Case Name: The President, Directors and Company of the Mechanics Bank vs. Dexter Hildreth
Court: Massachusetts Supreme Judicial Court
Jurisdiction: Massachusetts
Decision Date: 1852-03
Citations: 9 Cush. 356
Docket Number: 
Parties: The President, Directors and Company of the Mechanics Bank vs. Dexter Hildreth.
Judges: 
Reporter: Massachusetts Reports
Volume: 63
Pages: 356–360

Head Matter:
The President, Directors and Company of the Mechanics Bank vs. Dexter Hildreth.
Two partners, subsequent to the filing of a petition by one of them, individually, for the benefit of the insolvent law, but prior to the first publication of notice, divided between themselves certain promissory notes, the property of the part nership, one of which, before such publication, was indorsed with the partnership name by the partner receiving it; and such indorsement was held to pass a valid title in the note, so as to enable a subsequent indorsee to maintain an action against the maker.
This was an action of assumpsit, brought to recover tht amount of a promissory note, bearing date August 31,18 Ml, signed by the defendant, for the sum of $500, payable in nine months from date, to Hall & Lane, or order, and indorsed by them and A. B. Hall, to George W. Chipman.
At the trial in the court of common pleas, the plaintiffs proved the handwriting of the several indorsers on the note It was in evidence that Jeremiah S. Hall and Edwin J. Lane, of Lowell, dry goods dealers and copartners, under the firm of Hall & Lane, sold, on the 31st of August, 1849, all their stock of goods to the defendant, who is of Lowell, a grocer, and took therefor six notes, including the note in suit, five for $500 each, and one for $509.70. Thereupon the notes were deposited in the hands of A. W. Farr, the attorney who transacted the business, to be held by him until it should be ascertained whether the creditors of Hall and Lane would undertake to invalidate the sale, and take the stock of goods out of the defendant’s hands. Afterwards, the defendant transferred and delivered the stock of goods to Daniel West, of Lowell, and West gave the defendant a bond, to indemnify him against the notes. After receiving the bond, and upon the fourth day of October, 1849, the defendant told Farr, who held the notes, that he might deliver them to Hall & Lane, and that they and West might settle the matter together. Accordingly, Farr, in the evening of the 4th of October, 1849, gave four of the notes to Hall & Lane, who immediately divided them between themselves, each taking two as his share and property. Hall received the note in suit as one of his; and there was evidence that Hall & Lane, immediately on going out of Farr’s office, gave to each other authority to use the firm’s name in transferring the notes. Of the other two notes, one was, by the consent of all the parties thereto, given up to West, and the other had been reduced by indorsements, and afterwards, by consent of all the parties thereto, on the 4th day of October, 1849, transferred.
The day before this division, to wit, on the 3d of October, 1849, Edwin J. Lane, filed his petition for the benefit of the insolvent law, and the warrant thereon against his joint and separate estate was duly issued and put into the hands of the messenger, on the 4th day of October, and the messenger, just after the division of the notes as above mentioned, demanded them of both Hall and Lane. The first publication of the notice of Lane’s insolvency was in the afternoon of October 6; and such further proceedings were had in insolvency, that the joint and separate property was assigned to W. P. Webster, assignee.
There was evidence that, on the 5th or 6th day of October, but before the first publication of the notice of Lane’s insolvency, Jeremiah S. Hall went to Boston, and indorsed the note in suit with the name of Hall & Lane, and endeavored to sell it in State street, but without success; and, on the same day, and before such first publication, he made an agreement for the sale of it to A. B. Hall, which was afterwards, on the 12th day of the same October, carried into effect, and the money paid for it, and the note delivered to A. B. Hall, who afterwards sold the note to Chipman, who got it discounted by the plaintiffs. There was conflicting evidence as to the time when Jeremiah S. Hall indorsed the name of Hall & Lane on the note in suit. The plaintiffs received it from Chipman, and discounted it in the regular course of business, and were the bond fide innocent holders of it.
The note in suit was indorsed with the name of Hall & Lane in blank; and the plaintiffs, at the trial, before putting the note in evidence, asked leave to write over the name of Hall & Lane the words, “without recourse,” which the presid ing judge, Mellen, J., as all the indorsers consented, allowed tc be done. To this allowance the defendant excepted.
The defendant requested the judge to instruct the jury that the partnership of Hall & Lane was dissolved by the proceedings in insolvency ; and that, on the 6th day of October, the property in the note in suit was so changed that, after that day, Hall could not negotiate the note in the name of the firm; and that, although the name of the firm was written on the back of the note by J. S. Hall, on the 5th day of October, yet if it was negotiated in the name of the firm before the 12th of October, it could not be negotiated by him alone.
The judge instructed the jury that, if they were satisfied, on the evidence, that the plaintiffs took the note before it became due, for a valuable consideration, in the usual course of business, and without notice, they would not be affected by any transactions between the antecedent parties ; that the copart-nership of Hall & Lane was dissolved from and after the first publication of the notice of Lane’s insolvency; and that, after that date, Hall could not indorse the note in the name of the firm; and such indorsement, if so made, would be void, and, as the plaintiffs must derive their title through it, they could not recover. But if the indorsement was in fact made before the first publication of the notice of Lane’s insolvency, the plaintiffs might recover, although the note was put in circulation after the publication; that the authority to indorse the note, whether implied by the division of the property between Hall and Lane, or given expressly by one to the other, was revoked by the dissolution of the partnership.
The jury having returned a verdict for the plaintiffs, the defendant excepted to the above rulings.
H. F. Durant, for the defendant,
cited Blakely v. Grant, 6 Mass. 386; Dana v. Underwood, 19 Pick. 99; Peaslee v. Robbins, 3 Met. 164; St. 1838, c. 163, § 21; Arnold v. Brown, 24 Pick. 89 ; 3 Kent’s Com. 58.
B. F. Brooks, for the plaintiff,
cited Clarke v. Minot, 4 Met. 346 ; Briggs v. Parkman, 2 Met. 258; Yale v. Fames, 1 Met. 486; Sweetser v. French, 2 Cush. 309; Wheeler v. Guild, 20 Pick. 545.

Opinion:
Bigelow, J.
The single question upon which this case turned at the trial was, whether the plaintiffs had shown a valid title to the note in suit. They claimed to recover as indorsees, by a title derived through the indorsement of Hall & Lane, who, as copartners under that name, were payees of the note. The main ground of defence was, that the indorsement of the name of the firm was put upon the note after the dissolution of the copartnership, caused by an application of one of the firm, individually and not as copartner, for the benefit of the insolvent laws, and by the publication of the messenger's notice of the commencement of such insolvent proceedings; and that, therefore, no title to the note was passed by such indorsement, upon the familiar and well-settled rule of law, that, after the dissolution of a copartnership, in the absence of any special authority, one partner cannot indorse negotiable paper in the name of the firm.
We consider it unnecessary to go into a consideration of the question, which was very fully and ably discussed at the argument, whether a note, on which the name of the firm was indorsed before dissolution, but which was actually negotiated and put into circulation after the dissolution, by one of the copartners, without the authority of the other, passes by a good title to the indorsee; because, upon the facts stated in the bill of exceptions and found by the jury, we are of the opinion that a perfect title to the note was vested in one of the copartners, individually, before the dissolution, and before he negotiated it to the plaintiffs. It appeal's that the copart-ners, payees of the note, a month prior to the fourth day of October, 1849, had sold to the defendant their stock in trade, for which they took in payment six promissory notes. Four of these notes, by an agreement between the two copartners, subsequently made, were divided between them, each copart-ner taking two as his individual property. Hall, one of the copartners, received the note in suit, under this arrangement, as his own property. These facts seem not to have been in dispute between the parties at the trial. The question as to the time when the indorsement of the name of the firm was made on this note, was contested at the trial, and the 'ury have found that it was, in fact, indorsed before the publication of the messenger of the notice of the insolvency of the other copartner, and, consequently, before the dissolution of the copartnership thereby.
We have, then, this state of facts, admitted or found by the jury. Two copartners, during the continuance of the copartnership, agree to divide, and do actually divide, the joint property of the firm between themselves, each taking his share as his own individual property. This they had the legal right and power to do. Collyer on Part. § 174. Having the right to make such division of the copartnership effects, and having exercised it by dividing the notes among themselves, it follows, as a necessary consequence, that, while the copartnership continued, each copartner was fully empowered to do all that was necessary, in the name of the firm, to carry the division into effect, and to vest the title to the partnership property in .themselves individually. While the copartnership continued, there could be no doubt of the power of one copartner to indorse a note in the name of the firm to a thud person; and when it is agreed between the copartners to make it the separate property of one of the firm, he has the same authority, prior to the dissolution, to indorse it in Hie name of the firm, for the purpose of vesting a valid title thereto in himself.
The jury having found, that the indorsement on the note in suit was made before the dissolution of the firm, caused by Lane's individual application for the benefit of the insolvent laws, and it being admitted that such indorsement was made in pursuance of a valid agreement between the copart-ners, for a division of the four notes taken by them in payment for their stock in trade, it follows that thereby a good title to the note in suit was vested in Hall, so that he had a right to transfer it to the plaintiffs, who now hold it by a valid title derived through him. It is not, therefore, the case of a note put in circulation for the first time, upon its transfer by Hall to his indorsee, but that of a note first passed by a firm to one of its members, as indorsee for value, and by him negotiated in the regular course of business.
Exceptions overruled.