Court Opinion

ID: 5071486
Source: CourtListenerOpinion
Date Created: 2021-10-01 10:43:29.587969+00
Date Added: 2024-06-11T08:19:51.105090
License: Public Domain

FONES, Justice,
concurring.
I concur in the result reached by the majority opinion. However, I do not agree that the statement that “a partner cannot charge his private debt to the firm without the consent of his partners,” is the principle of law upon which this case should be decided.
There are very few words in the English language that have as many meanings as “charge.” But in the context in which it is used in the majority opinion, it appears to mean the incurring of an obligation, at the time of origin of the transaction, such as a partner borrowing money or making a purchase on the credit of the partnership. Indeed, the cases cited in the majority opinion, with the exception of Rogers v. Betterton & Co., 93 Tenn. 630, 27 S.W. 1017 (1894) and Bank of Bellbuckle v. Mason, 139 Tenn. 659, 202 S.W. 931 (1917) do not involve the application of partnership funds delivered to a creditor. Rather, they address the issue of whether money or credit initially advanced for the benefit of a partner, but charged to the partnership can be enforced as a partnership obligation.
Here, we are dealing with partnership funds delivered to a creditor of the partnership, who had a copy of the partnership agreement and knew that the checks represented partnership funds. The creditor, PCA, was also a creditor of the partner Bob Davis. PCA attempted to justify cred*86iting the partnership funds to the individual’s debt on the theory that since no instructions were given as to the application of the partnership funds, PCA had the right to credit the funds to Bob Davis’s personal debt.
Rogers v. Betterton & Co., supra, involved the application of partnership funds where the active partner who delivered the funds to the creditor was also indebted individually to the creditor and the payments were applied to the individual partner’s account. In that case, prior to the formation of the partnership of Skipper & Rogers, Skipper had been in business dealing with Betterton & Co., and owed that company an individual debt. Skipper entered into partnership with Rogers and was the active member of the firm, although Rogers furnished most of the money. Bet-terton sued the partnership of Skipper & Rogers and obtained a judgment before a Justice of the Peace. Shortly thereafter Rogers discovered that two partnership checks had been delivered to Betterton & Co. that had not been credited to the partnership account. Cox, the Betterton bookkeeper, testified that Skipper had directed that the checks be applied to his antecedent account, but Skipper testified that he instructed Cox to credit the checks to the partnership account. On appeal, this Court did not find it necessary to resolve that factual conflict.
The Court’s decision was premised upon the following principles of law:
In the leading case of Rogers & Sons v. Batchelor et als., it was held by the Supreme Court of the United States that one partner cannot apply the funds of the partnership to the discharge of his own separate pre-existing debts without the express or implied assent of the other partners, and it makes no difference, in such case, that the creditor did not at the time know that the fund was partnership property. 12 Peters, 221 [9 L.Ed. 1063 (1838) ]. See also Dobs [Dob] v. Halsey, 16 Johns., 34.
The general rule is, that one partner may not use the firm assets in payment of his individual debts, but if the co-partner expressly or impliedly assent thereto, or afterwards ratify the act, the payment will be held good. Everyhire [Evernghim] v. Ensworth, 7 Wend., 326; Livingston [Levingston] v. Roosevelt, 4 Johns., 251; Liberty Savings Bank v. Campbell, 75 Va., 534; Hartley v. White, 94 Pa.St., 31-36; Allen v. Cary, 33 La.Ann., 1455; Forney v. Adams, 74 Mo., 138; Sligall v. Caney [Stegall v. Coney], 49 Miss., 761; Thomas v. Punich [Pennrich ], 28 Ohio St., 55, 60; McNair v. Platt, 46 Ill., 211; Caldwell v. Scott, 54 N.H., 414; Filley v. Phelps, 18 Conn., 294; Burnwell [Bur-well] v. Springfield, 15 Ala., 273; Norment v. Johnson [Johnston], 10 Iredell, 89; Carter v. Beaman, 6 Jones, 44; Conant v. Fray [Frary ], 49 Ind., 530. See also Atkin v. Berry, 1 Lea, 91.
A large class of cases hold that, when the creditor has knowledge of the fact, expressly or impliedly, the burden is upon him to show that the partner had authority to use the firm’s property to pay his private debts. Davis v. Smith, 27 Minn., 390 [7 N.W. 731]; McNair v. Platt, 46 Ill., 211. And the mere fact that the partner states that he has consent of his co-partner is not sufficient. Allen v. Cary, 3 La.Ann., 1455-1460.
93 Tenn. at 635-36, 27 S.W. 1017.
The Court concluded its opinion as follows:
In the case at bar we have one partner, without the knowledge of his co-partner, applying the firm’s money to the payment of his antecedent debt. The creditor knew that the funds being used were those of the firm of Skipper & Rogers, and not of Skipper, and he could not apply such funds to Skipper’s individual, antecedent debt, except by the assent of the co-partner, Rogers. The money thus paid was improperly diverted from the firm’s purposes to the individual partner’s purposes, and complainant is entitled to have credit for the same as against the debt held by the firm of Betterton & Co. against Skipper & Rogers, and, the demurrer being out of his way, may have such credits applied in *87this case, although after the judgment was rendered before the Justice of the Peace.
Id. at 637, 27 S.W. 1017.
In Bank of Bellbuckle v. Mason, supra the principles set out in Rogers were affirmed, in dicta, as the decision of the case rested upon another issue.
The facts in Rogers are indistinguishable from those in the instant case; the law therein has not been altered by this Court or the enactment of the Uniform Partnership Act; and the principles in Rogers control the disposition of this case.