Case Name: Samuel Cohen, Appellant, v. Nathan Miller et al., Respondents
Court: New York Supreme Court, Appellate Term
Jurisdiction: New York
Decision Date: 1904-12
Citations: 46 Misc. 106
Docket Number: 
Parties: Samuel Cohen, Appellant, v. Nathan Miller et al., Respondents.
Judges: 
Reporter: New York Miscellaneous Reports
Volume: 46
Pages: 106–109

Head Matter:
Samuel Cohen, Appellant, v. Nathan Miller et al., Respondents.
(Supreme Court, Appellate Term,
December, 1904.)
Power of partner to borrow money and execute chattel mortgage — Fraud cannot be shown under a general denial.
Copartners are liable for money borrowed by one of them on the firm credit, whether applied to the firm business or misapplied, and to secure such loan one partner, without consulting his co-partner, can execute a valid chattel mortgage in the firm name. Such transactions are within the apparent scope of copartnership business.
Semble, a partner defending the foreclosure of such chattel mortgage cannot, under a general denial, maintain that the mortgage was executed pursuant to a scheme to defraud him.
Weight of evidence considered.
Appeal by the plaintiff from a judgment of the Municipal Court of the city of New York, thirteenth district, borough of Manhattan.
Max Brown, for appellant.
Henry Kuntz, for respondents.

Opinion:
Gildersleeve, J.
The pleadings are oral. The complaint is "Action on chattel mortgage." The answer is a " general denial." The uneontradicted evidence shows that the two defendants were copartners, and that the plaintiff loaned to the defendant Wilk $200, and took a chattel mortgage on the partnership property executed in the firm name by Wilk alone. This action is to foreclose that mortgage. The defendant Miller alone defended the action. The justice found for the defendant. The plaintiff appeals. Four witnesses were called for the plaintiff, and only one for the defendant, i. e., Miller himself. The plaintiff swears that he has known Miller for about five years, and Wilk for about twelve years; that one day in the middle of November, 1903, he and one Balofsky were playing cards with the two defendants, at defendants' place of business, when Wilk said he wished plaintiff would loan defendants $200, which request was repeated by Miller; plaintiff gave no positive answer; that a few days later Wilk said to plaintiff, " Cohen, will you lend me $200 ? " to which request plaintiff replied he would consider the matter; that still again Wilk asked plaintiff, " Did you make up your mind to give us the money ? " that plaintiff asked, " Where is Miller ? " and Wilk replied, " Miller sent me over to see you;" that plaintiff then said he would send a man to see if the property was sufficient security; that he did send one Meyer, who reported farvorably, and that he gave the $200 to Wilk, who gave him the chattel mortgage in.suit. One Balofsky is then called for plaintiff, and swears that he knew both defendants, and corroborated plaintiff as to the game of cards and the request of Wilk, in the presence of Miller, for the loan during the said game of cards, or shortly there after, at defendants' place of business in November, 1903. He contradicts bimself somewhat as to the details of that interview. The next witness is one Meyer, who swears that he examined the property of defendants, at the request of plaintiff, and had a talk with Wilk, but states that he did not speak to Hiller. The plaintiff and these two witnesses appear to have known Wilk a long time. The next witness is Wilk himself, who corroborates the testimony of plaintiff as to the game of cards, and states that he made-the request for a loan of $200 after the game was finished, and that Hiller said, " It would be a good thing;" that after the loan had been made and the mortgage given he gave $100 of the sum so loaned to Hiller and kept the other $100 himself. The plaintiff then rested his case, and Hiller was called as a witness on his own behalf. He denied that he received the $100 from Wilk, or that he authorized the mortgage, or -that he had any knowledge of the loan or mortgage until the marshal came to defendants' place of business with a warrant of attachment in this action. He also denied that the partnership needed this loan.
The justice appears to have given credit to the testimony of Hiller, and rendered judgment in his favor, as we have seen. We think this conclusion is against the evidence and against the weight of evidence, and that for this reason the judgment should be reversed.
But, even assuming the denials of Miller to be well founded, we find the facts to be, as shown by uncontradicted testimony, as follows, viz.: Wilk borrowed $200 from plaintiff, and gave a mortgage on the partnership property therefor, keeping the whole sum of $200 for himself, while Hiller knew nothing of said loan and mortgage until after the commencement of this action, but plaintiff understood; the loan was made to the firm. Whether or not there was any specific limitation in the articles of .copartnership upon the powers and authority of Wilk we do not know, as the said articles were not allowed in evidence. .We shall assume, therefore, that there was none, so far as the purposes of this appeal are concerned. All the members of a firm are liable, where money is borrowed by one of the partners, on the credit of the firm, whether applied to the business of the firm, or misapplied. 17 Wend. 47; 16 id. 505. One partner can, without consulting his copartner, execute, in the firm name, a chattel mortgage of the firm's property to secure a firm debt. 18 N. Y. St. Repr. 374; 17 Abb. Pr. 152.
The general rule is that one partner may bind the partnership to any transaction, within the apparent scope of the copartnership business, without the knowledge or consent of the other partner, so that a third party, acting in good faith, may recover against the copartners.
It is, apparently, the theory of the defense that plaintiff and Wilk had entered into a scheme to defraud Miller. But where is there any proof of bad faith on the part of plaintiff? The uncontradicted evidence, as we have seen, is that one partner borrowed money, ostensibly for the firm, and gave this mortgage executed by one partner in the name of both. This transaction was not without the apparent scope of the partnership business so as to call upon plaintiff to require the signature of both partners, especially as Wilk, whom he had known a long time, told him that " Miller had sent him over to see " plaintiff about the loan. Plaintiff, as we have pointed out, supposed he was loaning to the firm, and had no reason to suspect that Wilk was without authority to borrow the money or give the mortgage.
It is doubtful if the issue of fraud could be properly raised here, by reason of the answer. Fraud is a defense that should be pleaded, and the answer herein, as we have seen, is a general denial.
We think that under the proofs presented it must be held that plaintiff's mortgage has been shown to be a valid mortgage.
The judgment is reversed and a new trial granted, with costs to the appellant to abide the event.
Freedman, P. J., and MacLean, J., concur.
Judgment reversed and new trial ordered, with costs to appellant to abide event.