Platt v. Koehler, Dickey & Co.

Gbangeb, C. J. 1 2 [595] It is conceded on the authority of Sherwood v. Snow, 46 Iowa, 481, that “an individual loaning money to one member of a mercantile firm, and receiving a note therefor, has a right to presume that the note is made in the¡ course of the partnership business, and binds all the members of the firm.” The facts giving rise to the rule thus stated are precisely those of this case. In this case the fact is disclosed on the trial that Koehler, in obtaining the money, intended it for his own individual use, and so used it. It thus actually appears that the money was borrowed and used for a purpose outside of the partnership affairs, and without authority, but without' knowledge on the part of the plaintiff, and in a way that he had a right to presume it was for the firm use, and that the transaction was authorized by the firm. To defeat a recovery, in view of such facts, it must be made to appear that plaintiff parted with his money and took the note with knowledge of Koehler’s purpose in obtaining it, and as to this fact the court found that the testimony was “in equipoise,”' and, as a conclusion of law, held that, the burden being with defendants to show such knowledge, they must fail. Appellants’ claim is that when the facts are shown to be otherwise than as plaintiff, under the rule,' had a right to presume them, — as that the money was not borrowed for the firm, nor authorized by it, — then it devolved upon plaintiff to show that he was without [596] knowledge of the facts. It seems to us that the case of Sherwood v. Snow, supra, is quite conclusive of the question. See, also, Buettner v. Steinbrecher, 91 Iowa, 588, 60 N. W. Rep. 177. It should not be overlooked that the facts of that case and this are different from many cases on which reliance is placed, wherein an individual member of a firm gives the firm note for his own debt, or for the accommodation or security of the partner or of a third person, and money or property is not parted with when the note is executed. In the case of Bank v. Selden, 3 Minn. 155, the rule is stated as follows: “It is also well settled by the American decisions that where it appears in proof, or by the instrument itself, that a partnership note was given for the debt of one of the partners, or the partnership name was used for the accommodation of or the security of the partner or a third person, and that such fact is known to the creditor, or is implied from the nature of the transaction at the time the note or other instrument is received by 'him, the burden of proof is thrown on the creditor to show a previous authority or subsequent consent on the part of the other partners, before they can be charged. 1 Am. Lead. Cas. 406, etc., and the cases there cited.” It will be seen that the rule of that case is that the burden shifts to the creditor when it appears that the note is given for a private debt, for accommodation, security, or the like, and such fact is known to the creditor, or is implied from the nature of the transaction at the time the note or other instrument is received by him. There is a long line of authorities of substantially the same character. Some.' general statements give rise to appellants’ contention, but in no case that we have seen is a rule announced that shifts the burden as to knowledge, with the facts as in this case. In the Sherwood case, supra, after stating that “an individual loaning money to one member of a mercantile firm, and receiving a firm note therefor, has a right to presume that [597] the note was made in the course of the partnership business, and binds all the members of the firm,” it is further said: “But this presumption may be' rebutted by'showing it to be otherwise.” The presumption is not rebutted by showing that the partner acted wrongfully, but by showing that the creditor had no right to presume that the not® was made in the course of the business of the firm, and this may be done by showing that when he received the note he knew, or had reason to know, that it was for the accommodation, security, or personal benefit of the member of the firm, or such knowledge may be implied from the nature of the transaction in some cases, as where the note is received for a preexisting debt due from the partner to the creditor. Mr. Daniel, in his work on Negotiable Instruments, in discussing the subject “As to the Burden of Proof” (section 369), speaking of a note signed by the firm name, as in this case, says: “If the firm resists payment, it will be sufficient to show that the copartner signed the firm name for a private debt due the plaintiff, and its defense is then complete, unless the plaintiff reply by showing the assent of the copartners.” The italics are ours, to show the presumption that arises from the fact that the note is given for a debt of the partner, which indicates that the transaction is personal as to him. No case holds that a “defense is complete,” in a suit on such a note, for the firm to show that the copartner used the money obtained for the note for his private use, unless the plaintiff show that he had no knowledge of such purpose when the note was received. Appellants cite other parts of the same section in Daniel on Negotiable Instruments, but they refer to different facts — as where the suit is brought' by a “subsequent holder” of the paper, and the well known rule as to the change of the burden of proof is stated where there is fraud at the inception of the contract. We think the legal conclusions of the court are correct, and its judgment is aeeirmed.