Wiley, Banks & Co. v. Allen & Stanford

By the Court. Lumpkin J. delivering the opinion. Allen & Stanford being partners in merchandise, Allen draws eight hundred and forty dollars in money from the store, charges himself with it on the cash-book, and applies it in payment of an individual note which he owes to the plaintiffs, Wiley, Banks & Co.; and the question is, whether they can be compelled to allow this amount to go as a credit upon the firm debt of Allen & Stanford, owing them, unless they, or their agent, Judge Hutchins, had notice, express or implied, that the $840 was partnership money; or, at least, unless the. circumstances attending the payment were such as to put them upon enquiry as to the rightfulness of this payment. In support of the affirmative of the foregoing proposition, the defendant in error relies on the case of Rogers against Batchelor, (12 Peters’ Rep. 221,) where it was held, that the funds of a partnership cannot be rightfully applied by one [575] of the partners, to the discharge of his own separate, preexisting debts, without the express or implied assent of the other parties; and further, that it makes no difference in such a case, that the separate creditor had no knowledge, at the time, of the fact of the fund being partnership property. The difference between the payment out of money belonging to the firm, and the appropriation of the property or effects of the partnership, does not seem to have been taken, or occupied the attention of the Court in that case. One of the authorities cited to sustain the judgment of the Court, was that of Dob & Dob vs. Halsey, (16 Johns. Rep. 34,) where the Supreme Court of New York held, that if one partner delivers partnership property to a third person, who receives it, knowing that it is partnership property, in payment of his individual debt, in an action by the partners against the individual creditor of the individual partner, for the price of the goods, the debt of the one partner is not a defence or set-off against all the partners. Of course not. For, in the first place, the title of the partners had not been divested by the individual appropriation of their property by one of them. And, in the second place, the separate creditor received the partnership property, knowing it to be such. He participated, therefore, in the fraud attempted to be practiced by the individual partner upon his associates. I would respectfully submit, that the decision in Johnson is not a precedent for that in Peters. And further, that in every case quoted by J udge Story, both in maintenance of his judicial opinion and the same doctrine enunciated by him in his Treatise on Partnerships, the party knew, or had, at least, good reason to believe, that he was taking from his debtor the joint funds of the co-partnership. But the main purpose for which I adverted to the case of Dob and Halsey was, to show that the New York Court comprehended the distinction between a payment in money and property. Spencer says: “ Had Moore paid the defendant [576] the debt due to him, in money which he had taken out of the partnership fund, it would have presented a different question. Such a payment would have been valid, in the absence of all proof that the defendant knew that the money of the firm had been thus misapplied. In such a case, there would be ground for presuming that the transaction was fair, and that the debt had been paid out of the private funds of the partner indebted.” But the principle decided in the leading case of Miller vs. Pace, (I Burrows, 452,) and reviewed in Smith’s Leading Cases, 1 vol. 356, introduces a new element into this discussion. The payment by Allen to Hutchins, as the agent of Wiley, Banks & Co., was in money, either coin or bank bills. If the transaction was bona fide, and the record concedes that it was, can the money be recovered back ? According to Miller and Pace, which is considered settled law, it would seem that it could not be. Had Allen robbed the till of the store, or of the store of any one else, and applied the money to the discharge of his debt, in favor of currency, neither his partners, nor any other owner, from whom it had been stolen, could recover it back, unless some collusion or unfair 'dealing could be shown. It was said by Lord Mansfield, in delivering the opinion of the Court of King’s Bench, in Miller and Pace, that the general course of business, and the consequences to trade and commerce, which would be much incommoded by a contrary determination, that money never should be followed into the hands of a person who, bona fide, took it in the course of currency, and in the way of business. Unless, then, it can be shown that the payment was not only covinous on the part of Allen, who paid his private debt with the money of the firm, without the consent or knowledge of his partner, but also, that the separate creditor, or his agent, took the money under circumstances which were calculated to apprise him that Allen had no right to this [577] money, the defendants below must fail in their case. Perhaps, one of the circumstances calculated to awaken suspicion, and excite enquiry, would be, the insolvency of Allen, provided it existed at the time, and was known to Wiley Banks & Co., or their agent. Judgment reversed.