Case ID: ohio-st_32/html/0374-01.html
Source: Caselaw Access Project
Author: {"author": "Scott, J.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

Peterson v. Roach.
    1. A demurrer to a pleading admits the truth only of that -which is well pleaded. It does not admit the truth of mere conclusions of law, nor of allegation of fact which are repugnant to, or inconsistent with each other.
    2. 'Where a partner borrows money on the credit of his individual note, which is signed also by a surety, such borrowing does not create a partnership debt, though the money be applied to partnership purposes ; and the principal of such surety is the individual partner, with whom he joins in the execution of the note, and not the partners generally.
    Error to the District Court of Defiance county.
    The plaintiff in error filed his petition in the Court of Common Pleas of Defiance county, against William MeCreath and the defendant in error, Andrew Roach. His petition was as follows :
    “ The plaintiff’ says that at the September term of this court, a. ». 1871, in a certain action pending therein, wherein one A. B. Crunkilton was plaintiff and this plaintiff and the said defendant, William McCreath, were defendants, the said A. B. Crunkilton recovered a judgment against this plaintiff, and the said McCreath, for the sum of four hundred and thirty-four dollars and twenty-nine cents ($434.29) debt, and $17.28 cost of suit.
    “ That the causes of action upon which said judgment was rendered, accrued upon two certain promissory notes set forth in the petition in said case (and copies of which are also hereto annexed). One of which was dated on the 3d day of December, a. d. 1870, and the other on the 17th day of December, A. d. 1870, and were executed by the said William McCreath as principal and this plaintiff as surety, to the order of one Asa Toberen. One for the sum of $200, and the other for the sum of $215, payable respectively in sixty and thirty days after date with interest, and which said notes were afterward assigned to said A. B. Crunkilton.
    “ That the said defendants, William McCreath and Andrew Boach, were, at the execution and delivery of said notes, and each of them, partners in business ; and that the consideration for each of said notes was money loaned by the said Asa Toberen to the said defendant, William Mc-Creath, on account of and for the use of the said partnership ; and that the same was in fact used, laid out, and expended in the business of said partnership, and in paying expenses incurred therein by said partners.
    “ That this plaintiff signed said notes, and each of them, at the request of said William McCreath, as surety only, and without any other or further consideration whatever ; and that at the time said money was so loaned said defendant, McCreath, with the consent of said defendant, Boach, had the management and control of the business of said partnership, and the disbursement of its moneys.
    
      “ That, although said defendant, William McCreath, signed said notes in his individual name, he in fact hired said moneys, and said Toberen loaned (as he then well knew) said moneys on account of said parnership ; and this plaintiff signed said notes at the request of said McCreath, as surety for the said partners, and not for said McCreath individually, and, in signing the same; understood that he was becoming, and in fact did become, surety for said partners jointly, and not for said McCreath as an individual.
    “ This plaintiff further says that the said defendant, William McCreath, is totally insolvent, and that no part of said judgment can be made out of him upon execution, and that the plaintiff has been obliged to satisfy the same, and has in fact satisfied the same. Wherefore he prays judgment,” etc.
    To this petition the defendant, Roach, demurred on the ground that it did not state facts sufficient to constitute a cause of action against him. This demurrer was sustained, and judgment rendered for Roach. On petition in error by the plaintiffs, this judgment was affirmed by the district court; and this judgment of affirmance is now sought to be reversed.
    
      Henry Newbegin, for plaintiff in error,
    claimed that, as the surety was compelled to pay the debt in question, he had a right, under the circumstances, in equity, to recover it back from the partners. Purviance v. Sutherland, 2 Ohio St. 478; Horsey v. Heath, 5 Ohio, 354; St. Aubyn v. Smart, Eng. L. 5 Eq. 182; Blair v. Bromley, 5 Hare, 542; S. C. on appeal, 2 Ph. 354; Sprague v. Ainsworth, 40 Vt. 47; Smith v. Turner, 9 Bush. 417; Smith v. Robert, 5 T. R. 601.
    
      H. H. Dodge, J. R. Tyler, and James Murray, for defendant in error,
    claimed that the real question was, does a person who signs the individual note of a partner as surety become a creditor of the firm to the extent that the proceeds of such note are afterward employed for the benefit of the firm? We say not. See 2 Kinney’s Law Compendium, 374 (State Law Library edition), who quotes Bevan v. Lewis, 1 Sim.; Lloyd v. Treshfield, 2 Car. & Payne, 325; Smith v. Graven, 1 Cramp. & Jerr. 500; Jacques v. Marchand, 6 Cowen, 497; Whittaker v. Brown, 16 Wendell, 505; Thorn v. Smith, 21 Wendall, 365; Joyce v. Williams, 14 Wendell, 141; Martelle v. Le Blane, 10 Lou. 557; Pole v. 
      Gist et al., 4 McCord, 259; Willis v. Hill, 2 Dev. & Batt. 231; Ethridge v. Binney, 9 Pick. 272; United States Bank v. Winship et al., 5 Mason, 183, 5 Peters (S. C.), 529. See also Nicholls v. English, 3 Brews (Pa.), 260. The case of Salem v. Thomas, 47 N. Y. 15.
   Scott, J.

The sole question in this case is as to the sufficiency of the facts stated in the petition of the plaintiff in the court below, to constitute a cause of action. Was the demurrer to it properly sustained?

The action was brought against the defendants, Mc-Creath & Roach, as partners, to recover a sum of money alleged to have been paid by the plaintiff’ as surety for the firm. This payment is alleged to have been made in satisfaction of a judgment recovered against him and Mc-Creath alone, upon two promissory notes executed by Mc-Creath individually, and by the plaintiff as surety, for money borrowed by McCreath of one Toberin, for the use of the firm. There is no averment in the petition that the money borrowed of Toberin was loaned by him to the firm of McCreath & Roach. On the contrary, the averment is that the money was loaned to the defendant, William McCreath.

It is not alleged that said firm was doing business under the firm name of William McCreath, or that the notes given for its repayment were executed in the firm name. On the contrary, it is averred that “ said defendant, William McCreath, signed said notes in his individual name.” A recovery is not sought against Roach as a dormant or secret partner, who permitted the firm business to be carried on in the sole name of McCreath, while he kept his own connection therewith concealed from the world. So far as appears from the petition, the partnership was open, public, and notorious. And it is not averred that the plaintiff became surety on the notes at the request of the firm, or of Roach, but simply at the request of McCreath.

It is, however, averred that the money, to secure the repayment of which the notes were given, was loaned to MeCreath on account of, and for the use of, the partnership, and was in fact used in the business of the partnership? and that the plaintiff signed said notes at the request of McCreath, as surety for the said partners, and not for said McCreath individually, and in signing the same understood that he was becoming, and, in fact, did become, surety for said partners jointly, and not for said McCreath as an individual.

In so far as these averments may be understood as importing that the loan was made to the firm, or on its credit, and that the plaintiff became surety for the firm, we think they must be regarded as conclusions of law, drawn by the pleader from the facts stated; that is, from the facts that the money was borrowed for the use of the firm, and was, in fact, applied to and used in its business transactions. A demui’rer does not admit the truth of such conclusions. If they are to be regarded as allegations of fact, they are inconsistent with, and are negatived by, the other averments of the petition ; for the notes themselves (copies of which are appended to the petition), in connection with the averments of the petition, evidence a transaction and contract to which the firm was not a party. They show that the moneys were loaned on the credit of notes executed by a single member of the firm, in his individual name, and by the plaintiff' as his surety. They show that if the plaintiff signed the notes as a surety, his sole principal was William McCreath. In the absence of any allegation of fraud or mistake, the plaintiff can not be permitted, by averment, to contradict the plain terms of his own written contract. The notes must speak for themselves, and they purport to be made by, and in behalf of, William McCreath and the plaintiff only.

The questions raised by the demurrer to this petition are, then, as we think, substantially these: Where a partner, on the security of a note signed by him individually and by another as his surety, borrows money for the use of the partnership, and which is, in fact, applied to partnership purposes, does the money so borrowed become a partnership debt ? And if payment of the note be enforced against such surety, does he thereby acquire a right of action against all the partners, as his principals ? Both upon principle and authority we think these questions must be answered in the negative. “ Where one partner borrows money' on his individual credit, and afterward applies it to the payment of partnership debts, or loaus it to the firm, it does not entitle the original lender to consider himself a creditor of the firm, and to enforce payment against them." Jacques v. Marquand, 6 Cowen, 497 (per Sutherland, J., citing Ex parte Hunter, 1 Atk. 223; Parkin v. Caruthers, 3 Esp. 250). The plaintiff here became surety for an individual member of a firm, on an express separate contract made between him and Toberin. If the money borrowed was subsequently applied by MeCreath to the use of the partnership, he, and not Toberin, thereby became the creditor of the firm. Eor moneys procured by MeCreath on his individual credit, and used for the partnership benefit, there can be no doubt that he would be entitled to a credit in his account with the firm, and it would seem unreasonable that the other partner should, besides, be liable to the lender, on a contract to which he was not, even an ostensible party, and of which he may have had no knowledge.

In Bevan v. Lewis, 2 Eng. Ch. 376, it was held that if a partner borrows a sum of money and gives his own security only for it, it does not become a partnership debt by being applied to partnership purposes, with the knowledge of the other partner.

The same was held in Willis v. Hill, 2 Dev. & Bat. 231. So, in a recent case in New York, it was held by the court of appeals, that “where money is loaned upon the promissory note of one member of a copartnership, and upon his individual credit, the fact that the money was applied to the payment of the partnership debts, does not constitute the lender a creditor of the firm. It is only in cases where the name used, and to which credit is given, is that adopted by the firm, and used to designate the partnership, that it is held liable.” Nat. Bk. of Salem v. Thomas, 47 N. Y. 15. See also Emily v. Lye, 15 East. 7. Such, we think, is the well-settled rule where the question arises between the lender and the partnership. And it can not be otherwise where the surety of the borrower is the plaintiff'. His principal can only be one who is liable for the debt. And unless such liability attaches to the partnership, he can not claim that the relation of principal and surety subsists between the partners and himself.

¥e are,-therefore, of opinion that the court of common pleas did not err in sustaining the demurrer to the petition of the plaintiff below, and that its judgment was properly affirmed by the district court.

Judgment of district court affirmed.