Clark v. Dearborn — 13 N.Y. Super. Ct. 309

Majority

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Clark and McConnin v. J. Dearborn, impleaded with A. Dearborn.

Headnote

When one member of a firm makes a note in the firm’s name, and puts it in circulation, and it is shown that it was made without the knowledge or consent of the other partner, and for a matter not relating to the partnership business, an indorsee cannot recover against the latter, without proof that he took it before maturity, in good faith, and for value. Evidence that such note with others, was “passed to the plaintiffs for goods sold,” and that “these notes were left with the plaintiffs as collateral security,” is not sufficient to establish that the plaintiffs parted with the goods on the credit and security of the note.

The same is true as to a note made by one member of a firm, in the firm’s name, after its dissolution, and lent to the payees, without the authority or consent of the other partner.

When a note thus made comes into the hands of an indorsee for value, it is a question of fact for the jury, whether such indorsee took it with notice of the dissolution of the firm.

The fact that an account which had been opened with a bank, in the firm’s name, during its existence, was continued in such name to the date of the note, cannot be proved by parol, without producing the books of the bank, or connecting the defendant, not signing or assenting to the note, with such subsequent transactions. The books themselves are the best evidence of the dates of the entries, and of the contents or terms of such entries.

The jury should dispose of all controverted questions of fact, and when a verdict is taken subject to the opinion of the court at General Term, it should be on questions of law only. And although liberty be reserved to the court to find the facts, it cannot at General Term undertake, with propriety, to do so, especially if it be found in favor of a party who has been permitted to give incompetent testimony against the objection and exception of the adverse party, and the finding must be founded, in part, on such evidence.

(Before Doer, Bosworth and Woodruff, J.J.)

Dec. 1, 1856 ;

Feb. 14, 1857.

This action came before the court, at General Term, on a verdict taken, subject to the opinion of the court, for the plaintiffs. It was brought on a note alleged to have been made by the defendants, in their firm name of “ J. & A. Dearborn & Co.,” dated at the city of New York, the 28th day of December, 1853, payable four months after its date, to the order of D. 0. Ketchum & Co., for $705.31, and to have been indorsed by the payees, and to have become the property of the plaintiffs, for value naid for it. before it was due.

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The answer of John Dearborn, who alone defended, averred that the defendants did not make the note; that, at the time it was made, Alexander Dearborn, the other defendant, was not his partner, and that there was then no such firm as “ J. & A. Dear-born,” and put in issue the indorsement of the note by the payees, and the plaintiffs’ ownership for value. It also averred that the note was made by Alexander Dearborn, at the request of, and for the accommodation of the payees, and without any authority given to Alexander Dearborn to bind John Dearborn, or make him liable by reason thereof.

The action was tried before Slosson, J., and a jury, on the 19th of March, 1855.

It was proved that the firm of J. & A. Dearborn was dissolved on the 1st of February, 1853 ; that Alexander Dearborn made the note without consideration, and to accommodate the payees, and delivered it to D. 0. Ketchum, one of such payees. The evidence as to the transfer of it to the plaintiffs, and as to the consideration paid by them for it, was that of D. 0. Ketchum, and is as folows: He said,—

“ I passed this note to the plaintiffs with other notes; in all, the sum of one thousand dollars, for goods sold to us by the plaintiffs.

“ Q. Were these notes left with plaintiffs as collateral security?

[Question objected to by the plaintiffs’ counsel. Objection overruled; and to the decision in that behalf the counsel for plaintiffs then and there duly excepted.]

“ A. They were.”

This was the whole evidence on that point.

To show that the defendants had done acts, in the firm name of

& A. Dearborn, after the 1st of February, 1853, in addition to other evidence given, the plaintiffs called, as a witness,

Robert Leonard, who, being duly sworn, deposed as follows:—■ “I was a book-keeper in the Butchers’ and Drovers’ Bank in the year 1855, in and previous to the month of December of that year; I knew of an account being kept there of J. & A. Dear-born, but not of the firm.

“ To how late a day did you know of such an account being kept in the bank ?

[Objected to by the counsel for defendant John Dearborn, on the ground that the books df the bank, in which the account is kept,

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should be produced, and that John Dearborn should first be personally identified or connected with the account. The objection was overruled and the question allowed, and to the decision in that behalf the counsel for said defendant then and there duly excepted.]

“A. The account was kept until the 31st day of August, 1854; it might have existed several years previous to my going there; I kept the account from July, 1853, to 31st of August, 1854; I don’t know who constituted that firm, nor can I say when the account commenced.”

The plaintiffs were not shown to have had any dealings with the defendants’ firm, which the witnesses sometimes spoke of as J. & A. Dearborn & Co., and sometimes as J. & A.- Dearborn; and no notice of its dissolution was shown to have been published in any newspaper.

The printed case states, that on the evidence being closed, the court directed the jury to find a verdict, by consent of parties, for the plaintiffs, in seven hundred and forty-nine dollars and eleven cents damages and costs, subject to the opinion of the court, at a General Term thereof, on the questions of law, and also as to the facts, as if they were before a jury, (except as to the fact specially found by the jury, under the question specially propounded, as to which the finding of the jury was to be conclusive) with liberty to turn the case into a bill of exceptions or special verdict.

The court also charged the jury, and directed them" to answer the following question:

At the time of the making of the note in question, December 28th, 1853, did D. 0. Ketchum know of the dissolution of J. & A. Dearborn & Co., and of the withdrawal of Alexander from the firm ?

The jury answered, Yes; and thereupon found for the plaintiffs, as directed by the court, and the verdict was entered accordingly.

Thaddeus S. Lane, for plaintiffs.

John Graham, for defendant.

The note, on which this action was brought, bears the copartnership name of “ J. & A. Dear-

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born,” and is dated the 28th of December, 1853. That partnership was dissolved on the 1st of February, 1853. The note was made, and the partnership name signed to it, by Alexander Dear-born, without the knowledge or assent of John Dearborn. The note was made for the accommodation of D. 0. Ketchum & Co., the payees. D. 0. Ketchum, who received it from Alexander Dear-born, and who indorsed and passed it to the plaintiffs, knew when he took it that the firm of J. & A. Dearborn had been dissolved.

H there were no other obstacle to a recovery, the plaintiffs would be required to prove, in order to maintain their action, that they took it in the regular course of business, and paid value for it. The only evidence on this point is, that “ D. 0. Ketchum & Co. passed this and other notes to the plaintiffs, amounting in all to the sum of $1000, for goods sold to his firm by the plaintiffs. These notes were left with the plaintiffs as collateral security.”

This evidence does not show that the goods were sold and delivered on the security of these notes. If the notes were transferred after the sale and delivery of the goods, as security for a pre-existing indebtedness, the plaintiffs are not holders for value, within the meaning of the rule, which protects a bona fide holder for value, against a defence based upon the fact, that the note was made by one partner without the knowledge or consent of the other, for a matter in nowise connected with the business of the copartnership.

The burthen of proof was on the plaintiffs. The facts were all within their own knowledge, and the evidence of them within their own control. The only witness examined upon the point, and he was a party to the transfer, could have testified whether the goods were, in fact, sold and delivered on the credit of the notes. All that he said is entirely consistent with the fact, that the notes were transferred after the sale and delivery of the goods, to secure a pre-existing debt. He does not say that this is hot the truth of the transaction.

He does not say the notes were received as payment. His testimony is express that they were left as collateral security. He does not testify that they were left when the goods were purchased, or that they were then agreed to be left as security for the payment of the goods, and were subsequently transferred in pursuance of that agreement. At least, that much he was required

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to prove, and not having proved it, he is not entitled to recover for that reason, if there were no other.

The evidence given does not justify the inference, in favor of a party who was bound to establish the fact affirmatively, that the plaintiffs parted with the property on the credit and security of the note.

But even if the plaintiffs paid value for the note, or parted with the property on the credit and security of the note, it would then become important to determine, whether they took it without notice of the dissolution of the firm of J. & A. Dearborn. The plaintiffs are not shown to have had any dealings with the firm. No notice of its dissolution was published in any newspaper. It then became important to ascertain in what manner the members of the firm had conducted after the dissolution took place. Nearly eleven months intervened between the time of the dissolution and the date of the note. The acts of the parties may have been such as to justify the inference, that the fact of the dissolution of the firm had become as notorious as that of its previous existence.

And the acts of the parties may have been such as to justify the inference, that the fact of the dissolution had not become generally known, and that knowledge of it, in all reasonable probability, was possessed by those persons only, to whom actual notice had been given.

Among other evidence, given to prove that the facts of the case were consistent with the latter hypothesis only, Robert Leonard, a book-keeper of the Butchers’ and Drovers’ Bank, testified that “ J. & A. Dearborn,” kept an account in that bank down to the 31st of August, 1854.

After he had testified that he knew an account of J. & A. Dear-born was kept in that bank, he was asked this question: “ To how late a day did you know of such an account being kept in the bank ?”

The counsel for John Dearborn objected to the question, on the ground that the books of the bank in which the account is kept should be produced, and that John Dearborn should first be personally identified or connected with the account. The objection was overruled, and the question allowed to be put, and the counsel of John Dearborn then duly excepted to the decision.

This decision, for all practical purposes, allowed parol evidence

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to be given of the contents of the books. The witness was, in effect, asked to state, and, in fact, did state, the dates of the entries, notwithstanding the objection that those facts could only be proved by the books themselves.

If it be assumed that competent proof of the fact of the entries would make them evidence, that such transactions as they indicated had been had between the bank and the late firm of J. & A. Dearborn, at the times the entries bear- date, without showing that the acts which they recorded had been done by one of that firm, it is quite clear, as we think, that the books were the best evidence of the date of the entries, and of the contents of the entries themselves.

The objection having been taken, that the books were not produced, and that parol proof of their contents could not be allowed, we think the Judge erred in admitting the evidence.

Even if the court would consent to find the facts, which should have been found by a jury, and if it should find that the plaintiffs, when they took the note, had no knowledge of any facts and circumstances which should have induced them, as men of ordinary caution and prudence, to. suspect that a dissolution had taken place, as such fact would be found in part upon incompetent evidence, which has been received against the objection and exception of the defendant, our judgment would be erroneous, if in favor of the plaintiffs.

Whether the plaintiffs had knowledge of the dissolution of the firm, if they had previously heard of its existence, was a question of fact for the jury.

The defendant was undoubtedly bound to show, as against the public, that notice of the dissolution had been published, or such acts as were equally well calculated to apprise the community of that fact.

As illegal evidence was admitted against the objection of the defendants, and no judgment can be given for the plaintiffs on the finding of any fact in their favor, in proof of which such evidence was admitted, the verdict must be set aside, and a new trial granted, with costs to abide the event.