Commercial Bank of Rochester v. Colt

By the Court, Welles, P. J. The note for $1200, dated August 11th, 1851, to renew which, the note for the same amount, set forth in the bill of exceptions, was given, and the two drafts or bills of exchange for $2000 each, were discounted by the plaintiffs for and at the request of Buell, who at the same times indorsed and delivered to the plaintiffs the three warehouse receipts set forth in the bill of exceptions, as collateral security for the payment of the note and drafts. It is to be assumed that the plaintiffs loaned these moneys, the avails of the note and drafts, upon the faith, in part at least, of the receipts. It should also be assumed that at the times of discounting the note and drafts, the defendants were partners in the storing and warehouse business; because evidence was given tending to establish that fact, and the judge charged the jury that if they found that the transactions between. Shackleton and the witness Buell, were the private transactions of Shackleton, in which the defendant Colt had no interest,.and to which he was in no way privy in fact; and the receipts were given without his knowledge, and the money was received by Shackleton and applied to his separate use, then, although Buell and the plaintiffs might, in good faith, have supposed that they were dealing with the partnership, unless the jury were satisfied that the defendants were partners in the produce business at the time the receipts were given, as well as in the warehouse business, the defendant Colt was not estopped from showing that there was not any wheat in the warehouse at the time the receipts were given. It amounts to this; that if, at the times the receipts were given, Colt and Shackleton were not partners in the produce business, although they were partners as ware-housemen, Colt was not liable; but that if they were partners in the produce business he was liable. X am not able, I confess, to understand why Colt’s liability should be different in case he and Shackleton were partners in the produce business, from what it would be if they were partners as warehousemen. The receipts are proper warehouse receipts, and signed by Shackleton with the firm name of Colt & Shackleton, and if they were partners of the latter descrip [515] fcion, in the business of warehousemen, at the time the receipts were executed, they are both, prima facie, equally liable, as it seems to me, as if they were partners in the produce business; and if the fact that the receipts were untrue, and there was no wheat in the warehouse, as mentioned in them, will relieve Mr. Colt from accountability in the one case, I do not perceive why it will not in the other. The position of -the plaintiffs is, that he defendants in their character of warehousemen had received the wheat mentioned in the receipts which Shackleton had delivered, for, and which when received, was subject to the order of, and therefore to be treated as the property of Buell; and that Buell being so the owner of the wheat, assigned it to the plaintiffs in security for the money advanced on the note and drafts. That by the law respecting the relations of partners, Colt is not to be excused in consequence of the fraud of his partner Shackleton; that so far as innocent third persons are concerned, the receipts are to be regarded the same as if Colt knew of and approved the giving the receipts; and as the plaintiffs advanced their money upon the faith of the statements contained in the receipts and the transfer of them by Buell, both the defendants are estopped from denying such facts, or of showing the fraud of Shackleton. (Story 07i Part. H 105, 6, 7, 8.) This view of the question I think would be correct, and perhaps controlling, on the assumption that the defendants were partners at the times the moneys were advanced by the plaintiffs, except for the considerations which will'be presently adverted to. As the plaintiffs claim as assignees of Buell, they can take no greater right or interest than Buell possessed, and are chargeable with the same notice, and with all the equities that would apply to him. If he is chargeable with sufficient notice to put him on inquiry which would have led to a knowledge of the fraud of Shackleton, it is the same to him as if full notice of such fraud, and the falsity of the receipts, had been proved upon him; and in that event, the same consequence attaches to the plaintiffs. They are not protected as bona fide purchasers or holders, as in the case of commercial paper, but they took the assign [516] ment cum onere, and occupy no better position than would Bu-ell, in case he had not assigned the receipts, but had paid the note and drafts, as indorser of the former, and acceptor of the latter. To hold one partner liable for the acts bf his copartner, such acts must have been done in the name of the firm and within the scope of the partnership. In this case, the principal transaction was the making of the note and drafts and receiving the money. These were concurrent with the giving of the receipts. The note and drafts were made by Shackleton in his individual name; and the money received by him as "an individual, and not as a member of the firm of Colt & Shackleton. The making of the note and drafts and receiving the money, did not purport to be a partnership transaction. The receipts were written by Buell at Rochester, where the whole transaction took place, which was a different place from that where the warehouse was situated, and where the partnership business of Colt &• Shackleton was done. One partner has not the right to pledge the partnership effects or securities or credit, for his individual and private use and benefit. Mr. Buell knew or was bound to know that Shackleton was doing or attempting to do thus ; and it was sufficient to put him on the inquiry, with a view to ascertain the truth of the facts stated in the receipts, whether Shackleton had in fact delivered the wheat into the storehouse, or in store, as the receipts purported. If he had made such inquiry, as I think he was bound to do, he would have discovered the fraud, and that the receipts were all a mere cheat, a fiction got up to enable him to raise money. (Bank of Rochester v. Bowen, 7 Wend. 158. Joyce v. Williams, 14 Id. 141. Boyd v. Plumb, 7 Id. 809. Wilson v. Williams, 14 Id. 146.) [Cayuga General Term. June 6, 1863. Welles, Selden and T. R. Strong, Justices.] Upon the whole, I think the plaintiffs have no reason to complain of the rulings at the circuit; and that a new trial should be denied. Ordered accordingly.