Court Opinion

ID: 6501767
Source: CourtListenerOpinion
Date Created: 2022-07-19 18:14:36.372249+00
Date Added: 2024-06-11T15:54:37.909905
License: Public Domain

GOLDTHWAITE, J.
We have held this case sometime under consideration, in order that it might receive a more deliberate investigation than could be given to it in term time. This investigation has confirmed our first impressions that the evidence was improperly excluded from the jury.
*196The plaintiff in this case is shown to be a person clothed with a mere naked legal right, in consequence of the indorsement, but when the amount of the bill is recovered it goes into the general funds of the association, of which the defendant is a partner. If the money was converted by the plaintiff to his own use after receiving it, and he was not also a partner in the concern, an action could only be maintained against him by using the defendant’s name in connection with the other partners. Under the circumstances disclosed by the evidence offered, the present plaintiff is merely nominal, and the true plaintiffs in interest are the association. If the suit was in the name of the partners to the association, and the identity of one of the partners suing with the defendant was disclosed in the declaration, it would be bad on demurrer — or if the fact did not appear it could be pleaded. [Mainwaring v. Newman, 2 B. and P. 120.]
The present case does not rest on the principle which governed McNair v. Nance, [2 Ala. Rep. 349,] for there the note was given to a trustee for the purpose of launching the partnership, and in equity the contract could only be considered as the agreement of one partner with the others to contribute a certain sum to the common stock. Until the money was actually paid, the partnership had nothing in it. It rather resembles the cases of Hazlehurst v. Pope, [2 S. and P. 259,] and Smyth v. Strader, [9 Porter, 446,] where the whole subject was examined, and in which it was held that a note or bill given by a firm to one partner, and by him indorsed to a third person in due course of business, could be recovered upon. In both those cases, if the transfer by the partner had been merely colorable, we apprehend the decisions would have been that there could be no recovery.
In New York it is settled by a great number of decisions, that the rights of an assignee will be protected although he may not be a party to the record. [See cases collected in 2 Cowan and Hill’s Notes to Phil. Ev. 163, note 172.] We apprehend the converse of the rule, that the rights of a defendant will be protected against a colorable or fraudulent assignee is if possible, yet more clear. The general rule, when the bill or note is indorsed, after it is due, places the plaintiff in the situation of the one from whom he gets it, and is familiar to all. *197[Brown v. Davis, 3 Term, 81; Boehn v. Sterling, 7 ib. 424.] So also is that which declares that the defendant is let into all his defences when the holder has received the negotiable paper as a mere collateral security, or with express notice. [Livingston v. Dean, 2 John. Ch. 479; Coddington v. Bay, 5 ib 54.] In the latter case Chancellor Kent thus states the reasons for the commercial rule, that no defence can be admitted except as against the holder of the bill or note. “It is the credit given to the paper, and the consideration bona fide paid on receiving it, that entitles the holder to such extraordinary protection, even in cases of the most palpable fraud; it is an exception to the general rule of law, and ought not to be carried further than the necessity which created it.”
It is most obvious that the grossest frauds would be introduced if a legitimate defence could be avoided or smothered by the introduction upon the record of-a mere colorable party, and whatever may be the intrinsic merits of this case, as between the other members of the association and the defendant, the plaintiff shows no claim to be considered in any other light.
The disability of one partner to sue another upon any contract connected with and arising out of the use of the partnership funds, is not a mere technical disability. It results from the very nature of a partnership, that each partner is liable for all the debts of the partnership, and he never can be certain this liability will not be enforced until the debts are all discharged. But even then, until the affairs of the partnership are finally closed, and the balance of each partner ascertained, he may honestly doubt whether he is a debtor or a creditor of the joint concern.
The present association may perhaps afford an illustration as strong as any other of the general justice of the rule. It is not impossible that the identical bills with which the purchase of this paper was made, are yet outstanding, and may be enforced against this defendant — or other liabilities may already have been enforced against him. It is such and similar considerations which are the foundation of the rule that one partner cannot sue another at law, and we perceive no circumstances in this case to authorize the introduction of an exception, the re*198cognition of which has not been shown, and which, in our opinion does not exist.
On t~tis point in the case we are satisfied the judgment should he reversed, and as it will probably be decisive of the case, we forbear to express any opinion on the other questions ra~sed, farther than to observe that all the pleas demurred to seem to be deficient in certainty, for which, if for no other reason, the judgment npon the demurrer was proper.
Reversed and remanded.