Court Opinion

ID: 6642541
Source: CourtListenerOpinion
Date Created: 2022-07-20 20:46:54.915431+00
Date Added: 2024-06-11T15:59:18.003106
License: Public Domain

Maxwell, Oh. J.
On or about the fifteenth day of March, 1865, the plaintiff and defendants Josiah and John McCormick, and Jesse H. Lacey, entered into partnership as wholesale grocers, in the city of Omaha, under the name and style of John McCormick and Co. The plaintiff paid into the concern, as a part of the capital stock, the sum of $7,768.92, Josiah S. McCormick the sum of $1,560.-70, Jesse H. Lacey $19,194.91, and John McCormick the sum of $5 5,343.17. The partnership was to continue as long as mutually agreeable to the parties. The profits of the firm were to be divided as follows: The plaintiff, one-sixth, Josiah S. McCormick, one-sixth, Jesse H. Lacey, one-third, and John McCormick, one-third. The firm continued in business until about the first of March, 1871. The profits of the firm amounted to at least $100,-000, and the bad and uncollectible debts amounted to about $50,000. The firm was heavily in debt, and a large amount of assets were by mutual consent left in the hands of John McCormick for the payment of the debts. It is claimed by the plaintiff that after the application of these assets to the payment of the firm debts, there was still a considerable deficiency, which was made up by him and John McCormick.
In the year 1866, Lacey purchased lots 6, 7, and 8, in block 47, in the city of Omaha, and took the title thereto in the name of his wife; and during the years 1867 and 1868 he built upon lots 6 and 7 a large brick house, at a cost of about $30,000, the money to pay for the same being drawn out of the concern and regularly entered on the books of the firm. He also drew out other considerable sums, all of which were duly charged to him on the firm books. It is also clearly shown from the testimony, that all of the membex*s of the firm, including the plaintiff, drew out of the firm such sums as *446they saw fit, the sums so drawn being charged to them on the books of the firm. It also appears that all the members of the firm, except the plaintiff, largely overdrew their account.
In the years 1867 and 1868, Josiah S. McCormick erected a costly residence upon a lot owned by his wife in the city of Omaha, the money to pay for the erection of said dwelling-house being drawn out of the firm, and regularly entered on the firm books.
In the year 1874, the plaintiff commenced an action against the defendants in the district court of Douglas county, praying for an accounting, and that it be decreed that Catherine T. Lacey holds the title to lots 6 and 7 above described, with the improvements thereon, in trust for the use and benefit of said firm, and that they be sold and the proceeds applied as may be just and proper. Also, that Anna M. G. McCormick be declared to hold the residence erected by Josiah S. McCormick, in trust for said firm, and that the same may be sold and the proceeds properly applied. The defendants answered the petition of the plaintiff. In October, 1877, the case was tried and judgment rendered dismissing the petition as to Anna M. G. McCormick, Catherine T. Lacey, and the heirs of Sarah J. Misc.. The plajntiff appeals to this court. The court found that the plaintiff is entitled to receive from John McCormick the sum of $6,237.46, from J. S. McCormick the sum of $7,568.66, from J. II. Lacey $2,959.38; and that John McCormick is entitled to receive from J. S. McCormick the sum of $15,137.81, and from J. H. Lacey the sum of $5,918.73. The sums found due by the court below appear to be in conformity to the testimony.
The plaintiff claims he is entitled to interest upon what was due at each annual rest, from the time the capital stock was so far impaired that money had to be borrowed to take its place. This might be proper in *447some cases, but not in this. It is apparent in this case that the deficiency arises from the very large amount of bad and uncollectible debts held by the firm, amounting to about $50,000. It is evident that but for these debts the firm would have been able to have met all its obligations. The firm was doing a large amount of business, evidently selling considerable quantities of goods on credit. The amounts due the firm appear to have been considered as assets, without considering the probabilities of collecting the same, and I think the testimony clearly shows that there was no intention on the part of Lacey and J. S. McCormick to cripple, much less to bankrupt, the firm. The only.question, therefore, for this court to consider, is whether the court below erred in dismissing the case as to Catherine T. Lacey, Anna M. Gr. McCormick, and the heirs of Sarah J. Misc., it being claimed that Sarah J. Misc. acquired the title to lot 8, in block 47, from Mrs. Lacey, without consideration, and in fraud of creditors and the rights of plaintiff.
Each partner while acting within the scope of the partnership business, is deemed to be the authorized agent of the firm, and his contract, while so engaged, will be held to be the contract of every member of the firm. This power to bind the firm and to dispose of the partnership property, is sometimes regarded as arising from the agency growing out of the relations of partners, and sometimes from the community of interest by which each partner owns the whole in common with the others, but has no exclusive property therein. It probably rests on both foundations. 1 Parsons on Contracts, 175. But if a partner steps outside of the scope of the partnership business, and attempts to transfer the co-partnership property to himself, he acts beyond the scope of his authority, and will not bind the members of the firm, as one member of a firm cannot become the *448owner of the property of the firm without the consent and against the wishes of the other members thereof. And if a partner who exclusively superintends the business and accounts of the concern should, by concealment of the true state of the accounts and business, purchase the shares of his partners, for an inadequate price, by means of such concealment, the purchase frdll be held void. 1 Story’s Eq. Juris., Sec. 220.
In the case at bar each partner drew out of the firm such sums as he saw fit, and there seems to have been a tacit agreement among the members that this might be done, no objections being interposed by any one. The sums so drawn out were properly charged to the person drawing the same on the books of the firm, and these books were open to the inspection of all the members. The plaintiff knew that Lacey and J. S. McCormick were erecting costly houses, and that the money to construct the same was being drawn out of the firm, yet he made no objection whatever; and this failure to object on his part, under the circumstances of this case, must be construed as a consent to such use of the partnership funds. And partnership funds being thus used with the tacit consent of the partners, ceased- — at least so far as the partners are concerned — to be charged with the lien of the partnership.
It is claimed that the plaintiff attended to selling goods, and that he knew nothing about the books of the firm, of the condition of its accounts, and that he relied entirely upon his partners. It is a sufficient answer to this plea to say that he appears to be a man of ordinary intelligence, that no misrepresentations were made to him, and that if he did not know the actual condition of the affairs of the firm it was his own fault, as he had the means of knowledge at hand. It is apparent, however, from the testimony, that all the members of the firm, up to and including the year 1869, supposed that they were *449doing a large and prosperous business, and no one seems to have thought that the large sums thus drawn out by the partners would cripple the firm or cause its insolvency. The lien of the partnership being gone, it follows that the plaintiff can have no relief in this form of action, whatever his rights may be as a creditor. The judgment of the district court is
Affirmed.