Case ID: us-ct-cl_19/html/0160-01.html
Source: Caselaw Access Project
Author: {"author": "Nott, J.,", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

ALBERTO CAMPBELL ET AL. v. DISTRICT OF COLUMBIA.
    [No. 149.
    Decided February 4, 1884. ]
    
      On the Facts.
    
    The defendant states an account with the firm of C. & R., in which is deducted overpayments made to R., one of the firm, on his individual contract. The other partner receives the balance and receipts therefor as “in full settlement of the above-stated claim.” No objection to this settlement of individual indebtedness is raised by the firm or by either member thereof.
    I.The individual debt of a partner cannot be charged to a firm without its consent, which is really that of the individuals who compose the firm, nor can the partner presumably benefited be coerced into thus paying an alleged indebtedness without his oonsent.
    II.Consent may be shown in various ways, by agreement, by acceptance, by acquiescence.
    III.When a partner signs the firm-name to a settlement which extinguishes the individual indebtedness of another partner at the cost of the firm, it is as effective evidence of his consent as if he expressly consented in his individual name.
    TV. If the partner presumably benefited by the settlement does nothing, neither paying bis individual indebtedness nor denying it nor repudiating the settlement, it is conclusive that he acquiesced.
    y. The unauthorized act of a partner may continue in its fruits and results to be his unauthorized act; but if his firm, in the absence of fraud or concealment, keeps silence when it should repudiate his act, it will be estopped.
    
      The Reporters’ statement of the casé:
    It was conceded in this case that $1,608.10 of moneys retained on a contract was due to the claimants. The controversy in the case related to another amount and grew out of the following facts:
    On the 30th of June, 1875, the following account was made up by the defendant’s officers:
    “ Washington, D. O., June 30,1875.
    
      “ District of Columbia to Campbell & Rothwell, Dr.
    
    “ For contract 811. Seventh street east, Maryland avenue to North Carolina avenue :
    “Final measurement, sewer ..................$30,422 31
    “ Deduct material.....................$4,875 09
    “ Deduct certificate 14032 and 14033 .. 12, 887 46
    “ Retain on 5,835.5 feet of pipe ....... 583 55
    ----- 18, 346 10
    12, 076 21
    “Amount overpaid Campbell & Roth-well .............................. 481 80
    45 88
    “Charges against Campbell &
    Rothwell................... 13 05
    -- 58 93
    --- 540 73
    11, 535 48
    “Amount overpaid R. Rothwell........ 1,627 46
    “ Charges againstR. Rothwell... 25 00
    6 50 77 95
    - 109 45
    - 1, 736 91
    “ Balance................................. 9, 798 57
    “ Received this 2d day of July, 1875, from the Board of Audit, their certificate No. 14643 for $9,798.57, in full settlement of the above-stated claim.
    “Campbell & Rothwell.”
    7976.
    Jn the above account the items stated as “ overpaid R. Roth-well,” and as “ charges against R. Rothwell,” amounting in the aggregate to $1,736.91, related to individual transactions of one of the partners with the defendant, and not to transactions of the firm of Campbell & Rothwell.
    The receipt appended to such account was signed in the firm-name by Alberto Campbell, one of the partners, and he received. the voucher referred to, which was ultimately paid by the defendant. It does not appear that any objection was ever raised to the settlement of the individual indebtedness of B. Bothwell, either by the firm or by either of the members thereof. The firm consisted of Alberto Campbell and Bichard Bothwell.
    
      Mr. J. W. Douglass for the claimant.
    
      Mr. J. O. Fay (with whom was the Assistant Attorney General) for the defendant.
   Nott, J.,

delivered the opinion of the court:

It is a well-settled principle that the individual debts of a partner cannot be charged to his firm without its consent, and that a member of a firm cannot be coerced into paying an alleged indebtedness in this manner without his consent. Therefore the question in all such cases is practically one of consent.

And when the question of consent comes to be investigated the partnership ceases to be an entity, and the inquiry ordinarily must be whether the individuals who composed the firm consented. If it were otherwise, that which is really an abstraction, the partnership, would become the entity, and that which is an entity, the rights of persons, would become the abstraction.

Consent may be shown in various ways — by agreement, by acceptance, by acquiescence. In the present case we think it established, for the following reasons:

i. The partner whose individual indebtedness was liquidated was not the partner who accepted the settlement and receipted for the balance stated. If the case were reversed, if the settlement had been brought about by the partner presumably benefited, he having his individual indebtedness discharged at the cost of his firm, a court would view the transaction with suspicion. But no such suspicion can attach to the act of the partner presumably injured by the settlement. When such a partner signs the firm-name to such a receipt it is as effective evidence of his individual acquiesence as if he wrote at the foot, “I consent,” and signed his individual name thereto. On the argument it was insisted that the receipt given in the name of the firm was not the act of the firm, because one partner cannot divert partnership funds to individual liabilities; and that it was not the act of the partner who gave the receipt, because it was given in the name of the firm. But we think that this technical analysis cannot be sustained, and that it is the duty of the court to rest its decision upon the substance rather than upon the form of the transaction. In substance, here the settlement made and receipt given in the name of the firm were the acts of the firm, but subject to the approval or ratification, express or implied, of the individual partners. And it also seems to us clear that the act of the partner Campbell in signing the receipt and accepting the voucher was his individual approval or ratification of the settlement which he had just effected in the name of his firm.

2. It was the right undoubtedly of the partner Rothwell to reject this settlement. Apparently the settlement was for his benefit, but possibly he owed the. District of Columbia nothing and the alleged overcharges were mistakes, or against them he held a valid set-off. He might well object to his firm paying a fictitious indebtedness with money which in part belonged to himself. We fully recognize his right to annul the transaction, and if he denied the individual indebtedness his right was as complete as if he were not the partner supposed to be benefited. All that he had to do was to write a letter within a reasonable time, in the name of the firm, notifying the defendant that the settlement of the 2d of July, 1875, was the individual act of Alberto Campbell, without authority of the firm of Campbell & Roth-well, and that the firm disavowed the transaction and intended to hold the District liable for the moneys thus withheld. Instead of so doing, Mr. Rothwell did nothing whatever. So far as the record discloses, he received the benefit of the settlement, first as an individual, in having his individual indebtedness discharged, and second as a partner, in sharing in the balance of $9,798.57 wrhich was paid to his firm. Having thus allowed the other contracting party to believe that a transaction, apparently for his benefit, was effected with his knowledge and approval, he is most certainly7 estopped from denying that the settlement was the authorized act of his firm.

3. So far as the firm, considered as a body corporate, is concerned, the court recognizes the fact that the unauthorized act of a partner may continue in its results and fruits to be his unauthorized act. But in this case it is not pretended that either concealment or fraud was practiced upon the firm by the acting partner, and it is not denied that the firm accepted the certificate and received its proceeds. In the absence of concealment or fraud the firm is estopped from denying a transaction as to which it kept silence from the 2d day of July, 1875, when it received the certificate for $9,798.57, till the 31st day of March, 1883, when it filed its amended petition in this action.

It was also urged upon the argument that the settlement embodied upon the account of June 30, 1875, was not a final settlement between the parties, inasmuch as there were subsequent accounts, settlements, and payments for other services under the same contract. We are unable to perceive that this can help or affect the claimants’ case. It is one of the conveniences of mercantile usage that accounts remain open as to mistakes made or items omitted until the parties close them either by final' account stated or a final settlement effected. When that point is reached the contracting parties cannot reopen their accounts, and the statute of limitations begins to run. In the present case there is neither error nor omission. If all the accounts were still open and unsettled it would not affect the present question. The defendant’s demand against Rothwell would still be in the same plight in which we find it, and the claimants would still be responsible for its being there.

The judgment of the court is that the claimants recover of the defendant $1,608.10.