v. Williamsport Suspender Co.

• Decision Date: 22 May 1899
• Docket Number: 164
• Citation: 191 Pa. 511,43 A. 345
• Parties: H. M. Page, Appellant, v. The Williamsport Suspender Company, Defendant, and Jean Saylor-Brown and Townsend & Longmire, Intervening Creditors
• Court: Pennsylvania Supreme Court

43 A. 345

191 Pa. 511

H. M. Page, Appellant, v. The Williamsport Suspender Company, Defendant, and Jean Saylor-Brown and Townsend & Longmire, Intervening Creditors

No. 164

Supreme Court of Pennsylvania

May 22, 1899

Argued March 13, 1899

Appeal, No. 164, Jan. T., 1898, by plaintiff, from order of C.P. Lycoming Co., March T., 1898, No. 476, making absolute rule to set aside judgment. Reversed.

Rule to set aside judgment.

From the record it appeared that Jean Saylor-Brown, a creditor presented her petition to the court under the Act of July 9 1897, P.L. 237, praying for a rule on the plaintiff to show cause why his judgment should not be set aside for fraud. She did not at first file a bond as required by the act, but after the rule was issued, by permission of the court, she filed a bond, nunc pro tunc.

Townsend & Longmire, on petition, were permitted by the court to intervene and become parties to the proceedings to inquire into the validity of the judgment, but they never filed a bond.

The other facts appear by the opinion of McCLURE, P.J., of the 17th judicial district, specially presiding, which was as follows:

By the articles of copartnership Charles C. Case was to contribute $1,000 as his share of the capital stock of Ed. M. Hart & Co. To do this, he borrowed $500 from his father-in-law, the plaintiff, on May 5, 1897, and paid the balance June 22, by a negotiable note drawn by Mr. Page to Case's order payable four months after date at the West Branch National Bank. This note was indorsed by Case and Ed. M. Hart & Co. discounted by the bank, and the proceeds went to the credit of the partnership. Case was credited with the cash and proceeds of the note as capital and charged with the discount. The note was renewed, October 22, 1897, with like paper signed by Page to Case's order, indorsed by him and the suspender company, Ed. M. Hart having retired in the mean time, and the partnership name changed to Williamsport Suspender Company.

It is unquestionable that the money and credit loaned by Page were obtained by Case for the purpose of meeting his obligation to his copartners, and it is just as clearly proved that he not only failed to disclose this fact to Page, but represented to him that he was borrowing the money for the firm and they would protect him. No security was given Page until the confession of this judgment by Case for the defendant company, which was done without the knowledge of his partner, Keightley.

Between the partners the money loaned by Page was Case's debt, but Page is on a different footing. Each partner is the general agent of the firm and has the power to bind his copartners by acts done within the scope of the business. He may borrow money for the partnership and give notes therefor in the name of the firm. "If the lender is informed or has notice that the money is borrowed for the individual use of the partner borrowing, and not for the firm, the partnership is not liable for any security that may be given therefor in the name of the firm. But if the lender has no knowledge or notice, at the time of making the loan, the firm will be liable therefor, although the money may have been borrowed for the separate use of one of the partners:" Mr. Justice WILLIAMS in Potter v. Price, 3 Pitts. 136.

As we have seen, Page was not informed that the money borrowed was for the individual use of Case, but was told just the contrary, and there was no notice of any fact that ought to have put him on inquiry. It follows that the $500 loaned by Page was a debt of the partnership, and a judgment confessed for that amount would withstand the attack of its creditors.

That Keightley, when insolvency came, credited Page with $500 on the books of the firm is not of importance, as that entry would not make the partnership liable for the individual debt of Case. It was no more than a declaration that as between the members of the firm themselves they would consider it a debt of the partnership. To make it a claim which could be enforced by Page they would have to ratify the transaction or assume the debt by positive agreement with him: North Pa. Coal Co.'s App., 45 Pa. 181. Page's indorsement is another matter. His loan of money was a valid debt of the firm, only because there was no notice to him of the purpose for which the money was obtained and the consequent lack of authority in Case to bind the partnership, nor any circumstance that would have put a reasonably prudent man on inquiry. But when his son-in-law asked him to back the firm in securing a discount in bank he presented a paper on which the name of the partnership nowhere appeared. Instead, it was a note payable to his own order, and Page signed it, thus becoming the accommodation maker, not for the partnership but for Case. If, as we believe, Case said he wanted the money for the firm, this note bore on its face evidence that his statement, if not false, was at least not the whole truth. It was apparent, from the form of the instrument, that it was for some individual transaction of Case's. When presented to Page the partnership stamp was not on the note in any form. Notice of any fact that ought to put a man on inquiry is sufficient to protect a firm from the acts of a partner within the scope of the business: Potter v. Price, 3 Pitts. 136. Surely here was enough to lead any reasonably prudent man to inquire, why, if I am loaning my credit to the partnership, am I asked to sign a note payable to one of the partners? And inquiry would have developed that the money to be raised on the paper was to meet Case's obligations to his copartners, and for that he had no power to bind them. Mr. Page thought he was the indorser for the suspender company, but that cannot effect the law of the case. A man cannot be heard to say he did not know that which by due care he should have known. This loan of credit is not a partnership debt, and the confession of judgment by one partner, without the consent of the other is a fraud on him and the firm creditors: McNaughton's Appeal, 101 Pa. 550. And this fraud it would seem taints the whole judgment, for a judgment fraudulent in part is void in the whole as against other creditors: Gates v. Johnston, 3 Pa. 52. The only exception to this rule and recognition of partly good and partly bad judgments is, as Judge ARNOLD points out in Moore v. Dunn & Fell, 147 Pa. 359: "In cases of judgments held by married women against their husbands in which the excessive part will not be attributed to bad faith, but will be presumed to be a mistake, or included in good faith." We would be inclined to add this case to the exception rather than hold it within the rule, but our judgment of what the law is must control our personal views of what it should be.

And now, to wit: April 9, 1898, rule absolute, and the judgment is set aside so far as the Williamsport Suspender Company is concerned, as also the execution and levy upon the partnership assets.

Errors assigned were (1) in taking cognizance of the petitions of Jean Saylor-Brown and Townsend & Longmire, which are based on the provisions of the act of July 9, 1897, which act is unconstitutional and void; (2) in not dismissing the petitions of Jean Saylor-Brown and Townsend & Longmire, because said act is unconstitutional and void; (3) in taking cognizance of the petitions of Jean Saylor-Brown and Townsend & Longmire, because, if said act is constitutional, said petitioners did not comply with the provisions of said act; (4) in not dismissing the petitions of Jean Saylor-Brown and Townsend & Longmire, because, if said act is constitutional, said petitioners gave no bond, as required by said act; (5) in permitting bond of petitioner, Jean Saylor-Brown, to be filed March 5, 1898, as of February 23, 1898; (6) in making the following order: And now, March 8, 1898, this petition read in open court and upon motion of Hicks & Spencer, attorneys for petitioners, it is ordered that Townsend & Longmire be allowed to intervene in the proceedings now pending to try the validity of the judgment of H. Mudge Page v. The Williamsport Suspender Company, and that they be made parties thereto; (7) in overruling motion to revoke order staying execution of appellant; (8) in making the following order: And now, to wit: April 9, 1898, rule absolute, and the judgment is set aside so far as the Williamsport Suspender Company is concerned, as also the execution and levy upon the partnership assets.

Judgment reversed and rule directed to be discharged.

C. LaRue Munson, with him Otto G. Kaupp, for appellant. -- The act is unconstitutional: Krug v. Behringer & Co., 6 Pa. Dist. Rep. 772; Galbreath's Lessee v. Eichelberger, 3 Yeates, 515; Hortsman v. Kaufman, 97 Pa. 147; Counselman v. Hitchcock, 142 U.S. 562.

The proceedings to inquire into the validity of the judgment confessed to H. M. Page cannot be sustained, because petitioners have not complied with the provisions of the act: Parks v. Watts, 112 Pa. 4; Williamson v. McCormick, 126 Pa. 274; Hoppes v. Houtz, 133 Pa. 34; Johnston & Co. v. Menagh, 4 Pa.Super. 154.

The appellees, as subsequent judgment creditors of the Williamsport Suspender Company, had no standing to inquire into the validity of the judgment confessed to H. M. Page: Grier v. Hood, 25 Pa. 430; Erwin's App., 39 Pa. 535; Moore v. Dunn & Fell, 147 Pa. 359; Grier v. Hood, 25 Pa. 432.

The firm of Ed. M. Hart & Co., subsequently Williamsport Suspender Company, having received the money and credit loaned by Page, and having used the same exclusively in their business, a moral and legal obligation is created to support the firm's subsequent promise to pay: Siegel v Chidsey, 28 Pa. 279; Walker v. Bank, 98 Pa. 574; Coffin's App., 106 Pa. 280; Leonard v. Smith, 162 Pa. 284; Potter & Jones v....