Barrington v. Maner

BRYAN, Circuit Judge. To an action by appellee, as receiver of a failed national bank, against appellants Barrington and Horn individually on a note, which Barrington signed as maker and Horn as indorser, Barrington pleaded set-off of the amount on deposit in the bank to the credit of the Barrington & Horn Chevrolet Company and the Auto Loan Company, two [918] partnerships formerly owned by appellants, but which at the time suit was brought were owned individually by Barrington to whom Horn had previously assigned all his interest. At the close of the evidence, the trial court withdrew from the jury the plea of set-off, and directed a verdict for appellee for the balance shown to be due on the note. Originally appellants and one Banner were engaged in selling automobiles as partners under tbe firm name of Barrington & Horn Chevrolet Company. They sold many automobiles on credit, and, to, avoid embarrassment in enforcing collections from purchasers, tbe Chevrolet Company would indorse security notes to tbe Auto Loan Company, which was used merely as a collecting agency. Tbe Chevrolet Company applied to the bank for a line of credit up to $20,000, which was extended, but when tbe three partners went to obtain their first loan the bank requested, and they gave, notes signed by one of them as maker and by the other two as indorsers. This was done at the suggestion of the bank; the reason given by it being that the loan exceeded the maximum percentage of its capital stock permitted by law. The original and all subsequent loans were plaeed by tbe bank to tbe credit of tbe partnership known as the Chevrolet Company, and were withdrawn in tbe regular course of business, being used solely for purposes of tbe partnership, and never for the separate personal benefit of tbe individual ■partners. Long before tbe bank failed, Banner sold Ms interest to appellants. At tbe time the receiver was appointed, the bank held tbe note in suit, which was given and accepted under the original plan to extend credit ; and tbe balance on deposit in tbe name of tbe partnership was tbe amount alleged by. Barrington in bis plea of set-off. After tbe appointment of tbe receiver, but before suit, Barrington bought Horn’s interest in tbe partnership business, including the deposit, and assumed all the liabilities of that business; particularly liability on tbe note sued on. Debts which are mutual may be set off against each other-. Scott v. Armstrong, 146 U. S. 499,13 S. Ct. 148, 36 L. Ed. 1059; Revised Civil Statutes of Texas 1925, art. 2015. Appellee could have maintained an action on tbe note against appellants as partners, since tbe debt was contracted on behalf of tbe partnership, and it received tbe benefit, under an agreement with tbe bank that tbe note was a partnersMp obligation. This is true, notwithstanding tbe fact that the note was executed by tbe partners as individuals. Mock v. Stoddard (C. C. A.) 177 F. 611; In re Kendrick & Co. (D. C.) 226 F. 978; Frederick v. Citizens’ National Bank (C. C. A.) 231 F. 667; In re Davis & Trousdale (D. C.) 280 F. 136. If this suit bad been brought against appellants as partners, it is clear that the-debts would be mutual. It is manifest that the debts are not deprived of their mutuality merely by tbe circumstance that tbe suit was brought against tbe partners as individuals. At the time of bringing suit, Barrington bad acquired Horn’s interest, and was tbe sole, owner of the business. There was no longer a' partnership.. Barrington therefore was entitled to set off the debt due by tbe bank to the former partnership against the bank’s note. Craig v. Henderson, 2 Pa. 261, 44 Am. Dec. 193; Slipper v. Stidstone, 5 T. R. 493; 24 R. C. L. 868. The judgment is reversed, and the cause remanded for further proceedings iiot inconsistent with this opinion.