Case Name: THOMAS J. FISHER Et Al. vs. FRANK HUME and JAMES K. CLEARY, Surviving Partners of HUME, CLEARY & CO.
Court: Supreme Court of the District of Columbia
Jurisdiction: District of Columbia
Decision Date: 1887-07-11
Citations: 6 Mackey 9
Docket Number: No. 23,276
Parties: THOMAS J. FISHER Et Al. vs. FRANK HUME and JAMES K. CLEARY, Surviving Partners of HUME, CLEARY & CO.
Judges: 
Reporter: Reports of cases argued and determined in the Supreme Court of the District of Columbia (District of Columbia - reported by Mackey)
Volume: 17
Pages: 9–20

Head Matter:
THOMAS J. FISHER Et Al. vs. FRANK HUME and JAMES K. CLEARY, Surviving Partners of HUME, CLEARY & CO.
1. The rulings of this Court in Bank vs. Hume, 4 Mackey, 90, approved and applied in this case.
2. It does not follow, when one borrows money declaring that he intends to use it in the business of, or for the benefit of, the firm of which he is a member, that he borrows it upon the credit of the firm; he may well borrow, and the creditor may naturally deal with him, with exclusive reference to his individual credit; and if such be the case the firm cannot be held liable.
3. On appeal to the General Term from a refusal of the Court below to grant a new trial on the ground of the insufficiency of the evidence, the case ought to be a very strong one to induce a reversal of the action of the trial court.
At Law.
No. 23,276.
Decided July 11, 1887.
The Chief Justice and Justices James and Merrick sitting.
Motion by plaintiffs for a new trial on bills of exception.
Action on a promissory note. .The trial resulted in a verdict for the defendants.
The Case is stated in the opinion.
Messrs. Morris & Hamilton, for plaintiff's:
The indorsement by Thomas L. Hume of the firm name without the authority of the other members of the firm, or even his indorsement of the firm name in violation of an express agreement or understanding to the contrary, would not affect the note, unless it was shown that knowledge of such want of authority or agreement was brought home to the plaintiffs. Michigan Bank vs. Eldred, 9 Wall., 544.
Giving the testimony of the defendants its full force and effect, it fails to show that the note in suit was originally infected with such fraud or illegality as to cast upon the plaintiffs the burden of showing the circumstances under which they became the holders of said paper. Comrs. of Marion Co. vs. Clark, 94 U. S., 285.
Admitting that the testimony of the defendant was sufficient to infect the note with fraud and illegality, and sufficiently brought home to the knowledge of the plaintiff's, its only effect was to throw upon them the burden of showing that they are holders for value. Fisher vs. Hume, 4 Mackey, 90; Collins vs. Gilbert, 94 U. S., 760-1.
Messrs. W. D. Davidge and Hiñe & Ti-iomas, for defendants :
Any agreement between the partners of Hume, Cleary & Co., that neither partner should use the firm name for individual purposes, was inoperative against persons having no notice of it. Greenleaf vs. Birth, 5 Pet., 135 ; Phillips vs. Preston, 5 How., 288.
The Court was not bound to grant the plaintiffs instructions in the form and language in which they were asked. R. Co. vs. McCarthy, 96 U. S., 258.
The law of the case is correctly stated in the two prayers granted at the request of the defendants.
The defendants’ first prayer submitted to the jury the question whether the plaintiff’s received the note in suit in the usual course of business, without notice that the loan was for the individual benefit of Thomas L. Hume, the theory of the defense being that they did not so receive it.
It was for the jury to decide whether the paper was acquired by the plaintiffs in the usual course of business or was taken on account of the private indebtedness of Thomas L. Hume.
It is a fundamental principle in the law of partnership that the authority of each partner to dispose of the partnership funds and effects, or to use the partnership name, extends only to the partnership business. If partnership securities, funds, credits or effects are taken from one partner without the previous knowledge and consent of the others, for a debt which the creditor knew at the time was the private^ debt of the particular partner whether that debt was created at the time or has antecedent existence, all the authorities concur in holding such transaction to be fraudulent, and, therefore, clearly void in respect to the partnership. 3 Kent, Com. 42; Shirreff vs. Wilks, 1 East, 48; Ex parte Bonbonus, 8 Ves., 540; Rogers vs. Batchelor, 12 Pet., 221; Livington vs. Roosevelt, 4 Johns., 251; Story, Partn.’, sec. 132; Parsons, Partn., p. 116, 2d ed; Pollock, Dig. Law of Partn., p. 40.
It is true the presumption of fraud or mala fides in such case is never absolute or conclusive. It may be rebutted by proof of the authority given by the other partners, or of their knowledge and consent, or their ratification of the transaction; and this may be inferred from the usual mode of conducting the business, or the special circumstances of the case, if sufficient to raise a fair and reasonable implication of such authority. The burden of proof, however, is upon the party dealing with the partner, in respect to their separate affairs, to show circumstances sufficient to repel every presumption of. fraud, collusion, misconduct or negligence on his part as against the partnership; and if he fail in this, the transaction by which the funds, securities, credits, or effects of the partnership have been obtained will be treated as a nullity. Story, Partn., sec. 132, 133, and authorities cited; Williams vs. Brimhall, 13 Gray, 462, 467.
In Rogers vs. Batchelor, 12 Pet., 221, Judge Story, delivering the opinion of the Court, said that “ The true principle to be extracted from the authorities is that one partner cannot apply the partnership funds or securities to the discharge of his own private debt without their consent; and without their consent, their title to the property is not diverted in favor of such separate creditor, whether he knew it to be partnership property or not.”
“ No one member of a firm can, without the consent of all of his copartners, bind them by making, drawing, accepting or indorsing a bill or note for his private debt; and the creditor who receives such an instrument, or the indorser who takes it, with notice of the consideration, cannot re cover upon it. In order to recover, the party who took the paper from the partner for his private debt must prove the assent of all the copartners to his act.” Dan. Neg. Inst. sec. 366 ; also sec. 365 :
“ No one member of a firm can bind it without the consent of all its members, by signing the partnership name as drawer, maker, acceptor or indorser of a negotiable paper for the accommodation of a third party, for the obvious reason that such a transaction is not within the scope of copartnership business, unless expressly or impliedly made so, and would ordinarily be without authority and in fraud of the firm.
“ If it appears on the face of the bill or note that it was signed by a partner in the name of the firm as surety, this will be notice to the world that it was not given in course of partnership.
“ When a bill or note is carried by the drawer or maker to a bank to get it discounted on his own account, and it bears the name of a firm which is payee indorsed thereon, the transaction shows on its face that it is accommodation paper, and the bank must prove the copartners’ assent to bind them.”
And to the same effect:
Fowler vs. Brantly, 14 Pet., 318; West St. Louis Savings Bank vs. Shawnee Co. Bank, 95 U. S., 558; Angle vs. North Western Mutual Life Ins. Co., 92 U. S., 342; Nat. Bank vs. Law, and Nat. Bank vs. Savery, 127 Mass., 72, 75.
And when it is shown that the firm name was signed by a partner, not in the usual course of business but for his private benefit, the burden of proof is upon the holder to show that he acquired the paper in the usual course of business, for value, and under circumstances not affecting him with notice of the fraud.
Bank of St Albans vs. Gilliland, 23 Wend., 311; Bank of Vergennes vs. Cameron, 7 Barb., 143; Munroe vs. Cooper, 5 Pick., 412; Hart vs. Potter, 4 Duer (N. Y.), 458; Hogg vs. Skene, 34 L. J. N. S. C. P., 153; Chitty, Bills, 442; Edw. Bills, 105, 106; Byles, Bills (Sharswood), 47 and authority cited in note o; 1 Dan. Neg. Inst., sec. 369; Mercein vs. Andrus, 10 Wend., 463; Gansevoort vs. Williams, Joyce vs. Williams, and Wilson vs. Williams, 14 Wend., 134, 141, 147.
In the present case it must be inferred that the indorsement was in fraud of the firm.
There is no pretense that the defendants assented, expressly or impliedly.
It was for the plaintiffs to prove that they took the paper for value in the usual course of business and without notice of the fraud. This is the question left to the jury by the prayers granted at the instance of the defendants.
The cases of Livingston vs. Roosevelt, 4 Johns., 251, 273; Tanner vs. Hall, 1 Pa., 418; Miller vs. Consolidation Park, 48 Pa., 516; Bank of Vergennes vs. Cameron, 7 Barb., 150 and Moorhead vs. Gilmore, hold that the form of the note, when the paper is received directly from the maker, is notice in law that the transaction was private.
On the other hand, Wait vs. Thayer, 118 Mass., 473; Nat. Bank vs. Savery, 127 Mass., 75; Redlon vs. Churchill, 73 Maine, 146 and Sherwood vs. Snow, 46 Iowa, 487, declare that the form of the note is not notice in law, but evidence to be submitted to the jury. The whole difference is between a presumption of law and a presumption of fact.
The language in Wait vs. Thayer is that the form of the note need not give rise to any conclusive presumption, and this case was followed in Redlon vs. Churchill. In the two cases of Nat. Bank vs. Savery the ruling below in the first case was that the form of the note was matter of fact for the jury and not conclusive, and was approved, and the ruling below in the second case, holding the form conclusive, was reversed.
In Sherwood vs. Snow the Court below held that the form of the note was’ conclusive, and this ruling was reversed; but the appellate court declared in terms that the form of the note was a circumstance which the jury should have been allowed to consider in connection with the other circumstances proved.
The whole controversy in all the cases has been whether the form of the note gave rise to an absolute presumption which could not be gainsaid, or only to a presumption of fact.
In Brown vs. Duncanson, 4 H. & McII., 350, the form of the note was left to the jury.
See also Union Nat. Bank vs. Underhill, 21 Hun., 178-183 ; St. Nicholas Nat. Bank vs. Savery, 13 Jones & S., 97.
The evidence was amply sufficient to sustain the verdict; the case has been elaborately and fairly tried, and the judgment should not be disturbed.

Opinion:
Me. Justice Mereicic
delivered the opinion of the Court:
This is one of a series of cases which has been instituted in this Court by the holders of promissory notes drawn by Thomas L. Hume and bearing indorsements in the names of Francis Hume and of the commercial firm of Hume, Cleary & Co., which firm was composed of Thomas L. Plume, the drawer of the notes, of Francis Hume, the first indorser, and of James K. Cleary. At the trial the making of the note by Thomas L. Hume, and the indorsement of the firm name thereon by said Thomas L. Plume, one of the firm, and the notice of protest were admitted, but the signature of Francis Hume as indorser was denied; and after exhibiting the note to the jury the plaintiffs rested. Thereupon the defendants offered the defendants Francis Hume and James K. Cleary as witnesses to prove that the alleged signature of Francis Hume as indorser was a forgery, and that the signature of the firm was made without the knowledge or consent of the defendants, and that Thomas L. Hume had no authority to indorse accommodation paper in the name of the- firm, and that no part of the money borrowed from the plaintiffs ever went to the credit of the firm, or was in any manner used for its benefit, and that Thomas L. Flume was largely engaged in private business outside the firm.
A large amount of testimony in minute detail was given in that connection, to all or nearly all of which the plaintiffs excepted by their first seven bills of exception, but without assigning any specific objections at the trial or in argument upon appeal.
' These exceptions may, therefore, all be disposed of by the observation that this Court decided in the case of Second National Bank vs. Flume, 4 Mackey, 90, that after the formal proofs of execution and notice of protest by the plaintiffs, the defendants are at liberty to show by such proof as may be properly left to the jury that the instrument was procured by fraud or was fraudulent in its inception, or that the consideration was illegal, or that it had been lost or stolen before it came to the possession of the holder, and that when this was done the burden of proof was shifted, and it then became incumbent upon the plaintiffs to show that they acquired the note bona fide for value, in the usual course of business, before maturity, and under circumstances that created no presumption that he knew of the existence of the facts that impeach the validity of the instrument.
It is obvious from the terms of this rule that the evidence offered by the defendants was entirely pertinent, and, in the absence of some specific objection, it was the plain duty of the Court to admit it to go to the jury. After the cause had thus far proceeded, the plaintiff, Thomas J. Fisher, was recalled to show in what manner and under what circumstances and for what value he became the purchaser or holder of the note. In the examination in chief he stated that Thomas L. Hume made application to him for the loan of $2,000; the statement he made was that his concern had some heavy payments to make that day, and that a great many of their best customers were out of the city, and they were.short of funds, and after some conversation he agreed to make the loan; that he had a check drawn to the order of Thomas L. Hume, and Hume then wrote a memorandum, due bill, or a check, he did not remember which; but the memorandum, due bill or check, was thrown into the drawer with the cash, and two or three days afterwards Hume brought a note signed by himself and indorsed, adding these words: " But the condition of the loan was that his brother Frank should indorse the paper by Frank Hume or his firm," and delivered it to me; and his check or due bill or whatever it was was surrendered.
The witness further stated that he knew that Thomas L. Hume was a member of the firm, that he had no knowledge except what he stated above of the purpose for which he wanted the money. He further testified that he knew the handwriting of Thomas L. Hume and knew that the firm name was subscribed to the note by him, but did not know anything about Frank Hume's handwriting. Being asked on cross-examination whether his agreement, at the time he made the loan and gave Thomas L. Hume his check, was that Thomas L. Hume was to come in a few days and give his individual note indorsed by Frank Hume, he replied: " I do not know that the agreement was that. No, I do not think there was anything further said on that subject. He was to bring in a note with Frank Hume's indorsement. It would have made no difference to me whether it was Flume, Cleary & Co. or Frank Hume. I do not think we discussed that; the only discussion about it was that it was to have Frank Hume's indorsement; " and in answer to succeeding questions the plaintiff said that nothing was said about the indorsement of the firm or about the paper of the firm, and that there was no discussion about the character of the note except that it was to have the indorsement of Frank Hume; and again recurring to his examination at a former trial of the cause the witness, further answering, said that 'all the security he exacted was that Thomas Flume should give a note indorsed by his brother, Frank Hume.
On re-examination, the witness stated that.he loaned the money to Thomas L. Hume for the benefit of the firm, according to his statement. There was some slight verbal variation in the form of question and answer in the course of cross-examination, re-examination and recross; but the shades of difference are too slight to be appreciable on a cold record, whatever influence, derived from manner or emphasis, may have been exerted upon the jury at the trial. It must strike the judicial mind from the circumstances and manner in which the loan was made, and from the hesitation of the plaintiff in declaring whether he gave any credit to the firm as a firm, or whether his whole thought was not the separate credit of the two individual men, Thomas L. Hume and Francis Hume, regardless of the credit of the firm, and in view of the rule of law above stated in respect to the burden which rests upon the plaintiffs after an impeachment of the honesty or legality of the instrument, that it was eminently proper to submit the whole case to the jury to determine, as a matter of fact, whether the holder of the paper at the time he made the loan was dealing with the drawer in his individual capacity, or was dealing with him as a member of the firm for the benefit of the firm; nor was the necessity for the submission disproved by the fact that Thomas L. Hume induced the plaintiffs to believe that he intended to apply the money for the benefit of the firm, and that he made that his sole pretext for asking the loan.
It does not follow when one borrows money, declaring that he intends to use the money in the business of or for the benefit of the firm, that he borrows it upon the credit of the firm. He may well borrow and the lender may naturally deal with him with the exclusive reference to his individuaj. credit. The motives and inducements of the lender are not the motives and inducements of the borrower because of the fact that the former is aware of the purposes of the latter. It follows from these premises that the Court was right in refusing to grant the sixth prayer of the plaintiffs, the object of which was to require the jury to find a verdict for the plaintiffs at all events.
It remains for us to consider whether the instructions which the Court gave to the jury were a full and sufficient guide to them in applying the law to the testimony which was submitted for their scrutiny. The Court granted with very slight verbal modifications the first, second and fifth prayers of the plaintiffs, and the plaintiffs' third in its original form, and rejected the sixth for the reason already suggested, and also rejected the fourth and seventh. The Court also granted the first and second prayers of the defendants.
By the plaintiffs' first prayer the jury was instructed that if the plaintiffs' received the note in good faith for value, in the' usual course of business, and without knowledge or notice that the note was made and indorsed by Thomas L. Hume in the firm name for his individual purposes and benefit, or without the authority or assent of the defendants, they should find for the plaintiffs, notwithstanding they might find that, under the partnership agreement, Thomas L. Hume had no authority to make said indorsement of the firm name. By the second, they were instructed that neither the form of the note sued on nor the fact that the indorsement of the firm name was written by Thomas L. Hume, nor the form of the check for the money loaned, indicated as a matter of law that the transaction was 'for the individual benefit of the maker of the note, nor as matter of law imputed notice or knowledge of such purpose to the plaintiffs. By the fifth, the jury were advised that if the plaintiffs had neither knowledge nor actual notice, at the time of the loan, or of the making the note, that Thomas L. Hume was acting in fraud of the copartnership, the plaintiffs were entitled to recover, although they may have acted without care or caution. The fourth prayer was properly rejected, because it was embraced in the second prayer as modified and given by the Court. The seventh prayer was properly rejected because it omitted the important element of knowledge by the plaintiffs, of the want of authority in the drawer to use the firm name for. his private purposes, and seemed -designed to impress the jury with the idea that a member of a firm has the power to use the firm name for all purposes.
The two prayers granted at the instance of the defendants were to the effect that if the money was obtained for individual purposes the burden of proof was thrown on the plaintiffs to show that they had no notice of such purposes; and, secondly, taken in connection with the plaintiffs' second instruction that the form of the note and check were circumstances, although by and of themselves raising no presumption, which might be taken into account'with all the other facts and circumstances in determining whether the plaintiffs had knowledge of the infirmity of' the transaction.
It seems to us that in all these rulings the Court followed strictly the principles laid down in the case of Second Nat. Bank vs. Hume, 4 Mackey, 90, and that, especially by the fifth instruction, the case was placed before the jury in a way as favorable to the plaintiffs as it could have possibly been put; for the jury were in that instruction explicitly told that want of care or caution on the part of the plaintiffs would not defeat their right of recovery; that nothing short of actual notice or knowledge of the fraud perpetrated upon the partnership would suffice to that end.
Now, all of the instructions being in conformity with law, and the case being of the character peculiarly appropriate for a jury's estimate of the value to be assigned to the plaintiff's testimony, this Court does not feel at liberty to grant a new trial upon any of the reasons assigned for the motion, which were considered and deemed insufficient by the Circuit Court.
We may be permitted to say, further, that although the Supreme Court of the United States has declared (Metropolitan R. R. vs. Moore, 121 U. S., 558) that an appeal lies to this Court from a refusal to grant a new trial in cases which heretofore were regarded as addressed exclusively to the sound discretion of the trial justice, and, therefore, not appealable yet we are of opinion that the case ought to be a very strong one in which an appellate tribunal would assume the responsibility, deprived as they are of the advantage of the personal presence of the witnesses — an advantage so great that it is secured to the parties at the trial before the jury as an almost sacred right. And, indeed, the following extract from the opinion of the Supreme Court fully sustains this view:
" It is quite true, nevertheless, that the judge sitting at special term on the trial of a cause by a jury is, from the nature of the case, better qualified, because he sees the witnesses and hears them testify, to judge whether the verdict is warranted by the evidence, than other judges,'even of the same Court, upon a report of the testimony in writing; and where the question comes up in General Term on an appeal, all proper allowances will be made in its consideration for that difference, and its due weight given to the order of the judge at special term denying the motion."
A new trial is refused, and the judgment is affirmed.