Case Name: James S. Colburn, v. William Mathews
Court: South Carolina Court of Appeals
Jurisdiction: South Carolina
Decision Date: 1847-02
Citations: 1 Strob. 232
Docket Number: 
Parties: James S. Colburn, v. William Mathews.
Judges: 
Reporter: South Carolina Law Reports
Volume: 32
Pages: 232–239

Head Matter:
James S. Colburn, v. William Mathews.
In the sale of ail unnegotiable security, there is no implied warranty of either its goodness or money value.
There is no fraud in the fact that two partners confess a judgment to a third.
A Judge may very properly stop the examination, in reply to evidence which could not have established fraud.
It is the duty of the Judge to tell the jury when, in his judgment, there is nothing in the proof to justify them in finding a verdict.
Tried before Mr. Justice Butler, at Charleston, May Term, 1846.
Debt on bonds, executed jointly and severally, by Benjamin P. Colburn and the defendant, (with another.) They bore date 20th November, 1841, and were given to secure the payment of $12,000. The defence was, that these bonds had been obtained by fraud and misrepresentation, and that they were therefore void. The latitude of the defence was seen more in the argument than the plea. The circumstances under which the bonds were given were detailed by Col. Memminger in his evidence, and were as follows: He said, that while James Smith Colburn and B. P. Colburn & Co. occupied adversary relations to each other in respect to their accounts, he, as the representative of the latter, and Mr. Desaussure as the representative of the other, were called on to make a final settlement of them upon strict legal principles. That in the contest between the parties, nothing was conceded except the power of their respective agents to settle the whole matter according to their best judgment. A judgment that had been confessed by B. P. Colburn & Co., for $50,000, was before them, but he said it was not regarded as the true measure of indebtedness; on the contrary, the agents looked behind it. for a true statement of the accounts. After a fair calculation of what was due by B. P. Colburn & Co., he came to the conclusion that the firm owed James S. Colburn at least $12,000, and that for that amount the plaintiff had an unquestionable legal claim, but thought at law J. S. Colburn could have established a much larger amount. Such being his opinion, ho advised B. P. Col-burn, who was present, to give, as required, good bonds with security for that amount; and suggested to B. P. Colburn, the son-in-law of William Mathews, that he, Mathews, should execute the bond, and take an assignment of the judgment for $50,000, it being understood that Mathews was the endorser of the firm for a large amount. In conformity with this suggestion, B. P. Colburn made the application to Mr. Mathews, and obtained his signature to the bonds. In making these arrangements, he had no conference with James S. Colburn,—and throughout, B. P. Colburn seemed to represent Mr. Mathews, and was desirous of protecting his interests. After the bonds and assignments of judgment were executed, heard complaint of judgment, but not before. During the controversy in the settlement of the accounts, B. P. Colburn did produce a paper, purporting to have been signed by himself, in which it is said that J. S. Colburn was not a secret partner'. That seeing such a course of proceeding as that indicated by the son, would lead to very disagreeable and unbecoming developments of transae- tions between father and son, he advised the withdrawal of the paper, as he did not regard it as essential to the settlement of the legal demands between the parties; and said it was not proved, on the occasion referred to, that J. S. Colburn was a secret partner of B. P. Colburn & Co. After these bonds had attained maturity, and when the creditors of B. P. Colburn & Co. were pressing them for a settlement, B. P. Colburn became desirous of setting judgment and bonds aside, upon the ground that James S. Colburn had been secret partner, or on some such ground. The witness declined to institute legal proceedings for the purpose of setting them aside, giving it as his confident opinion, that it could not be done, tie was then employed to compound with creditors, which he did by procuring from them an agreement to accept fifty cents in the dollar.
The witness, on his cross-examination, said he did not know that J. S, Colburn was present, when his son produced the paper referred to; the son, B. P., said that his father had taken a blank note with his name on it, and had filled it up with a declaration that he, J. S., was not partner. The witness said, that he had come to the conclusion that J. S. had no such interest in the assets as to make him a secret partner. Throughout Mathews was not present, and B. P. Colburn acted as his agent and representative.
On the part of the defendant, two of the plaintiff’s sons were sworn; Fred. A. Colburn, living in Boston, and B. P. Colburn. The first said that, originally, the title of the firm was J. S. Colburn & Co.; that it was afterwards changed to F. A. Colburn & Co. The members of the firm were J. S. Colburn, F. A. Colburn, and Isaac Mordecai. J. S. advanced all the capital; two-thirds of the profits to go to witness; afterwards witness was to go out, and J. S. to receive half. B. P. Colburn said when he joined the firm, it was known as B. P. Colburn & Co. The understanding was, that J. S. Colburn was to receive half of two-thirds, and Mordecai to have one-third. Said the goods were ordered at his father’s instance. James S. would draw out money and goods when he wished. Mathews, his father-in-law, was an endorser for the firm, and has paid out $3,000. When he confessed judgment to his father for $51,000, he sup posed it was right then; but before settlement did not think he owed any thing. His father had said that, under the judgment, he would take all the assets of the firm to satisfy it. After Mr. Memminger had examined the accounts, he went to Mr. Mathews, and made a communication ot what Mr. Memminger had said, and asked Mathews to join him in the bond. That he alone went to Mathews, and made all the representations to him that were made; his father was not present, nor did he send any communication, but insisted on enforcing the judgment. The witness said he told Mr. Mathews that his father threatened to enforce the judgment, and that he claimed all the assets under it. He did not tell Mathews that his father was a secret partner, nor did he s^y to him he thought the judgment bad. He induced Mr. Mathews to take an assignment, as the best wa.y of indemnifying himself against liability.
Mr. Mazyck was going through a minute examination of the books of the firm, with a view of ascertaining what had become of the proceeds, when the presiding Judge said, if there was no further evidence of misrepresentation and fraud, it was unnecessary, on the part of plaintiff, to take up more of the time of the Court. Upon this suggestion, the counsel went to the jury, and argued the case at great length. His Honor remarked to the jury, that they had heard the case, and had jurisdiction over it; but he said, he saw nothing which, in his opinion, would authorize a verdict for the defendant. Without leaving their box, a verdict was rendered for the plaintiff.
The defendant appealed on the following grounds;
1st. That under the circumstances of the case, all the representation that could rationally be contemplated in the recent decree of the Court of Appeals, must be contained in the sup-pressio veri of the fact that plaintiff was a secret partner; it being entirely analogous to the fraud committed in the suppression oí the fact of unsoundness in a horse, or negro.
2d. That it was the duty of James Smith Colburn, before the sale of the judgment to William Mathews, the confidential endorser of the firm ofB. P. Colburn & Co., to inform him of his secret copartnership in that firm, and his concealment of that fact itself was a fraud.
3d. That defendant, in proving that fact, proved all that could be required, inasmuch as in itselfit rendered the judgment valueless to him; because, under the circumstances on which it was taken, it would not be good against creditors, and its presumed availability against creditors was, and could be, the only inducement for defendant to purchase it.
4th. Because every judgment entered up in due legal form, on its face holds out presumptive evidence oí being bona fide, and it would be absurd to require that the seller thereof should go and inform a purchaser that he has not transacted a secret fraud in procuring it; the purchaser is already imposed on by the suppressio veri, which, under such circumstances, is fully equivalent to the suggeslio falsi, for all the purposes of fraud.
5th. Because his Honor erred in charging the jury, that: there was not evidence before them to warrant a verdict for defendant.
6th. Because his Honor erred in charging the jury, that they were not to consider the evidence which had been given as relevant to the issue, and refused to permit defendant to go into further proof corroborating the same.
7th. Because his Honor erred in charging the jury, that they were bound at all events to find for the plaintiff, thereby stripping them of all discretion over the issue.
8th. Because the charge of the judge and verdict of the jury, were otherwise contrary to law and evidence.
9th. Because his Honor, the presiding Judge, totally misapprehended the facts of the case, charged the jury, and rejected the testimony under a false impression, and therefore deprived the defendant of a fair trial of the issue.
Rhett, for the motion.
When fraud is pleaded, the plaintiff may demur and go to equity, or go to trial before the jury; Chew v. Moffet and Wife, 6 Munford, 122 and 123. Going to the jury waives the estoppel. Usually, you cannot go into the consideration of a sealed instrument. The judgment was not such as it purported to be, when sold to Mathews. It is good between the parties, but fraud has been practised on Mathews in the sale of it to him. Colburn suppressed the fact of his being a secret partner, and liable on the notes which were endorsed by Mathews; thus depreciating pro tanto the value of the judgment This judgment was sold to Mathews before the execution of the paper called a dissolution. Wyche v. Macke], 2 Randolph, 427. Joining issue waives the right of estoppel.
Hayne, contra.
There was no privity between young Col-burn and the elder, or Mr. Mathews. The act of selling the judgment, was the act of young Colburn, and his the fraud, if any. J. S. Colburn was not a partner.
Walker, contra.
There is no implied warranty in the assignment of a noil-negotiable security; 2 N. & M’C., 28G; 1 Hill, 58. The party would be bound only by an express warranty, which was not made in this case. B. P. Colburn was the agent of Mathews, and knew or must have known that J. S. Colburn was a partner, therefore no deception; 4 T. B., 60. One may be a partner in profits, and not entitled to the corpus of the property or assets; 1 Camp., 330; 2 Hen. Blackstonc, 590; Story on Partners, section 32. As to the property of the firm, J. S. Colburn was a stranger, and could take no lien on it. Ostensible partners bind the firm; and in this case they give a lien to the dormant partner; Story on Partners, sec. 358, page 509. The assignment was good as to all the three partners, and placed Mathews in a better situation than all the creditors. A dormant partner may, or may not, be joined as defendant; Story on Farmers, sec. 241, note, do. 360. The action should have been case, for deceit, if the fraud alleged really existed; 1 Chit, on Plead., 157.
Yeadon, for the motion.
Citing 6 Munford, 328, and 6 Randolph, 426. We should have been allowed to go into evidence of fraud. The judgment was itself a fraud on the creditors of the firm. It is for some 851,000, when, it is allowed, only some 812,000 were due. This judgment was good between the parties, but a fraud as to third persons.

Opinion:
O'Neall J.
delivered the opinion of the Court.
The idea attempted by the zealous counsel for the defendant, to be enforced in their first four grounds, is, that in this case there was an implied warranty on the sale of the judgment. For without a warranty express or implied, there could be nothing to affect the plaintiff in the suppressio veri, to which the grounds allude. That in the sale of an unnegotiable security, there is no'implied warranty of either its goodness or money value, is too plain a proposition to require law to sustain it.
The former opinion of the Court, sent this case back that another trial should be had, so that if there were any fraud committed by Colburn in the sale of the judgment, and obtaining the bonds, it might be elicited. It is plain now, as it was before me, that there was no fraud in that respect, and that in truth the whole effort on the part of the defendant was to show that the judgment against B. P. Colburn and Mordecai, as the firm of B. P. Colburn & Co., ought in part to embrace James Smith Colburn as a dormant partner, and the defendant, Mathews, had been deceived in buying it, as he supposed James S. Colburn was not a partner, and that this security would be important to his (Mr. Mathews) indemnity, as an endorser of the firm. Stating the defence in this way, it is difficult to say what it is. The defendant has a valid subsisting judgment, and which was a legal lien upon ali the assets of B. P. Colburn & Co. Pie has therefore the very indemnity which he expected, and may for aught we know have been repaid under and by it, dollar for dollar, all his liabilities. One thing is very certain, the assignment to Mathews enabled B. P. Colburn and Morde-cai, with his assent, to compound with their creditors at 50 cents in the dollar, to receive the assets of the firm, and finally to sell to a new firm all the stock. After this, it is a rather late idea to talk about fraud. But I confess, I never could see fraud in the fact, that two partners confessed judgment to a third. He may have been their creditor, and therefore the judgment right. This appears from Mr. Memminger's testimony to be the case here. Notwithstanding the judgment, the partner, in whose favor it was confessed, might be liable to creditors. The great burden however, of the defendant's complaint, is, that the Judge below refused to permit him to offer more proof. But this is an allegation not sustained by the report. The Judge, very properly, stopped the plaintiff's attorney from examining in reply to evidence, which, in his and our opinion? could not have established fraud, saying to him, if there were not further evidence of misrepresentation, it was unnecessary to take up more time of the Court. On this hint, the defendant's attorneys went to the jury. There was no testimony in their favor, beyond what they had offered, except as the 6th ground says in corroboration. But of what value was it to add testimony to that which could not affect the case?
We agree with the Judge below, that there was nothing in the proof which could, in any way or shape, prevent the plaintiff from having a verdict. It was therefore his duty to tell the jury, that in his judgment there was nothing in the case which could justify them in finding a verdict for the defendant.
The motion is dismissed.