Case Name: Berryhill's executors vs. M'Kee's executors and Greenway
Court: Tennessee Supreme Court
Jurisdiction: Tennessee
Decision Date: 1839-12
Citations: 1 Hum. 31
Docket Number: 
Parties: Berryhill’s executors vs. M’Kee’s executors and Greenway.
Judges: 
Reporter: Tennessee Reports
Volume: 20
Pages: 31–37

Head Matter:
Berryhill’s executors vs. M’Kee’s executors and Greenway.
Ramsey executed a note to Campbell, payable at the branch bank of the State of Tennessee; Campbell endorsed the note, Berryhill endorsed the note in the style of the firm of Berryhill and M’Kee. The bank to ok the note in the fair course of trade, without notice of the circumstances under which it was made; ¿judgment was recovered in a codrt of law against the maker and Campbell, and against Berryhill, M’Kee and Greenway, who were accommodation endorsers. Berryhill discharged a large portion of the judgment and filed his bill for contribution: Held, that this accommodation endorsement, in a question between the partners, was not binding on M’Kee and Greenway, and that the judgment obtained by the bank furnished no evidence of the liability of M’Kee and Greenway.
An acknowledgment made by Greenway after the dissolution could nOf dffect the rights of M’Kee, nor would the expression of an opinion that he was liable to the holders of the note affect the question between himself and Berryhill.
On the 26th day of November, 1825, William Berryhill filed a bill in the district court of chancery at Franklin against William M’Kee, Edward M, Greenway and Ephraim H; Foster. The defendants acknowledged service of the bill. On the 4th day of September, 1826, Greenway filed his answer, and on the 6th day of December, 1826, M’Kee filed his answer. At the January rules, 1828, the complainant filed a general replication to the answers of M’Kee and Greenway, and Foster having failed to answer, the bill was taken pro confesso and set for hearing ex parte as to him.
The facts are substantially as follows: Berryhill, a citizen of Nashville, and M’Kee and Greenway, citizens of Abing-don, Virginia, entered into articles of agreement for the purpose of carrying on in partnership the business of merchant dizing in the town of Nashville. This association wag formed on the first day of January, 1816, under the firm style of Berryhill and M’Kee. The provisions of this agreement under the seals ot parties, so tar as it is material here to state foem> were, that the partnership should continue “for arid during the term of seven years from the above date,” and that Berrryhill should be the active partner; “that is to say, he will transact all the business of the concern, such as purchasing the goods, attending to the sales thereof, keeping the books, attending to the collection of the debts, and in fact devote the whole of his attention to the business of the concern, and conduct it in the best manner which his abilities and judgment may dictate.” Berryhill agreed to furnish a standing capital of five thousand dollars; M’Kee and Green-way agreed to furnish each a standing capital of six thous- and five hundred dollars; and the expenditures were to be charged to the joint account of the firm. M’Kee and Green-way .also agreed to furnish five hundred dollars more at the end of six months, and in the event that at that time the capital engaged should be “found insufficient, and it should be convenient for both parties to increase it, they will apportion the increase as five to seven, it being the interest of all parties to make the business profitable and respectable.” On the dissolution of the partnership, at the expiration of seven years, “the original capitals were to be refunded, and in the event of a profit, that profit should be divided into two equal parts, one half assigned to Greenway and M’Kee and half to Berryhill, and in the event of loss that loss should be sustained in similar proportions.”
Under this article they commenced business in the town of Nashville. Complainant alleges in his bill that in the year 1820, “Thomas Ramsey, a merchant of Nashville, reputed wealthy and respectable, agreed to furnish the firm of Berryhill and M’Kee with twenty thousand bushels of salt, to be sold by them on commission, for which they were to be allowed five per centum on the proceeds of sales. During the time said Ramsey was delivering salt to said Berryhill and M’Kee under said contract, said Ramsey presented a note, drawn by him in favor of William Campbell and by him endorsed and payable at the branch bank of the State of Ten nessee at Nashville, for five thousand dollars, and requesting the firm of Berryhill and M’Kee to endorse it, stating that was a stock note, that ins other endorsers were out ox town, and that he would not trouble them again to endorse it. Said Ramsey having occasionally endorsed for said Berryhill and M’Kee previously, and believing that they would have á large fund of said Ramsey’s in their hands under the salt contract^ they éndorsód thé note.” Ramsey failed to comply with his contract for the delivery of the salt, removed- to Alabama and died insolvent. Campbell also became insolvent. Green, who also endorsed the note at a renewal, also became insolvent. On the 8th day of October, 1822, the partnership was dissolved by an article of agreement, and the partnership effects placed in the hands of Ephraim H. Foster for the settlement of the debts of the establishment, as the trustee of the parties, and for the purpose of restoring the capital invested and apportioning the profit or loss to each respectively as the profit or loss of the concern should render just. On the 31st day of July, 1823, the State bank recovered a judgment against Campbell, Green, Berryhill, M’Kee and Greenway in the county court of Davidson county for the sum of three thousand and thirty-five dollars and thirty-three Cents, the balance of the note above mentioned for five thousand dollars. On the 7th April, 1824, Campbell paid five hundred dollars on the judgment, and Berryhill five hundred. On the 15th January, 1825, Berryhill made a further payment of four hundred and eighty-five dollars and sixty cents. It does not appear that at the dissolution of the partnership on the 8th October, 1822, Berryhill communicated to M’Kee or to Greenway the facts in regard to the liability for Ramsey, but on the 11th day of January, 1823, Green way, in a letter to Berryhill, used the following language: “I regret extremely to hear by yestei'day’s mail that we are to sustain so serious a loss by your endorsement for Ramsey, and the whole is likely to fall upon the concern.” Foster, not regarding the debt due to the Bank as a debt of the establishment] for Twhich the funds in his hands were intended, refused to pay back to Berryhill any portion of the monies he had paid out on the judgment, or to discharge the baldncd of the judgment, or any portion of it.'
Complainant prayed in his bill that Foster, the trustee, should refund to him the sum of one thousand dollars, advanced by complainant, and that he should discharge the balance of the judgment obtained by the bank with the partnership funds.
Greenway and M’Kee, in their separate answers, declare that they had instructed Foster not to pay the judgment obtained by the bank with the partnership funds in his hands; that they knew nothing of the facts and circumstances alleged in the bill as being connected with the endorsement for Ramsey; that they were wholly ignorant of that endorsement for the accommodation of Ramsey at the time it was made; that the said endorsement was made without their consent, and “was an unauthorized and improper use of the name and responsibility of the said firm of Berryhill and M’Kee;y that they did not admit that there was any custom in the town of Nashville for one merchant to endorse for another; that it was not contemplated at the time of the formation of the partnership that the firm of Berryhill and M’Kee should borrow money out of bank for the purpose of carrying on their establishment, much less did they intend to authorize the use of their names as endorsers for the accommodation of others.
On the 28th day of October, 1829, the honorable N. Green, chancellor, gave a decree substantially in conformity with the prayer of the- bill, and ordered the clerk and master to report the amount of payments made by Berryhill and the amount of the balance of the debt due by judgment to the bank, &c.
After this decree M’Kee died, and his executors, John H. Fulton and Elias Ogden, were made parties by bill of revivor at the May term, 1835; and at the May term, 1836, the death of Wm. M. Berryhill was suggested, and the bill revived in the name of his executors, James Woods and Charles C. Trabue. On the 16th May, 1836, Berryhill and Green discharged the balance of the judgment, and on the 25th day of April, 1837, upon the coming in. of the report of the clerk &nd master, the chancellor decreed against Greenway and the executors of M’Kee the one half of three thousand hundred and eighty-eight dollars and eighty-four cents, to wit: the sum of one thousand seven hundred and forty-four dollars and forty-two cents, the said sum being half of the sum lost by the endorsement; and directed the trustee, Foster, to pay the said sum with the partnership funds, &c. &c.
From this decree there was an appeal to the supreme court by the defendants.
P. B. Fogg, for plaintiffs in error.
One partner cannot bind another by an accommodation endorsement or by a guaranty. The endorsement by Berryhill in the name of Berryhill and M’Kee is binding upon Berryhill alone. The other partners did not authorize it, nor had they any knowledge of it during the existence of the firm. The letter written by Greenway on the 11th January, 1823, was no ratification of an endorsement made in 1820 without his knowledge; and if he was informed that he was legally responsible when he was not, such expression would not bind him in law or equity, and certainly would not bind M’Kee, the other partner. Neither of the parties after the dissolution could, by any agreement or acknowledgment, make that a partnership debt binding upon the common fund which was not so at the time of the dissolution. Duncan vs. Lowndes, Campbell’s N. P. Cases, 478: 2 Barn, and AL 673: Crawford vs. Starling, 4 Esp. N. P. Reports, 207: 12 Sergeant and Rawle, 13: 16 Johnson, 154: 5 Connecticut Rep. 574; 1 Wend. Rep. 529, •
Campbell, for defendants in error.
Theletter written from New York on the 11th day of January, 1823, by Greenway to Berryhill, shows conclusively that the defendants considered themselves bound and had no idea of questioning the authority of Berryhill to make the endorsement. In July*. 1823, the bank of Tennessee instituted an action against the-maker of the note and against all of the endorsers, M’Kee. and Greenway included. All the members of the firm were, properly before the court defending themselves; it was then ascertained and adjudged that the endorsement upon the note was binding upon M’Kee and Greenway.' Berryhill’s auto endorse was established by the judgment at law. v J °

Opinion:
Oumlom, J.
delivered the opinion of the court.
On the IsGday of January, 1816, complainant, Berryhill, and defendants, M'Kee and Greenway, entered into articles of partnership to carry on trade and merchandise in Nashville. Berryhill was to be the active partner. The firm continued to do business till the 8th of October, 1822, when they dissolved, • and the effects of the firm were placed in the hands of E. Xi. Foster, Esq. as trustee, (who is also made defendant,) to collect and pay the effects of the firm to those entitled. Before the dissolution Berryhill endorsed a note, in the partnership name, for Thomas Ramsey, which had been previously endorsed by Wm. Campbell, which note was negotiated to the president, directors, &c. of the bank of the State of Tennessee.
The firm of Berryhill, M'Kee and Greenway were accommodation endorsers. The note was protested for nonpayment. Suit was instituted against the maker and all the endorsers, and judgment recovered against them; and owing to the insolvency of those liable before Berryhill^ M'Kee and Greenway, Berryhill has had to pay the greater part of the judgment, and Berryhill files his bill to recover contribution from M'Kee and Greenway, or, to have the joint effects in the hands of Foster, the trustee, made liable.
The articles of partnership do not in terms, or by any reasonable construction, authorize one of the partners to sign the name of the firm to an accommodation note, such as the one in question was. And it is very clearly settled that where the authority is exercised in the absence of an agreement to that effect between the partners, that as between themselves, the partners who do not make the endorsement are not bound. The question, when it arises between themselves, is a very different one from that which would arise where third persons are concerned who have taken the note in the fair course of trade without notice of the want of authority. See 19 John. Rep. 154: 5 Con. Rep. 574: 1 Wend- Rep. 529. The answers of MKee and Green way deny the authority to make the endorsement.
It is insisted for the complainant that the endorsement against the firm is prima facie evidence of the joint liability of all the members of the firm, and that this presumption is not removed. The court is of a different opinion. The bill, answers of defendants, and the articles of co-partnership, all negative the idea that Berryhill had any authority to use the name of the firm for any such purpose.
But the complainant's counsel relies upon a letter written by defendant, Greenway, to Berryhill, dated 11th January, 1823, in which he says: "I regret extremely to learn by yesterday's mail that we are to sustain so serious a loss by your endorsement for Ramsey, and the whole is likely to fall upon the concern." This letter was written after the dissolution, and therefore could not affect the rights of others. The tone of'this letter shows surprise, and that the writer had for the first time come to the knowledge of the endorsement for Ramsey, and believing, as he no doubt did, that he was liable to the holder of the note, it accounts for the phraseology of the letter; and it by no means, in the opinion of the court, ratifies the endorsement, nor does it prove any authority ever did exist to endorse the note.
We are of opinion that the bill be dismissed. Let the decree be reversed and the bill dismissed.