Carter Bros. v. Galloway & Burns

The opinion of the Court was delivered by Manning, J. In a suit by the plaintiff firm against the deiendant firm of Trezevant, Tenn;, for $2,076.58, a writ of attachment issued, and Kirkpatrick & Co. of this city were served with interrogatories and process of garnishment. They answered, denying any indebtedness, whereupon a rule was taken to traverse their answer. In the main suit there was judgment in favor of the plaintiffs for their demand, less $692.19, received by them from the defendants since the institution of this suit, and also against the garnishees for $764.50 with interest. The garnishees appealed. Galloway & Burns had a running account with the appellants. They failed, and made an assignment on February 9, 1882 in Tennessee, eleven days before this attachment was issued. Kirkpatrick & Co. had received from Galloway & Burns ten bales of cotton on Nov. 21,1881, and a bill of lading therefor accompanied by a letter of instructions, and eleven bales on Feb. 8, 1882 with bill of lading and a letter of instructions, the purport of the instructions for both shipments being to hold for account óf W. H. Galloway, the senior member of the defendant firm. These instructions were without the knowledge of his partner. Galloway had been speculating in futures, and his directions were that these twenty-one bales should be held as margin for his private speculation. A partner cannot divert property belonging to the firm to his own use, and any one dealing with him and knowing the facts will be deemed to have acted in bad faith, and in fraud of the partnership, and the transaction by which the funds or securities of the partnership have been so obtained will be treated as a nullity. Story on Partnership, § 132. He who knows that the partner’s act is not within the firm-business, knows that it is not authorized, and when he knorvs that the partner is acting for his own immediate and several benefit, [732] he cannot presume that the firm authorizes it. Parsons on Partnership, 228. A party taking- the paper of a firm with the knowledge that it was given for the private or personal debt of one of the partners, knows enough to 'put him on his guard, and is bound to inquire whether the firm authorized the use of its name Ibid. 121. The principle applies to the property of a firm equally as to its paper. Kirkpatrick &Co. received these shipments from the firm in the same manner as they had received others — the bills of lading drawn in the same way — and all others had been placed to the account of the firm except these two. They are therefore charged with knowledge that one of the members of the firm was diverting its property to his own use, and must therefore be held to accountability for it to the firm, or the firm’s creditors. Oral objection was made that the garnishees were owners of the proceeds of this cotton, and that their title could not be attacked except in a direct action, on the authority of Ivens’ case, 30 Ann. 249. No exception was made to the rule to traverse, nor any plea filed, nor even oral objection (we are informed) to the trial of the rule. So serious a question as that of title, entailing the legal consequence of a direct action for its attack, ought surety to have appeared by written exception orplea. Florance v. York, 2 Ann. 996. Slatter v. Tiernan, 12 Ann. 376. The objection was not made until the argument. If valid, it should have been made sooner, and should have been put formally on record. This was said explicitly by the Court in Florance v. York ut supra. Judgment affirmed.