Court Opinion

ID: 9841646
Source: CourtListenerOpinion
Date Created: 2023-09-22 20:00:26.887899+00
Date Added: 2024-06-11T09:01:27.506574
License: Public Domain

Mr. Justice McLEAN
delivered the opinion of the court.
The plaintiff brought his action as the second indorsee of two promissory notes in favor of E. Stevenson, purporting to be signed by Strader, Perrine, & Co., which partnership consisted of Dan*414iel P. Strader, Jamés Perrine, E. Stevenson, and John H. Woodcock. The notes were assigned by Stevenson to Stinson & Campbell, of New Orleans, and by them to the plaintiff. Stevenson died before the commencement of the suit, and. the process was' served only on Perrine and Woodcock. At the fall term of 1842, Woodcock pleaded a discharge undér the bankrupt law, and Perrine pleaded that the partnership of Strader, Perrine, & Co. commenced in November, 1835, and that in December of the same year he withdrew from it. That at the' time of leaving the firm he sold, for oné thousand dollars, his interest to Stevenson, who, by Stinson & Campbell, through one Primrose, paid him the above' sum ; and that they knew of his withdrawal. That the notes were antedated, and were not in possession of Stinson & Campbell, or assigned to them, till, after the 17th of May, 1836. ‘
Issues being joined on these pleas, the case was submitted to a jury, who found in favor of Perrine, and that Woodcock'had been discharged under the bankrupt law.
The questions for decision arise on a bill of exceptions, taken by the plaintiff.
The plaintiff proved, by the deposition of Hood, that Stevenson was á member of the firm of Strader,' Perrine^ & Co., and that he executed the notes, and that they are dated before any public notice was given of the dissolution of. the firm. That the firm of Stinson & Campbell were indebted to the plaintiff, in a large sum, in the summer of 1831 ; and that in part payment, the notes, before maturity, were assigned to him, for which a credit oh their account was entered. ' And here the plaintiff’s evidence closed.
The defendant, Perrine, proved, “ that he withdrew from the firm the 6th of December, 1835-, but that there-was no public advertisement, giving' notice of the dissolution of the .firm, until the 23d of April,' 1836, although the fact was known to Stinson & Campbell at the time of Perrine’s withdrawal.”
, The defendant also proved, by John Testj that in August, 1836, he saw in the'hands of the plaintiff’s agent' an account current between him and the firm of Stinson & Campbell; that, he made a copy, of the sanie,, which he produced, and from which it appeared that no credit had been entered for the notes sued on.
The plaintiff’s counsel moved the court to exclude from the jury all testimony as to the transactions -between Stevenson and the firm of Stinson & Campbell, or .between Stevenson and the other members of the firm of-Strader, Perrine, & Co., there being no proof of any notice to the plaintiff of any of these matters-insisted on by the defendant in his defence. But the court overruled the motion, and “ instructed the jury, that if they believed the said notes were'made by Stevenson, without the knowledge and. consent of his partners,, and that he passed the,m off to the said. Stinson & *415Campbell without tljg knowledge or consent of his partners, and that if the said Stinson & Campbell, at the time of their receiving jthe notes, knew' that, prior to that time, to wit, on the 6th of December,- 1835, Perrine had withdrawn from said firm, and was not then a partner, and that if it was also proved to them that the said notes were passed to the said Stinson ’& Campbell by Stevenson for his individual benefit, and not for the interest and benefit of the said firm, and that this was known to the said Stinson & Campbell when they received the said notes, that then the jury must find for Perrine, the defendant.” To the above ruling and instruction, exceptions were taken by the plaintiff.
From the instruction of the court, it appears the notes in controversy were considered as governed by the law merchant. By the Alabama stamte of 1812 (Clay’s Dig. 381), the. assignee of “ bonds, obligations, bills single, promissory notes, and all other writings for the payment of money,” may sue in his own name; but all equities and grounds of defence remain, ópep as fully as though the instrument had not been assigned, until thé defendant had notice of the assignment. But by the act'of 1828 (Clay’s Dig. 383), it is provided, “ that the same remedy on bills of exchange, foreign and inland, and on promissory notes payable in bank, "shall be governed by the law merchant, as to days of grace, protest, and notice ”; and, by the succeeding section, all other contracts for the payment of money, &c., are made “ assignable as heretofore, and t}ie assignee may maintain such suit thereon as the obligee or payee could have done, whether it be debt, covénant, or assumpsit.”
The phraseology of this section would seem to place all other instruments, for the payment of money, &c., on, a different looting from those described in the preceding section. The provision of that section appears only to relate to the remedy on bills of exchange and promissory notes payable at bapk under the law merchant, as regards the days of “ grace, protest, and notice.” But as the following section defines the rights of the assignee of e‘ all other contracts in writing for the payment of money,” &c., it may perhaps, be fairly inferred that the legislature intended the negotiability and character of the instruments above named should be regulated by the general commercial law. Such seems to be the opinion of the Supreme Court of Alabama. In the case of McDonald v. Husted, 3 Alabama Rep. 297, it was held, “ that a note made negotiable and payable at bank is not subject to offset, in the hands of a bona fide indorsee, who has acquired it previous to maturity, although it has never been negotiated at the bank where it is made payable.” Also in Beal v. Bennett, 6 Alabama Rep. 156, the same principle is recognized.
However fairly Stevenson may have acted in the execution of. these notes payable to himself, it is clear that he could not have *416sustained on them an action at law. A partner of a firm cannot, at law, sue it, for that would be to sue himself.. But a bona fide assignee of Stevenson might maintain an action. Jones et al., Assignees, v. Yates, 9 Barn. & Cressw. 532 ; Bosanquet et al. v. Wray, 6 Taunt. 597.; Aubert v. Maze, 2 Bos. & Pul. 371 ; Smith v. Lusher, 5 Cowen, 688. Stevenson, in executing the notes to himself, under the circumstances proved, committed á fraud against his partners ; and this fraud was. greatly aggravated, if, as alleged, he antedated the notes so as to charge Perrine as partner. That he assigned the notes to Stinson & Campbell, if for any consideration, for one that was personal to himself, and wholly disconnected with the partnership,' is not controverted; These facts, or a part of them, of which Stinson & Campbell must have had knowledge, would have defeated a recovery by them. Every “ contract in the name of the firm, in order to bind the partnership, must not only be within the scope of the business of the partnership, but it must be made.with a party who has ño knowledge or notice that the partner is acting in violation of his obligations and duties to the firm, or for purposes disapproved of by the firm, or in fraud of the firm.” Story on Partnership, 193. This rule as well applies to the indor ement of negotiable instruments as to other contracts.
But the fraud of Stevenson, and the knowledge of that fraud by Stinson & Campbell, do not necessarily defeat the plaintiff’s action. And the charge of the court on this point was clearly erroneous. If, before the maturity of the notes, in the due course of business, and without any knowledge of the circumstances of their execution and first indorsement, the plaintiff received them, he maybe entitled to recover, notwithstandirig the fraud. By “forming a partnership, the partners declare themselves to the world satisfied with the good faith and integrity of each other, and impliedly undertake to be responsible for what they will respectively do. within the scope of the partnership concerns.” Story on Partnership, 161. On this principle, the firm is bound for the frauds committed by one of its partners. Where one of., two innocent persons must suffer by the act of a third person, the rule is just, that he shall suffer who reposed the higher confidence and credit in such person.
But if the plaintiff received these notes after their maturity, he holds them subject to all the defences which might have been set up against them in the hands of Stinson & Campbell. Or if he received them out of the ordinary course of. business, without consideration, or under circumstances which authorize an inference that he had knowledge of the fraud in their execution or their first indorsement, he cannot recover. These are matters of evidence for the jury.
Thé testimony of John Test, which was excepted to, we think *417was. rightfully admitted. He proved, that, in August, 1836, he saw in the hands of an agent df the plaintiff an account current between him and the firm of. Stinson' & Campbell. That he copied the account, which copy he exhibited, and from which it did not appear that. a credit had been entered for the notes in controversy. As this, compared with, the evidence of the plaintiff, might conduce to disprove the consideration alleged to have been paid for the notes by the plaintiff, it was property admitted. The. relevancy of the deposition of Charles, which was also excepted to, is not very apparent. It shows that Stinson & Campbell, in 1836, drew a large amount of drafts- on the plaintiff, in part payment of drafts which hie had previously drawn on them. This drawing and redrawing constituted no part of the account current spoken of by. Test, but at the foot of *1116 account a memorandum was made of these drafts. As this ■ deposition conduced to show the nature of the accounts bétween the plaintiff and the firm of Stinson & Campbell, no very strong objection is perceived to its admission as evidence. It could not have misled the' jury.
The deposition of Strader, which wasf also excepted to by the plaintiff, was not admissible under the decisions of this court. He was-one of the firm of Strader., Perrine, & Co., and his testimony conduced to show the fraüd of Stevenson in the execution of the notes. In the case of the Bank of the United • States v. Dunn, 6 Peters, 57, this court said, — “ It is a well settled principle, that no one, who is a party to a negotiable note, shall be permitted, by his own testimony, to invalidate it.” The same principle was held in Bank of Metropolis v. Jones, 8 Peters, 12. This was decided in the case of Walton et ah, Assignees of Sutton, ». Shelley, 1 Term R. 296 ; and although that decision was overruled by the King’s Bench' in the case of Jordaine v. Lashbrooke, 7 Term R. 601, this court, in the. cases cited, and-in several subsequent cases, have established the -rule as above stated. In the State courts, there is a great diversity -of judgment on this point.
Strader was a party on the record, and that rendered him an incompetent witness. Scott v. Lloyd, 12 Peters, 149 ; Stein v. Bowman et al., 13 Peters, 219.
Upon the whole, the judgment of the Circuit Court is reversed, and a venire de novo awarded.