Granby Mining & Smelting Co. v. Laverty

Opinion by Mr. Justice Williams, The plaintiff alleges that the bank, the garnishee, holds moneys belonging to its debtor, the firm doing business as the Galvanizing Company. This the bank denies. It admits that the firm was a depositor but asserts that the money so deposited has been paid out upon the cheeks of the firm. To this the attaching creditor replies that some of the checks charged to the firm account were really the individual checks of one part, ner and were not binding on the firm. This raised the question on which the case turned in the court below. The general rule undoubtedly is that the attaching creditor stands on no higher ground than his debtor. He acquires by virtue of his attachment no rights other than those his debtor possessed. The determination of the question in this case requires therefore the adjustment of the account between the bank and its depositor. To facilitate such an adjustment the attaching creditor presented to the referee fifteen requests for findings of fact from the evidence before him. Ten of these were considered and the findings made substantially as requested. They showed the formation of a partnership between Laverty and Scully under the firm name of The Manufacturers Galvanizing Company, in August, 1886, and its dissolution in a state of insolvency in February, 1889. They showed that the articles of copartnership required that all checks and drafts should be signed by both parties; and that to give effect to this stipulation a form of cheek for use by the firm was prepared and lithographed, having two lines for signatures, at the end of one of which the word “ Chairman ” was printed, and at the end of the other, the word “ Treasurer.” It further appeared that this provision in the articles of partnership was communicated to the bank soon after, or at the time, the firm account was opened, and the form for executing checks by the firm entered on the signature book of the bank. The fact further appears that from the opening of the account in August, 1886, down to within about four months of the dissolution of the firm, the partners and the bank conformed to *294 the articles of partnership, and. all checks were signed by both parties in accordance with the lithographed form of check. In a few instances checks were paid bearing but one name, but the other was added at the first opportunity, and at the request of the bank, so that, of several thousands of cheeks drawn, all bore the name of both partners until about four months before the dissolution. At that time Scully began to draw a series of checks in addition to those bearing both names, which were executed by himself only, for purposes and in transactions not entered on the firm books, nor known to his partner. These checks were one hundred and one in number, and amounted to eight thousand one hundred and one dollars and sixty-three cents, and were repudiated by Laverty as soon as they came to his knowledge. In the remaining five requests for findings the referee was asked to say that while these checks were being drawn by Scully he was carrying on business outside the scope of the partnership, without the knowledge or consent of his partner’, not entered upon the firm books, which resulted in losses, and caused the insolvency of the firm; and that if the bank had not paid the checks in controversy this losing business could not have been carried on bjr Scully. The referee was asked also to find and report to what partnership purpose, if any, these checks were applied. The referee was of opinion that these requests related to subjects that were not material to the present controversy, and reported that he “ did not think it necessary to decide ” upon them because they were important only in “ settlement of the equities between the partners.” This may be so, but is by no means certain, until the facts are found. If, as between the bank and the partnership, the payment of these checks was unauthorized, then the bank is not entitled to a credit for them as against the garnishee. It is very clear that the checks were drawn in violation of the partnership agreement, and paid in utter disregard of the notice to the bank and the mode of execution appearing on the signature book. The paying teller understood this and refused payment of these checks. He paid them only under the direction of the cashier who was the father of John Scully, Jr. Upon these facts the bank took the risk of their being drawn for a legitimate partnership purpose, and is entitled to credit no further than it is able to show that the money drawn upon them *295 was used in payment of obligations for which the firm was legally bound. For this reason the referee should have found, as requested, to what purpose the money drawn by Scully on checks signed by himself was actually applied, so that his general finding that the money was applied to partnership purposes might be examined in the light of the facts which led him to this conclusion. He should also have determined whether the business conducted by Scully without the knowledge of his partner was the business in which these checks or any portion of them was used, and if so whether the debts so contracted were binding on the firm. The mere fact that Scully behaved in bad faith towards his partner is unimportant. The question to be determined between the plaintiff and the garnishee is whether the bank is entitled to credit for the checks drawn by Scully alone; and this, as we have seen, depends on whether these checks or their proceeds were applied to obligations legally binding on the firm. The judgment is reversed and the record remitted that the further findings indicated above may be made.