Marine Co. v. Carver

Mr. Justice Lawrence delivered the opinion of the Court: The firm of Carver & Co. commenced its suit against the Marine Company of Chicago, to recover a balance of $638.89, which Carver, a member of the former firm, had misapplied in payment of his private debt. This sum stood to the credit of Carver & Co. on the books of the Marine Company, and Carver, being individually indebted to that company, on the 26th of June, 1861, drew a check in favor of the company, signing the name of his firm, and the check was placed to the credit of his individual account. In July, 1861, another member of the firm of Carver & Co. drew a check in the name of the firm, for the supposed balance in their favor on the books of the Marine Company, and sent it to the office of the latter, by their clerk, for payment. The clerk was informed that the account was balanced, and so reported to his employers, and was then sent back for a statement. On returning to the office of the plaintiff in error, he was shown the account and the check drawn by Carver, upon which it had been balanced. He took the check and returned with it to Carver & Co., who retained it to the time of the trial. The clerk also testified that Mr. Billings, one of the members of the firm of Carver & Co., and Mr. Scammon, one of the members of the Marine Company, afterward had some conversation about the matter, when witness was called in and stated the above facts. On the trial in the court below, a jury was waived, and the court gave judgment in favor of plaintiffs for the amount of said balance and interest. This suit, for its recovery, was commenced on the 26th of June, 1865. However clear the right of the plaintiffs below to recover might have been, if they had repudiated the action of Carver as soon as it came to their knowledge, we are obliged to regard the actual facts as amounting to a ratification. The check drawn by Carver was returned to them by the Marine Company, with a statement of the balanced account, and this check they retained, allowing Carver, one of their firm, to retain the credit for its amount, which he had received on the books of the Marine Company. Suppose the latter, after the check had been received by Carver & Co., and retained by them, had brought suit against Carver for the amount of his individual indebtedness, could it have recovered judgment for the sum which had gone to his credit upon this check % Clearly not, because he would have shown that the check, whether properly drawn or not for his individual benefit, had been duly returned to his firm and retained hy them, and thus treated in all respects as if it had been drawn by their authority, or at least received their sanction. But it is said that the Marine Company was not injured by this apparent ratification, because Carver still was, and continued to the time of the trial, largely indebted to the company. But how can the court from this circumstance alone, say the Marine Company was not injured ? If the firm of Carver & Co., had repudiated his act and returned the check, they would have thus advised the Marine Company, that, in the opinion of his copartners, Carver was unworthy of credit, and this would have induced that company to make an effort for the collection of its debt. But the apparent acquiescence of the copartners of Carver would indicate their own confidence in his pecuniary solvency, and thus tend to strengthen his credit with the Marine Company and lull it into a false security. In cases of this character it is to be remembered that the duties and obligations between members of a partnership and third persons are reciprocal. While it is true that one partner cannot rightfully appropriate the partnership funds in payment of his individual indebtedness, yet it is equally true, that, if he does so appropriate them, his acts, when they come to the knowledge of the other members of the firm, should be clearly and promptly repudiated. At least no room should be left for doubt, in the minds of the parties concerned, as to whether the act is repudiated or ratified. Good faith requires this, for copartners must necessarily understand the pecuniary condition of each other better than third jiersons can do, and if they seem to ratify an act of one of their firm originally unauthorized, it is a declaration in his behalf that he possesses their confidence and is entitled to credit. It would be most injurious to the interests of the commercial community, were we to hold, that four years after the misapplication of partnership funds in the payment of individual indebtedness, the firm during all that time, having had knowledge of the fact, and so far as appears, acquiesced, and retained the check improperly drawn in their name as they would have retained one drawn in the ordinary course of business, they could then turn around, repudiate the transaction, and repudiate their own apparent sanction of it, and recover the funds on the ground of the original absence of authority in their copartner thus to apply them. The judgment is reversed and the cause remanded. Judgment reversed.