Case ID: ky_19/html/0435-01.html
Source: Caselaw Access Project
Author: {"author": "Judge Mills", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

Southard and Starr vs. Steele.
    December 23.
    Appeal from the Jeflerson Circuit; John P. Oldham, Judge.
    
      Arbitrament and Axoard. Submission. Partners. Deeds■ Writings unsealed. . Delivery. Statutes. Practice in this court. Equity.
    
    Debt.
    Case 140.
    Case stated of a submission in writ* ing to arbitrament of a controversy between two firms made ou the part of one of the firms by one-partner only.
    Instructions moved by ap-. pelloe.
    Question of law reserved and conditional verdict.
    Judgment of the circuitj epurt.
    Submission, was by one partner in writing, but not under seal, and an. award responsive to it.
    
      Question — le the other partner bound by the award ?
   Judge Mills

delivered the Opinion of the Court.

This is an action of debt upon an award, brought by one firm, or copartnership in merchandize, a gainst another. The writ was served on one of the .defendants, and returned as to the other no inhabitant. The one on which the writ was served, appeared and defended the sub, and afterwards the other appeared also, and the cause was tried on the issues of nil debet, and no award. The defendant who last appeared gave proof, shewing that his co-partner who had departed this life, pending the suit, hqd. in the partnership name, executed the instrument of wi-iting submitting the matters in controversy to an umpire, while ho was not in tiio state, and then moved the court to instruct the jury—

That if they believed that he had not executed the writing, his partner had no power to submit the matters in controversy to an umpire, so as to bind him by the award, and therefore they ought to find for the defendant.

The court, with the assent of the parties, reserved this question, and a verdict was rendered subject to the opinion of the court on the point reserved,

The court ultimately gave judgment for the. defendant, and from that judgment the plaintiffs below have appealed.

The instrument of writing on which the award was founded and which refered the accounts in controversy is formal and explicit in its terms, and is. signed with the partnership name but not sealed. The award of the umpire appears completely on its face responsive to the submission, and determines that a large balance is duo to the plaintiffs below.

And the question is simply whether one co-partner can submit matters in controversy between the firm and strangers in this mode, so as to bind the co-partners.

fiii¡>mv?io» of a controversy between a partnoribip stud others by deed executed by but ene >.f the partner? will net: bind the either?.

Oy.o partner in ay land tho ol'iorsbywvit iir-s not sealod.

Question nf í 1:o power «f one partner to miko a Pobinission to biii'l his co-partners examined on ihfi Iiriti-h authorities end the vow-in' allowed.

This question has never been the subject of at!-* jtuliralion in this court, ho far as we are informed.

If filis submission batí been by deed or sealed instrument wo would readily concede that the partner who did notpcrsonally join therein would not bcboup.d thereby according to the law-merchant. We admit. that the reason for this distinction between scaled am! unsealed instruments is and always has been somewhat technical, and more especially so under our state of law. Bu! ciiii it has been so long sanctioned, and has been followed by this court, in accordance with ancient precedents, (see Trimble vs. Coons, 2 Marsh. 375.) that it is sufSeient now to say without searching for the reasons, lex ila scripia est.

But it is equally true as an universal principle, that tuve partner can bird another to strangers by a writing not sealed, in all matters pertaining to the partnership concerns. Watson in his treatise on partnership, pa. 44 4.

Kytl on awards makes the case of submission to arbitration an exception from tho general pinciple? and lays down the doctrine that one partner cannot thus bind another in this matter. As was well observed in argument, both of these elementary writers found lliis (loci ripe on the solitary case of Strangford vs. 2 Mod. 228. This; case does nof seem to he clearly reported, and took place at an|age when the law merchant had not progressed to that defined extent, to yybich it has since arrived in the courts of Gnat Britain or those of tho United States, and—

it Mill be seen by examining a more modern and lucid author. Go'.y on partnership, commencing M'itk his 56tli page and combining to the 102(1, that he makes hut a single exception, from the power of one parincr to hind another in ail matters touching die. parliicrship concerns, and that iq the case by deed, and he summarily and lucidly lays down, anil by indubitable aulhoriiy, supports principles which fully sustain the doctrine that one partner can hind anolher in a reference to arbitration by an instrument, not sealed, and what is more remarkable in his 95th page he draws a different principle from the case o|‘ JStrangford vs. Green, from that drawn by bis predecessors, Watson and Kyd, and that is. that one partner who makes a submission to arbitration, is bound to perform the award, although his co-partner was no party to the submission. This we conceive is the most correct deduction from that obscure authority, It has also been well observed in argument; that both Kyd and Watson, in making the exception which they have made, have laid down a position incompatible with other principles maintained by them.

Power of one partner on soiling, contracting, releasing and arbitrating controveisics of the con; corn.

It is said or-.q., partner may enter an appearance i or another in court, a-d so causo him to; be bound.

It is clear, according to the position of Watson that one partner may not only bind bis co-partner in all unsealed instruments touching partnership concerns, but ho can sell the stock in trade, transfer the company debts, ami even by a release under seal, may release a debt dujrtlie firm without the express assent of his co-partner, Wat. on part. 225. And it is laid down as a general rule that any one who is capable of making a disposition of his property ór a release of his right, may make a submission to an award, Kyd on awards, 20, It is difficult ami perhaps imposible to give a satisfactory reason for prohibiting one partner to bind Hie other by submission to an award, and allow him at the same time equal or greater powers in every other respect. The power given to one partner to bind his fellow, is a matter of great convenience to the partners themselves and enables them to transact business wit!» equal facility without a special au - thority for every act, when they reside in different countries and it redounds greatly to their benefit; because they thereby enhaneo their credit by binding the funds of each, to strangers, who in their turn are benefited by a security without the signa-; ture of each. Why then should they be prohibited from submitting their differences with strangers to this peaceable and often times convenient mode of adjustment?

Indeed it is said that one partner may enter an appearance for another in court, and thus bind .him by a legal proceeding, could he not by the same rule take every step in a suit for his co-partner and assent to a rule or order of court submitting the suit to a reference? If so, it must be clear that he cao do so without such rule, by an instrument of writing in the partnership name.

Casein Pennsylvauia citen) in Gow, lefered to as ih point.'

Tiio statute placing cei? lain unsealed writings on the same footing with deeds doc3 not altor the modo of executing unsealed instruments — it on? ly gives the greater effect io them after they are executed, which may be dono as before.

Delivery is essential to a deed, not so of other writingsnotseal-

But we are not left to reason alone to guide us in this conclusion. The learned counsel who argued this cause have directed us to a late case in the supreme court of Pennsylvania, Gow on part. 483, expressly in point, whore the question is fully considered and the case ably reviewed, and conclusive reasons advanced in favor of the exercise of such a power. Although this case is not obligatory upon us, yet it is entitled to respect, and we have no hesitation in adopting it, in preference to the obscure case of Strangford vs„ Green, and conclude that by the law merchant one. partner can bind another by submission to an award.

But it may be insiwtc.^tliat an act of assembly, 1 Dig. L. K. 264, has altered the law merchant hr this respect. That act provides that “All writings’ hereafter executed, without a seal or seals, stipulating for the payment of money or property, or for the performance of any art or acts, duty or duties, shall be placed upon the same footing with sealed writings containing the like stipulations^ receiving the, same consideration in ait courts of justice, and la, all intent:; ami purposes having the same force and eiicct, and upon which the same species of action, may be founded as if sealed.” It may be contended that as this act places unsealed instruments on the same fooling with sealed, and as it is conceded that if this instrument was sealed, the co-partner would not have been bound, therefore he cannot be bound by an instrument entitled to the same consideration. This argument is plausible but not conclusive.

At the passage of this act the mode of making and executing sealed and unsealed instruments were different. Some formalities, such for instance, as delivery, necessary in the former, were not necessary in the latter. These requisites by the act were not changed. Each instrument was left to bo made or executed as theretofore, and, to be done by the same parties and in the same manner. Tho force of the statute then consists in the weight oí evidence attached to each instrument after it is made, and not to the manner of creating the obligation. Itlacii instrument, therefore, is left to come into existence in the same mode as before tiie passage of the act, and it cannot avail the appellee.

After reversing a judgment this court goes buck to the first error.

An award at common law, cannot be impeached for either mistake,partiality in the umpire,or unfairness in obtainingit, but must be assailed in equity.

As tiie judgment must be reversed, another question presents itself, 'flic appellee filed several pleas which were demurred to and overruled, and he tendered evidence which was rejected on the trial; and upon the reversal of a judgment it is both the. practice and duty of this court to go back to the first error.

The object of all these pleas, and of the evidence offered, was to impeach the award for mistake, partiality in the umpire, and unfairness in obtaining the award, and the facts offered, if true, might affect the award. The court below resisted every such attempt, in doing so, in an action at law, that court was correct. For it is a well settled rule tiiat an award cannot be impeached in an action at law, but the party attacking it must be left to his suit in equity, 1 Saun. 326. Wills vs. McCormack, 2 Wil. 148, Gow on part. 491. The circuit court therefore did not err in excluding from the action at law the defence set up.

Tiie judgment must be reversed with costs, and the cause be remanded, with directions to enter judgment for the plaintiffs, on the verdict in the court below.

MOTION TO CORRECT THE JUDGMENT AS TO THE TARTY AiPEIfLEE.

The counsel of" Robert M. Steele moves the court to correct the judgment rendered by this court, by striking his name out of the caption of the orders, and inserting William, the appellee, againstwhoi»s lie insists the judgment was rendered in the circuit court.

The declaration is against William Steele ami Robert M. Steele, and process issued against boil), which was executed on William, and returned as to Robert, no inhabitant. William, on whom the writ ty&s executed,, appeared and defended the suit. V. is said in the first entry in court, that William filed a plea Sec. and a demurer &c. and his name, and that only, is contained in the introduction to the plea, and the several demurers are, by the defendant, in the singular number — and so are the entries of (he judgment upon them. It is true that afterwards the pleadings and entries contain the word defendants; such is the style of a number of special pleas, after-wards filed, and the subsequent entries touching them. Butin no plea, order or judgment, is the name of Robert contained; it does appear to haves been put on the margin of some of the. pleas, but it is contended that such á statement of parties, composes no part, of the plea, nor can it effect them; k is only designed to shew to what causé the paper belongs,and its inaccuracy cannot expel a person, plaintiff or defendant, from the cause, and much less introduce one on whom process liad never been executed. But at the trial term, the entries, all of them, áre defendant, in the singular, and so is the final judgment on the question reserved át the subsequent term. It is true, there was no' abatement of the suit entered ás to Robert because of the Sheriff’s return of no inhabitant as to him; but it is insisted, tiie plaintiff having accepted the plea and detauvers of William, i i tin ally suffered an abatement as to Robert, or what would be equally favourable to him; a discontinuance.

If Robert could be supposed, to be again brought up into the cause by the use of the. plural defendants, then it is insisted that by the saíne prbeess of reasoning, he would be afterwards extricated from the cause, by the subsequent use of the singular.

II docs appear in the bill of exceptions, that William had died, and it would seem to be implied that Robert had been defending the suit at the trial, hut it is relied that William’s death bad never been suggested on the record and that he could not be patent of the world and the cause, by a bill of exceptions; and much less could Robert, who had newt- been summoned, be made by that means, (he only defendant and the subject of the judgment, to meet ¡Í ¡¡lone.

As to the circumstance of the appeal bond having been made pay aide, to Robes t, (bar car have no effect; it was bul the mistake of the clerk.

On the whole record, it is contended that the whole proceeding in the inferior court, must he taken as against Williani oniy, and that so ought to he the entries here, If, however, there be any doubt on, this question, it is then relied that the. proceedings below and here,íroin the first «se of ,the word de - fendants in. the court below, must bo taken as against both, and that the entines in this court ought to be corrected by inserting filename of William Steele— and-should the court override the first motion, thcr. this motion is made — and should either motion prevail, the court will be moved tfi strike the canse olí' the docket for the insufficiency of the appeal bond.

In the event of the court overruling these motions then the attention of the court is called to'the folio wing:

PETITION I?on 1 REHEARING ON THE MERITS, BY F. W. S. GRAYSON ESQ.

Cdn ode partner bind another Tnj submission of their accounts to arbitration? t

The defendant roost respectfully prays a rehearing of this case. His counsel, with great deference would urge, that the court erred in adopting the principle upon which the judgment of the'- inferior court has been reversed^ namely, that one partner may, for his co-partner as well as himself, submit matters of controversy to arbitration:- a principié which has, perhaps, the support of nq previous decision and only one dictum, that, which is to lie found in the case of Taylor vs. Coyell & Co. in the Supreme court of Pennsylvania, Gow, 585. There the only defendant upon whom process'was served, by whom defence was made, and against whom Judgment was rendered, was William Taylor, the partner, who made the submission: the other partners were not before the court, and what Judge Dun cart said in that case, as tending to charge partners who do not concur in the submission, was extrajudicial, aiul.no authority even in Pennsylvania. The case of Strangford vs. Green, 2 Mod. 228, contains a contrary’dictum., There, too, the partner who wrs sued had, for himself and co-partner, made a parol submission; the court in deciding that the partner who submitted was bound by the award, took occasion at the same time, to say, that Iiis co-partner was not bound. This dictum has, however, been approved and adopted* as iaw, by Bacon in his abridgment, 1 vol. 208; by Kyd in his treatise on awards, 42; and by Watson in his treatise on partnership, 446; Gow in his treatise on partnership,. 86, the latest on the subject, states that the partner who made the submission is bound by the award, though his copartner was no party to it; by which he leaves us to infer that the latter is not bound. He refers to Strangford vs. Green, without questioning the, principle therein expressly laid down, that the co-partner who did not concur in the submission is not bound by the award. Partners are agents for one another; the power which one partner possesses to bind another is but the authority of an agent to !>ihd his principal, conferred for the benefit and by the necessity or interest of the principal. Agents are clothed with general or special powers. Partners belong to the former class: they can make no higher claim. Now, a general.agent cannot bind his principal, by a reference to arbitration, without his special authority. ' No case has gone so far. The ¡interest of the principal, in the genera), cannot require and his safety oftentimes Forbids it it is true, that arbitrations are convenient and deapatchful; but it is equally true that they are extremely hazardous. And the errors and injustice which unlearned re ferees.máy commit, however enormous, admit of no correction. It is a dangerous jurisdiction, to which principals themselves seldom i-esort, and too often with well founded regret. That there is no redress of an unjust award, however ruinous, presents an invincible argument against the power of a general agent to bind bis principal by a submission, without bis. special consent.. Kyd on awards, page 45, says it is out of the ordinary course of the business of an Attorney to refer a matter to arbitration, and therefore he does not possess the power; although it is the common understanding that the assent of an Attorney in a cause, to a reference by a rule of nisi piuSf will bind the client: because his employment as

Attorney, in a particular suit, implies the client’s consent that he may do every thing which the court may approve, in the progress of the cause. Yet the assent of a solicitor to a inference by a rule of a court of equity, will not bind his client without hia actual concurrence. 1 Chy. R. 194. 1 Cha. ca. 86, 1 Eq. Ca. ab. 49. And yet Attorneys at law and solicitors, possess sitnilarpowers. To submit a matter to arbitration, by an agent for his. principal, is considered an unnecessary and dangerous exercise of power and if it be allowed to an Attorney at law, it is because it is exercised under the approbation of the court; which is scarcely a sufficient reason and has been deemed insufficient in the court of chance* ry to authorize a solicitor to do the same tiling.

A guardian represents the Ward for whom he acts, and is his general agent; yet if he submits to a' reference, as he may do, for the infant, lie binds himself thereby and not the Infant: 3 Vin. 110, Kyd 39, Com. 319, Roberts vs. Newbold. A court of chancery will not decree an award to bind, the infant. 1 Eq. Ca. ab. 50, pl. 1.

The authority'conferred by act of Assembly upon, Barnett’s Commissioners, to sell and convey lands and to collect, and pay. debts,did not.carry with it, the power to submit a matter to arbitration. Although it is a mode, cheap, convenient and despatched, to collect debts or settle controversies, it is at the same time, an extraordinary and dangerous mode. 2 Bibb. 270.

An Executor or Administrator represents, the creditors and legatees or distributees of the decedent.

He is their general agent and something more. He" possesses power coupled with interest. , He is a trustee with the most extensive powers. And although an executor or administrator, as such, may submit to arbitration, yet if the" arbitrators do not au’ard as rouchaslie would be entitled to at law, it will be a devastavit for the residue. Toll. 425. Bac. ab. 207, Kyd 40.

The reason is stronger in favor of guardians and. executors or administrators binding those they represent by submissions to reference than other agcuts: for unless they possess such power by virtue of their character of guardians, executors oradnintisfcrators, however convenient and safe a reference may be deemed, it cannot be bad, but at their special peril, whilst as to other agents, the principals «iay be consulted or a special power' delegated, whenever it may appear expedient.' The legislature of Kentucky has accordingly authorized guardians to submit land controversies to arbitration, according to the arbitration laws that may- be in force, 1 Lit. laws 676, Hard. 323. But the reference there authorized,' is to be had under a rule of court, and not the common law reference to an arbitrator, who acts’yvithout thp obligation pf an oath, ami without the power of summoning or swearing witnesses: a sort of hap hazard umpire.

It would he- difficult to imagine a reason in favor of one partner binding another by a submission, which would not apply to executors or administrators. Both'have power to make sales, to collect or release debts. The argument of convenience equally applies to each. Yet the former cannot submit to reference, but at their own peril, however expedient it may seem; whilst as to tho latter, if references he, desirable, special power to that effect may in al[ such cases, be conferred, and therefore not necessary that the power should be implied.

The reference made-in this case, was a common law reference, to an arbitrator, who was to act without oath and' without the power of summoning or swearing witnesses, and yet whose decision, however erroneous or oh]list, was to be conclusive on the parties. This is a-sort of reference, which, even an Attorney at law Ijas no authority to "make, though, employed for tito sole and special purpose of managing the controversy to be submitted. If he sain piits iiis client’s cause to reference, it must be with the approbation of the court, and to a sworn arbitrator, with competent power to summon ami swear tiie witnesses to he examined. And yet how much, more competent is he to exercise the delicate discro-tion of agreeing to a reference, than ordinary part iters in the country?

One partner may bind another, concerning partjjfrshipshatters, by parol contracts, but not by deed: •^because a deed precludes all enquiry into its consideration. This would therefore, be a dangerous power and is not to be implied; but an award equally precludes inquiry into its merits and no reason occurs against one partner binding another by deed, >vhich does not equally apply to awards.

It is not denied, that one partner executing a deed for himself and co-partner submitting to a reference, cannot bind the co-partner to submit to the award, Gow 489. Decisions to that effect are sufficiently numerous, and if they are less so as to parol submissions, it is, perhaps, because parol submissions are of rare occurrence in the books, as said by Duncan J, in Gow 489; and which, as I take it, is because common law references in England, are almost always made by deed. But if an award is not binding upon all the partners, where the Submission is by the deed of one, executing for himself and co-partners, it follows that the award would not be obligatory upon them, though made upon a parol submission. The objection to the former, is not that one partner cannot bind another by deed, for it is not claimed that the co-partner is bound by the deed, but by the award; the deed is only used as evidence of the fact, that the one partner submitted for all; as to which, the seal can form no conceivable obstacle, any more than to a receipt for money, 'whipfa might happen to have a seal to it.

It has been said by an Attorney, Dampier, in argument, that one partner may enter an appearance for another to an action, 7 T. R. 207, which Judge Duncan in the case of Taylor vs. Coyell & Co. mistook for an authority, Gow 491. But the contrary had been held by Judges Iredell and Chase, 3 Dal. 391; and so expressly decided in South Carolina, 2 McCord’s rep. 310, Gow 195 in note— and upon principle, because the interest of the co-partners caqnot require it. If one partner can appear for another, it can only be where there has been service of process, bio general agent can appear to a suit for his principal without service of process. If a partner have .such power, then service of process upon one should bo deemed sufficient for all, as U>e case of executors, which we know, to be oth*. erwise. There is then, not a single authority in favor of the power of one partner to appear for another, without previous service of process, whilst there are respectable authorities against it. If the partner have no such power, it, will scarcely be contended that he can bind his co-partners by an award made upon his submission for them, without their consent, where lie not only appears for and represents them, but creates without their authority, ari extraordinary and dangerous jurisdiction, from whose errors, however ruinous, no redress can be had.

April 10.

Answer to (he petition a3 to '.lie parties.

One defendant in 1 lie cayia$i returned no inhabitant,and who did not at Srst appear, is .-shifted into . he stead of ■A-O ojhor 7,7.10 first defended and after-wards died, and is so become the sole defendant without any formal entry — a singular case.

The decision in this case is the first and only one I have been able to find reported in favor of the power of one partner binding anothci\hy an award made upon his parol submission, and if it be not against principle, it is at least without authority, and is opposed by the opinions of some of the ablest Judges and Lawyers of England.,

This-case was heard upon the argument of the Appellant’s counsel only, • Several points were decided by the inferior court, against appellee and as is believed all of them, not correctly,- to argue which also a rehearing is desired. "All which is respectfully submitted.

The court on consideration overruled both the motions, and stated the grounds in the following

Additional opinion of the Court, by Judge Mills.

As to the questions raised by the petition for a rehearing that the court below proceeded against a wrong defendant, or that the judgment below or proceedings hero have been had against one on whom, process is not served, the court returns the following answer.

The writ was executed on William Steele and returned as to Robert M. Steele, “not found and no inhabitant.”- The appearance is entered generally fortlie defendants. — It is true some of the first pleas in abatement (as the jileas are, numerous) are expressly in the name of William Steele alone. But others, as the cause progressed are filed expressly iii^the name of both and that which contests the execution of the writing is by Robert M, Steele, a lone, and ho is the partner, who on the trial contested the effect of the writing upon him, by proving that it was signed by William Steele in the company name, when he, Robert, was out of the country. There is then no doubt Robert really appeared and is completely a defendant in the cause', as much so as’ if the process had been executed upon him. Tlfe trial and ali the entines relative thereto, including the judgment, notice but one defendant only; and there is no diticulty in ascertaining which it is. It is clearly Robert, who denied the power of his partner to bind him. The exceptions taken shew this, and that, at that time, William had departed this life. This accounts for ail the proceedings against one only. The parties knew that he was dead. They proceeded according to this knowledge against the surviving partner; but omitted to make an entry on record abating the suit as to the deceased defendant* The fact of his death is at length shewn clearly, and the proceeding is not against him, but ¡¡is partner, who it lias been seen had appeared. This irregularity we deem by no means sufficient to warrant this court, in setting aside either its own proceedings or those of the court below', for presuming that in all their solemn forms, these proceedings were against no person — -that William is dead and Robert unknown in the cause. The cause has all along had strong resistance from some quarter, and it is not difficult from the record to ascertain that this opposition arose from Robert M. Steele. It may be that the clerk of the court below, as well as the clerk of this court, in the caption of their entries, have employed die name of William Steele after his decease, inadvertently. If so, these entries are amendable as there is enough in the record to amend by, and such correction of the entries is directed accordingly.

One partner has by the general authority as Co-partner, power to bind the others by the submission of iheir accounts to arbitration by writing not coaled.

As to the main point, whether one partner can bind another by submission of their accounts to arbitration, evidencing that submission by such an instrument as one can execute for another, it is impossible to read'cither the elementary writers or adjudicated cases, and not believe that such a power is comprehended in the general authority conferred upon bis co-partner by the nature of their association. The reason for that general authority fully embraces this act. The particular instances iu which one partner can bind another, as held in the adjudicated cases, by analogy sustain this power also. For the exception to the general rule there ought, therefore, to be strong reason or clear authority. ‘ Of reason there is none — of exception there is but one — that ancient, before the law merchant had come to perfection, and is more a dictum than a decision — not clearly reported; though it is admitted it has given birth to an exception in some elementary treatises. This weak authority, if such it can be called, we conceive is not only shaken but overturned by conclusive reasoning, and modern cases and treatises.

Crittenden, for plaintiff; Grayson, for defendant ■

The petition for a rehearing is, therefore, overruled.