Case ID: ohio-st_28/html/0055-01.html
Source: Caselaw Access Project
Author: {"author": "Wright, J.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

Charles Thomas v. A. L. Pennrich, Assignee.
    1. In a case of which the court of common pleas would not have had original jurisdiction, brought into that court by appeal from the justice of the peace, if the parties proceed to trial upon the merits, without objection to the mode in which jurisdiction was taken, it is too late upon error to make such an objection.
    2. One partner can not apply the funds of a partnership in payment of his private debt, without the assent of his co-partners, and an action may be maintained by the assignee of the firm to recover the amount so applied against the party receiving the same.
    Reserved in District Court of Cuyahoga county.
    
      Suit was brought by Andrew L. Pennrich, assignee' of Vm'. Hutchinson & Co., against Charles Thomas, before a justice of the peace, to recover the sum of $112.06, for lumber sold. The case was appealed to the court of common pleas, where a petition was filed stating simply that the action was on an account for goods sold and delivered by the firm of which plaintiff is assignee. Thomas answers and says that before- the assignment by the firm he had paid the bill in question; that William Hutchinson was owing defendant for sundry bills of groceries the sum of-dollars; that said William, in order to settle said bill, acting for said fixm of William Hutchinson & Company, asked defendant for payment of the said bill of lumber, amounting to the sum of $112.06. And thereupon said William Hutchinson, instead of paying defendant’s bill in money, receipted said company’s bill and gave it to defendant, and paid defendant the difference, amounting to the sum of-. And defendant accepted such receipted bill in lieu of the money, and gave Hutchinson, upon the payment of the balance, a receipt in full for the amount due him. Wherefore he says that he has fully paid said bill, and asks, etc.
    Plaintiff, for reply, denies that said account has been in any way settled, paid, or discharged, or that on the 4th day of March, 1870, or at any time before said assignment, the said William Hutchinson settled said bill.
    He admits that at some time, but at what precise time he can not state, the said William Hutchinson sought to settle the account upon which this action is founded, by allowing said defendant to off-set against the same a private account he had against said William Hutchinson, but he denies .that in so doing he was acting for said firm of William Hutchinson & Co., or with the knowledge and consent of said firm, or by or with its authority. On the contrary, he says that in said attempted settlement said William Hutchinson was acting without authority, and in fraud of the rights of said firm of Wiliiam Hutchinson & Co. He says, further, that said firm is insolvent, and without sufficient assets to pay its indebtedness. '
    The case was submitted to the court on the following agreed statement of facts:
    3. That the account upon which this action is founded was a just and valid account against the defendant.
    2. That William Hutchinson & Co., now represented by the plaintiff assignee, were lumber dealers in the city of Cleveland, and at all times during the existence of said firm, William Hutchinson was an active member of said firm.
    3. That the defendant, on or about March 4, 1870, purchased of said firm $112.06 worth of lumber, which was charged to him on the firm books.
    4. That said William Hutchinson purchased of defendant before and after said 4th day of March family supplies.
    5. That on or about the 20th of April, 1870, said William Hutchinson was owing defendant, for supplies so furnished, the sum of $162.06, on which day defendant presented his bill to said William Hutchinson, and demanded payment therefor, whereupon said William Hutchinson presented to the defendant the company?s bill for lumber, amounting, •as before stated, to the sum of $112.06, and demanded payment thereon of defendant, and thereupon receipted the same, and gave it to the defendant, and also gave defendant a check for the balance of his bill, and thereupon defendant receipted his bill, and gave the same to the said William Hutchinson.
    6. On the — day of December following, the firm of William Hutchinson & Co., believing themselves insolvent, made an assignment of all their firm property to the plaintiff for the benefit of their creditors.
    7. Plaintiff sues.
    8. Defendant pleads payment.
    9. It is also agreed that said William Hutchinson’s action in the matter was fraudulent, so far as the other members of the firm were concerned, and that no credit was ever given said Thomas upon the books of said firm, or any notice given to the other members of said firm of the transaction, and that neither of the other members of said firm knew of said settlement until after said firm had made said assignment to plaintiff', nor have said other partners at any time ratified the same. It is also agreed that said firm of William Hutchinson & Co. is hopelessly insolvent.
    In the common pleas judgment was rendered for plaintiff, and a petition in error was filed in the district court, and the cause was reserved to the Supreme Court.
    
      Marvin, Hart $ Squire, for plaintiff in error.
    
      John G. Grannis, for defendant in error.
   Wright, J.

It is claimed by plaintiff' in error that the justice had no jurisdiction of the cause, because it involved considerations of an equitable nature.

It is well settled in this state that though the justice may have had no jurisdiction, yet, if,the case be appealed to the common pleas, and the parties there proceed to trial upon the merits, it is too late afterward to raise an objection of that character; it is considered as waived by failure to object at the proper time. Harrington v. Heath, 15 Ohio St. 483; Bisher v. Richards, 9 Ib. 495; Wood v. O’Farrell & Gabriele, 19 Ib. 427.

It appears from the agreed statement, that Wm. Hutchinson, one of the firm, owed Thomas, defendant below, a private debt, and that he undertook to pay that debt with the property of the firm, the knowledge or consent of the firm thereto not being shown. Thomas had bought of the firm 'the lumber sued for in this case. Wm. Hutchinson had bought groceries of Thomas. They settled their accounts by Hutchinson giving Thomas the receipted bill for the lumber, paying the balance in cash. This does not absolve Thomas from his liability to Hutchinson & Co. for the lumber he had bought of them.

The statement shows that the action of Wm. Hutchinson was fraudulent, so far as the other members of the firm were concerned; that the transaction was not entered upon the books of the firm, no notice of it was given to the-other partners; that they did not know of it until after the-assignment, and never ratified it. Such an act of one partner can not be held binding upon the others.

It is said in Homer v. Wood, 11 Met. 62 : “ The general-principle of law is too well settled to require either argument or authority to sustain it, that one partner has no right to apply the partnership securities and effects in payment of his private debts and liabilities, without the assent,, express or implied, of the other members of the firm.”' Corwin v. Suydam, 24 Ohio St. 209.

It appears to be urged in this case that no action can he-maintained at law upon the facts appearing in the record.. Perhaps it is sufficient to say in answer that our courts administer legal and equitable remedies in the same tribunal. But, if this were not so, we see no difficulty in maintaining-an action like this.

It is held in England that where a partner has taken the property of the firm, and paid his own private debt, the firm can not sue for such misappropriation. The reason given is that the partner so acting has committed a fraud on his other partners, and when they sue to recover back,, he must be joined as plaintiff, and this is maintaining an action, the basis of which is the fraud of those who seek the benefit of it.

Lord Tenterden states the proposition thus: “We are-not aware of any instance in which a person has been allowed, as plaintiff in a court of law, to rescind his own act,, on the ground that such act was a fraud on some other person, whether the party seeking to do this has sued in his-own name only, or jointly with some other person.’.’ Jones v. Yates, 9 B. & C. 538.

The case of Homer v. Wood, 11 Cush. 63, follows Jones v. Yates, and adopts 'its reasoning. Homer v. Wood is very like the cause now before us. One partner undertook to-pay his private debt with the property of the firm, and when the firm sued to recover back, it was held the action ■could not be maintained. The course of argument pursued by Bigelow, J., in his opinion, maintains that, as the •action is in form ex contractu, both partners must join as plaintiffs, as neither can recover alone; that the debt has once been paid, and a recovery of the amount so paid can •only be had by establishing, in answer to such payment, the fraudulent acts of one of the co-plaintiffs in misapplying the partnership assets in discharge of his own separate debt; or, in other words, the’ plaintiffs can maintain their .action only by proving fraud in one of themselves. This is a violation of the salutary principle that a party in a court of law shall not be heard to allege his own bad faith as a foundation of his right of recovery. It can make no ■difference in the application of the principle, that the party who seeks the recovery sues not in his own name, but jointly with another person who is innocent of any fraud. The right of action being joint, if one of co-plaintiffs dies, the right of action survives to the other, and that other may be be the party who has been guilty of the fraud against his co-partner. Thus, the fraudulent partner might maintain an action alone, and in his own name, and thus, for his own benefit, avoid his own’ act by proof of his own misconduct, and recover again, from the defendants the very debt which has once been paid to him, and from which he has discharged them in full.

This line of argument merely assumes the proposition to be proved. It assumes that the debt has been paid. The ■assumption is true if the setting off of a debt due the firm .against the private debt of the partner is a payment of that debt. But it is conceded that a partner can not pay his own debt by using the firm property to that end.

If we follow out the coux’se of the case at bax’, it seems to us, it may plainly be seen that no difficulty can arise. Penn rich, the assignee of the firm, pro hac vice, representing the firm, sues for a debt due it. The defense is that that ■debt was set off against a private debt of a partner by hinx, and is so paid. The reply to such a defense is that such a transaction is illegal. A demurrer to an answer setting up such a defense would be sustained, and no payment, therefore, can be predicated upon such a transaction. The partner then secures no benefit from his own wrong,, or fraudulent conduct. That conduct simply amounts to-nothing, and all rights remain as they, were before. Purdy v. Powers, 6 Penn. St. 492.

Judgment of common fleas affirmed.

Day, J., did not sit in the case.