Case Name: Young & Thompson v. Wm. S. Read
Court: Supreme Court of Texas
Jurisdiction: Texas
Decision Date: 1860-10
Citations: 25 Supp. Tex. 113
Docket Number: 
Parties: Young & Thompson v. Wm. S. Read.
Judges: 
Reporter: Texas Reports
Volume: 25 Supp.
Pages: 113–118

Head Matter:
Young & Thompson v. Wm. S. Read.
The general rule is, that one partner cannot apply the partnership funds or securities to the payment of his own private debt; but he may do so with the consent of the other member of the firm.
Upon the issue, whether or not the partner who has used the partnership funds to pay his individual debt had the authority of the firm so to do, such partner is a competent witness.
The statute of 5th February, 1858, (Paschal's Dig., Art. 3754,) authorizes either party to a suit to. examine the other party as a witness. But this does not apply to a case where the interest of the party is balanced.
. [Note.—For the authorities on this statute see Paschal’s Dig., Note 857, p. 614.] Where there is conflict in the evidence upon the material question, the verdict of the jury will not be disturbed.
Error from Guadaloupe. The case was tried before Hon. A. W. Terrell, one of the district judges.
"Young & Thompson sued Read on an account. The petition charged that Thompson had acknowledged the payment and receipt of the account, in consideration of the receipt of Read for Thompson’s individual debt to him, which settlement the petition repudiated, and Young alleged the insolvency of Thompson. Read plead the general issue, payment, and a mutual settlement of accounts; also, that the settlement was made with Thompson, the active partner, and that the account was contracted with the understanding that it was to be paid by the board-bill of Thompson, and that, as a part of the settlement, he executed his note for the balance, $124 35. The petition was. amended, by Young averring that Thompson had sold him his entire interest in the partnership assets. The plaintiffs read their partnership contract; one article of which declared ‘ that in no event should the partnership assets be applied to the individual debts of either partner. The defendant, Read, swore that he contracted the account with the firm of Young & Thompson, with the express understanding with Thompson that it should' be offset by his board account; that he believed the fact was known to the other partner and all the clerks, because the account was not presented until the date of the settlement with Thompson. He admitted knowledge of a rumor that Thompson had run away before the settlement. There was proof that the partnership firm had paid some of the individual debts of Thompson. The defendant also proved, by Thompson, one of the plaintiffs, that he had settled the account with Read, and had entered the settlement upon the books, as he had other individual debts which he had paid, and that the books were examined by Young. The book-keeper oí the firm, witness for plaintiffs, proved the settlement, but stated that he had no knowledge of any understanding that the firm was to pay the account of Thompson for board; that he had told Read he had better settle his account with the firm; but when the matter was mentioned to Young, he objected to the offset, and said he should not permit it; and witness told Read that Young would not agree to the offset. Witness stated. that Thompson was not in the habit of settling his individual accounts upon the partnership books.
The court charged the jury that the settlement between Read and Thompson was not binding upon the firm, unless Young also consented to it.
When Thompson was offered, the plaintiffs objected, upon the ground that his evidence would go to discharge his individual liability to Read.
Verdict and judgment for defendant. The plaintiffs assigned for error, the overruling the objection to Thompson’s evidence, and the overruling the motion for a new trial.
J. P. White, for appellant.
—1. “ It is a well-settled principle, that one partner cannot apply the partnership funds and securities in payment of his individual debts, whether the creditor knew they belonged to the partnership or not.” (Goode v. McCartney, 10 Tex., 193; Powell v. Messner, 18 Tex., 402; Story on Partnership, § 132.) “And where the fact is once established, that the partnership security was given for the individual debt of one of the partners, then, under the American authorities, the creditor has to prove the assent of the other partners to 'hold them bound.” (Vide similar case, Evernghim v. Ensworth, 7 Wend., 326; also, Powell v. Messner, 18 Tex., 402; 16 John.’s Rep., 34; 12 Peters, 229; Story on Partnership, p. 202.)
2. Under the circumstances, was Thompson a competent witness as against his copartner, Young? We think not. It is a general rule, that, when the fact is once established that a partnership security has been taken in discharge of the separate debt of one of the partners, it is prima fade evidence of fraud as to the rights of the other partners and creditors of the firm, and the onus is upon the creditor or holder to repel every presumption of mala fides, fraud, collusion, misconduct, or negligence. (Story on Partnership, § 133, and Botes.) Instead of repelling this presumption, on the contrary, does not the evidence of Bead himself and of Bane establish, beyond controversy, that, at the time of the settlement, Bead knew of Young’s objection? And was not the settlement made in the very teeth of his (Young’s) expressed dissent? If, then, there was mala fides, fraud, or collusion, Thompson was a party to it, and the principal party. Could he be a competent witness, when “the witness proposed to be examined was the principal actor in the fraud complained of? To allow him to tell his own story in his own way, and to mislead the jury, perhaps, by an artful tale, would reflect little credit on the wisdom of the law.” (Tuttle v. Cooper, 5 Pick., 412; Robbins v. Willard, 6 Pick., 464; Bridge v. Gray, 14 Pick., 61; Jewett v. Stevens, 6 N. Hamp. Rep., 82; 2 Starkie Ev., (5th Amer. ed.,) 587, 25, Note 1.)
John Ireland, for the appellees,
argued the facts of the case. He insisted that Thompson was a competent witness, under the act of the 5th February, 1858. (0. & W. Dig., Art. 481; Paschal’s Dig., Art. 3754.)
That, as the defendant had the right to call either plaintiff or both to the stand, he might call Thompson, regardless of the fact that he had mortgaged or assigned his interest to Bead.
But that, if Thompson had no interest, which was denied, then his interest was equally balanced, as he would be liable over to the losing party. (Wright v. Nichols, 1 Bibb, 299; Douglass v. Holbert, 7 J. J. Mars., 2; Bennett v. McC., 1 B. Monr., 279.)

Opinion:
Bell, J.
—The main question presented is, whether or not Thompson, one of the partners composing the firm of Young & Thompson, was a competent witness for the defendant, Read, to prove the consent of Young, the other partner, to the settlement made between Thompson and Read. The general rule undoubtedly is, that one partner cannot apply the' partnership funds or securities to the payment of his own private debt. But he may do so with the consent of the other members of the firm. (Goode v. McCartney, 10 Tex. 193.)
In this case, the defendant, Read, undertook to show, in support of the settlement between Thompson and himself, that Young had authorized Thompson to make the settlement. We are of opinion that Thompson was a competent witness to prove the fact of Young's consent to the settlement with Read, inasmuch as he was called by the defendant, Read, and his interest in the result of the suit was balanced. If Read sustained his defence to the suit, then Thompson was indebted to the firm of Young & Thompson in the sum of $469 50, the amount of the partnership funds which he had used in the settlement with Read. If the firm of Young & Thompson recovered judgment against Read, then Thompson would he indebted to Read in the sum of $469 50.
The statute of February 5, 1858, (O. &. W. Dig., Art. 481,) authorizes either party to a suit to examine the opposing party as a witness. We think this statute cannot fairly be construed so as to make it applicable to a case like the present, where the partner, who is called by the adverse party to testify, is not incompetent on the ground of interest. We hav'e held, that a party to the record, whose interest is not balanced, cannot be called to testify, under the provision of the statute quoted above. (Gill v. Campbell, 24 Tex.)
We do not. think that the court below erred in overruling the motion for a new trial, on the ground that the verdict was contrary to the evidence. There was a conflict in the testimony, upon the question of Young's consent to the settlement between Thompson and Read; and the verdict of the jury was not without sufficient evidence to sustain it.
Young might have.made Thompson a defendant on the' record,' and thus have escaped the effect of his testimony; but, in the attitude which the case' presents, we are of opinion that the judgment must be affirmed; and it is ordered accordingly.
Judgment aeeibmed.