Trumbull v. Union Trust Co.

Gtabnett, P. J. From the statement of facts it is clear that the amount of money advanced by the Union Trust Company upon wool shipped by Ayers & Fell, and which was still unpaid at the time of the hearing in the County Court, is purely conjectural. It is admitted that the entire account of Hall & Co. with the trust company was at all times kept as one individual account. The various payments on, and renewals of all the Hall & Co. paper, made after the last advance on that wool, appear to have hopelessly destroyed all traces of the identity of those advances. Ho effort was made to prove that the payments were not properly applicable to these specific items in the absence of directions by the debtors to apply them differently. Ho special application by the trust company of such payments is shown. Ho fact or circumstance in proof furnishes a foundation for any presumption in favor of the trust company’s contention that a specific amount of the remaining debt of Hall & Co. represents part of the advances on the Ayers & Fell wool. The trust company affirmatively asserts that at the date of the assignment, Hall & Company owed it a certain sum of money, which by agreement was made a lien on certain wool in the warehouse of the debtors. To maintain that allegation the burden of proof was on the party making it. It was necessary to prove, not only that Hall & Co. were in debt to the trust company, but that the debt proved, or some specific part of it, was the debt which the debtor had agreed to secure by lien on the wool. Changes in the form of the debt would not affect the security, but the payments made may have extinguished the liability in question. It certainly appears from the evidence that payments were made in amounts sufficient to satisfy all the advances on the Ayers & Fell wool. If these payments should be applied to other items in the account, the claimant should have proved the facts requiring that application. It is unnecessary to enter into a critical analysis on other points of the evidence offered in support of the claim of the Union Trust Company, as the most liberal inferences warranted by the proof do not justify the finding of a lien in its favor. The court erred in awarding to it a better standing than that of the general creditor without security. A serious question is presented as to the authority of the two partners to make the assignment without the third joiningin, or authorizing its execution, yet we think the current of authority and the better reasoning establish the rule that an assignment of that character can not be made in the absence of the other partner and without his authority, unless a crisis has arrived in the affairs of the firm, and the absent partner can not be consulted, personally or otherwise, in time to avoid or meet the threatening emergency. If these conditions exist, authority from the absent partner to make the assignment is implied. [Ratification by the absent partner does not operate to divest the rights of purchasers and lien holders, acquired in good faith after the execution of the first instrument, and before the ratification. 1 Bates on Partnership, Secs. 338, 339; Stein v. La Dow, 13 Minn. 412 (381); Holland v. Drake, 29 Ohio St. 441; Coleman v. Darling, 66 Wis. 155; Hook v. Stone, 34 Mo. 329. The case in hand is not within the exception. Thomas W. Hall on July 19, 1888, was absent from Cook county; where he was, is not proved. For aught that appears, he could have been personally interviewed by another member of the firm within an hour’s ride of Chicago. If not, he may have been accessible, at a more distant point by telegraph or telephone. If he was in Montana, as stated by counsel, there is no reason to believe he could not be reached by wire. At all events, the record is barren of evidence as to his whereabouts when the supposed assignment was executed, and the instrument was inoperative to pass title until it was ratified by him on July 21st. To the suggestion that the interest of the two partners executing, if nothing more, passed to Kinsey, the reply is simple. That was not their intention, or the intention of the assignee in accepting the supposed trust, nor could they in that manner terminate the partnership. The law absolutely denies the power of two out of three partners to assign under these circumstances, and is not so inconsistent as to permit an act to be done indirectly when it refuses to allow it to be done directly. If this conclusion is correct, there was nothing to prevent the storage company from taking possession on July 20th of the premises of which it held leases, and the wool there stored. We are unable to see that it makes any difference that it contrived to take possession by deceiving Kinsey. Stearns v. Sampson, 29 Me. 568. At that time he had no right as against the storage company. Although the evidence is convincing that its so-called possession prior to July 20th was a mere pretense, and would have been wholly insufficient to protect it and its receipt holders against a judgment creditor of, or bona fide purchaser from T. W. Hall & Co., the action taken by it on that day was sufficient (so far as the wool covered by its receipts was concerned) to make its title complete against the assignors, assignee and general creditors to the extent of the advances of its receipt holders, which remain unpaid. The argument that the receipt holders have no better footing in the case than the storage company, and that it can have no rights because the evidence shows that its arrangements with Hall & Go. were intended by both parties to procure for the firm a credit from others which would not have been extended if their relations were made known, is not sound. The receipt holders are free from fault, whatever may be said of the storage company. They advanced their money on the receipts in good faith, having no reason to believe that any such intention existed as is charged, or that the possession of the storage company would be so evanescent that their investments would be in constant danger. Why should they be visited with a penalty, which, if inflicted at all, should be borne only by the transgressors? It is true that appellant’s success in this case is a measure of indirect benefit to the storage company. But whatever infirmities may be charged to the law, it never consents to the punishment of the innocent for fear the guilty may flourish. The proceeds of all the wool on the second and third floors, except what was directed to be paid to Patterson Brothers, Lieneman & Schmidt, Grande Brothers and Barberry and Kertz, should be awarded to the storage company for use of its receipt holders, deducting the expenses as hereinafter directed. The evidence shows to our satisfaction that Patterson Brothers’ wool, to the extent of the proceeds of sale were awarded to them by the decree, was in the warehouse of Hall & Co. at the time of the assignment, and was distinguishable from all other wool there. That is also tacitly conceded by appellants to be the case with the wool found by the decree to belong to Lieneman & Schmidt; and it sufficiently appears that, although Grande Brothers’ wool was lost sight of, other wool was substituted for, and received by Hall & Co. in place of it. The shipments by Parberry and Hertz consisted of Montana wool. After it was received in the warehouse, each of their shipments was graded, and that belonging to each grade was mixed with other wool of the same grade; but no account appears to have been kept of the quantity of any grade belonging to either shipper, nor does the evidence disclose how much of any one grade was received from either Parberry or Hertz. There was some evidence of a custom authorizing the factor to mix consignments of the same grade from his several customers, but the custom testified to, falls far short of permitting the disposition made of the Parberry and Hertz wool without taking any precaution to ascertain the quantity in each grade. It would seem, therefore, clear, that Hall & Co. were guilty of confusion when they thus obliterated all traces of the property of these two consignors. Against these wrongdoers, certainly there should be an effectual remedy, and we think that applied by the court in allowing the owners of the wool less than the average proceeds of those grades of wool was none too liberal. The doctrine of confusion is intended to make the wronged party whole beyond all doubt, and had the decree found Parberry and Hertz entitled to the proceeds of every pound of wool out of the best grade with which it was mixed, there might be serious difficulty in disputing the propriety of the finding. 2 Schouler on Personal Property, Secs. 43, 47, 48. Appellants were not absolute purchasers, but merely lien holders or pledgees, and so they have no better standing against these consignors than the factors, Hall & Co., would have. Jones on Pledges, Secs. 328, 329, 331. The decree in- favor of Patterson Brothers, Lieneman & Schmidt, Grande Brothers, Barberry and Kertz, is not erroneous. The claims of Yehmeyer and the Lincoln National Bank were correctly disposed of. They were based on what purported to be warehouse receipts issued by T. W. Hall & Co. That firm was never in the business of warehousing, although they had for several years issued what were in form warehouse receipts of their own property stored in their own warehouse. That course of business does not make what is known as a warehouseman, nor does a receipt of that character furnish any greater protection to the holder than an unacknowledged chattel mortgage. No attorney’s fee should be deducted from the share of appellants in the proceeds of the wool. The attorney’s fee should be paid by the assignee from the general fund, except so far as the direction to pay from the shares of the several parties having priorities was consented to or not complained of. So far as the other charges and expenses are concerned, the decree is approved. Patterson Brothers, Lieneman & Schmidt, Grande Brothers, Barberry and Kertz will recover their costs in this court against appellants. Yehmeyer and the Lincoln National Bink will be charged with their own costs, and appellants will recover one-third of their costs from the Union Trust Company. We think no error is disclosed by the record aside from those pointed out herein. The decree is reversed and the cause remanded with directions to the County Court to enter a decree in conformity with this opinion. Reversed cmd remanded with directions.