Sterling v. Jaudon

By the Court, Ingraham, J. The first point made by the plaintiffs is as to the right of the defendants to appropriate the money of the firm to the private account of Erasmus Sterling. It is very clear they would have no such authority without instructions so to do. Whether or not they had such orders at the- time the money was paid to them was to be decided by the jury on contradictory testimony. ■ They found for. the defendants, and such finding necessarily involves a finding that they had such instructions from Sterling when the money was paid. The question then is whether the judge.erred in charging the jury “if Sterling directed-the firm check to be applied in whole or in part to his private account, the defendants could so apply it.” It must be remembered that all the transactions were made by E. Sterling, who had previously settled up accounts of the firm. No notice was given- in any way that these funds were the property of the firm, and the only fact .on which the plaintiffs can rely is, that the check, being in the name of the firm,_ was sufficient -notice to the defendants that it was. partnership property, and was enough to put them on inquiry before giving credit to E. Sterling on account of it. This is not the case of paying an old debt with partnership funds, but it is an incurring of liability on the strength of the payment. It was used to increase the margin of E. Sterling on [462] his private transaction, without which the defendants would not have incurred the additional risk of holding themselves liable to furnish the gold for Sterling on his contract, when the price was rising. I do not think the mere fact that the check was the check of the firm was sufficient notice. All the cases which hold the delivery of partnership property to a third person for the private account of one of the partners, to be invalid, base that rule upon the fact of knowledge on the part of the party receiving it. The mere fact of the check being that of the firm is not-such notice. If it be so, then in all cases where a man pays the check of a third .party, the person receiving it would be compelled first to inquire as to the bona fldes of the check and the right of the party to use it. Such a rule would not answer in a commercial community. The presumption may just as well be indulged that the firm held money belonging ‘to the individual partner, as that he was guilty of a fraud upon his copartners. Some other proof was necessary to establish notice. The plaintiffs contend that the notice requiring a further margin or that the defendants would close the gold for their account at the market price on that afternoon, was insufficient. The defendants were not bound to continue liable for the plaintiffs’ contracts for an indefinite period. If the margin was deficient, they might have closed the transaction without notice by purchasing the gold on the plaintiffs’ account. If - they were unwilling to continue liable even with the margin, they could give notice to that effect, and then if^ after a reasonable notice, the plaintiffs did not comply, they could act in the same way. In such a transaction as this, no notice is necessary of the time and place at which they will make the purchase. That only applies to the pledge of stocks or other securities for the -payment of a debt. The defendants were bound to make the purchase at the market price, and in purchasing they assumed the responsibility to the plaintiffs to do so. We [463] have so held lately in a case decided in the general term. Some evidence was given as to a custom among brokers entitling them to close out an account of their customer with a reasonable notice. There was some .contradiction among the parties on this point. The evidence was received without objection, and the judge left it to the jury as evidence in the case. The plaintiffs’ counsel requested the judge to instruct the jury to disregard it as an illegal custom, which he refused to do. There was no error in this refusal. Whether the custom was proven or not was immaterial. It was nothing more than, the legal right of the defendants without a custom, and the attempt to sustain that right by proof of custom was unne- , cessary. Whether made out or not, it would not have altered the legal liabilities of the parties. [New York General Term, April 1, 1867. Judgment should be affirmed. Leonard, Ingraham and J. C. Smith, Justices.]