Farley v. Lovell

Morton, J. The appropriation by Quinn of the partnership property to the payment of his private debts was a fraud upon the firm for which the laws furnish a remedy to the defrauded partners. The only question in this case is whether they have adopted the proper remedy. We are of opinion that the case of Homer v. Wood, 11 Cush. 62, is decisive of this question. The principles upon which that decision is founded, and the reasoning by which the conclusion is reached, are equally applicable to the case at bar. The difficulty in maintaining the action in that case, which was found to be insuperable, was, that the plaintiffs could only do so by alleging and proving the fraudulent acts of one of the coplaintiffs in misapplying the partnership assets in payment of his separate debt, which would be “ a manifest violation of the salutary principle that a party in a court of law shall not be heard to allege his own bad faith, as a foundation of his right of recovery.” The full discussion of this principle, and of the reasons for its application to cases where the fraudulent partner sues jointly with other parties who are innocent of the fraud, renders it unnecessary to do more than to refer to the case. The same difficulty exists in the case at bar. The plaintiffs can maintain their action, whether in the form of contract or tort, only by proving the fraudulent acts of one of themselves. But the plaintiff’s urge that this case is distinguishable from Homer v. Wood in two particulars. The plaintiffs offered to prove that the defendant as well as Quinn acted in bad faith and with an intent to defraud the innocent partners. If this be true, it in no way affects, unless to aggravate, the fraud of Quinn; and the force of the objection, that the plaintiff’s can recover only by showing the fraudulent conduct of one of themselves, remains unimpaired. The right to recover does not depend upon the good or bad faith of the person with whom the fraudu.ent partner has dealt, [390] but is defeated by a disability of one of the coplaintiffs to allege and prove a fact necessary to maintain the action, arising from his own fraud. Thus, if the fraudulent contract, in such a case remains executory, or if one partner should give the note of the firm in settlement of his private debt, the innocent partners may defend a suit brought to enforce it, without regard to the question whether the other party to the contract acted in good or in. bad faith. In such event, there is not presented the incongruity of allowing a party to rescind his own act by alleging his own fraud. The other grouqd of distinction urged by the plaintiffs is, that their declaration contains a count in tort, while Homer v. Wood was an action of contract. But the difficulty is, that they have joined Quinn as one of the plaintiffs. The suit is in his name and for his benefit, and can only be maintained by permitting him to allege and prove his own misconduct. The reasons of the decision in Homer v. Wood apply as strongly to an action of tort in which the fraudulent partner is joined as a coplaintiff, as to an action of contract. In the leading case upon this subject in England, Jones v. Yates, 9 B. & C. 532, the principle was applied in an action of trover as well as in an action of assumpsit. The question is not before us, whether the innocent partners can maintain any action at law in their own names without joining Quinn. Having joined him, the disability which the law attaches to him, to allege his own turpitude as a foundation of his right to recover, must defeat.the right of the plaintiffs to recover in this action. The objection that this defence is not open under the pleadings cannot be sustained. The facts relied upon by the defendant are not matters in discharge or avoidance of the action of tort, but they meet and rebut the allegations necessary to support the plaintiffs’ case; and to the count in contract the defendant in his answer sets up payment under which he may avail himself of these facts. Exceptions overruled.