Williams v. Barnett

The opinion of the court was delivered by Bkewer, J.: This case has been here once before. On the first trial in the district court the plaintiff (present plaintiff in error) obtained a judgment. That judgment was reversed by this court on the ground of error in the admission of testimony. (7 Kas., 339.) Upon the second trial the defendant obtained judgment, and to reverse such judgment the present proceeding is instituted. Two questions arise on the record. The first question we shall consider grows out of the giving, at the instance of the defendant, the folloAving instruction: “ If the jury find from the evidence that the plaintiff, with the knoAvledge of the partnership, contracted for the corn in dispute of one of the partners, Butts, and the proceeds of such sale, by the terms of the contract between such partner and buyer, were to be- applied to the separate private account of such partner, without the knoAvledge and consent of the other partners, such sale is, as against the other partners, fraudulent, and no title passed, and the jury must find for the defendant.” [461] i. partners; ciispose of partnership property, s. Fraudulent ner. [462] , 3. Knowledge of purchaser. [460] We see no error in this instruction. True, each member of [461] a partnership has the jus disponendi in reference to all the partnersliip property; but that right is subordinate to the obligation to make all dispositions for the t, x benefit oí the partnership. He may not pledge the partnership credit, or use the partnership assets, for the satisfaction of his- individual indebtedness without the consent •of his partners. That is a use foreign to the purposes of a partnership. Neither can he in any way dispose of the property so as to deprive the partnership of the benefit of it. In Rogers v. Batchelor, 12 Peters, 229, the supreme court of the U. S. said: “The implied authority of each partner to dispose of the partnership funds strictly and rightfully extends only to the business and transactions of the partnership itself; and any disposition of these funds by any partner beyond such purposes is an excess of this authority as partner, and a misappropriation of those funds, for which the partner is responsible to the partnership, though in the case of bona fide purchasers without notice, .for a valuable consideration the partnership may be bound by such acts. * * * In the case of a partner paying his own separate debt out of the partnership funds, it is manifest that it is a violation of his duty, and of the rights of his partners, unless they have assented to it. The act is an illegal conversion of the funds, and the separate creditor can have no better title to the funds than his debtor himself had.” See also upon the general subject of the limitation upon the power of a partner to use partnership funds or credit for individual benefit without the consent of his partners, Story •on Partnership, §§ 131, 133; 3 Kent’s Com., 43; Cadwallader v. Rooesen, 22 Md., 200; Dob v. Halsey, 16 Johns., 34; Gansevort v. Williams, 14 Wend., 133. The question has generally arisen in cases where a partner has given a firm note for his individual debt. But the principle on which these, cases rest sustains this instruction. That which vitiates is, the attempt to wrong the partnership. To it belongs a certain amount of credit and property. To transfer either, without its consent, .is a trespass on its rights. And it makes no difference whether [462] its credit or its property be taken, nor whether the proceeds be applied to the payment of a pre-existing debt, or the creation of a new account. In either case the partnership loses, while the individual gains. Of course, it often ¿results, from the acts of bona fide purchases from one of the partners, that that partner is placed in possession of money or securities, and converts the same to the injury of the partnership. This, considering the powers of a partner, is unavoidable, and in nowise chargeable to the purchaser. But when the purchaser contracts to secure to the individual the price that A belongs to the partnership, he is ■ a party to the wrong, and cannot complain if he suffer the penalty. We think therefore, that the principle of law embodied in this instruction is correct. But it is insisted that though this may be true as a general proposition, yet there are many exceptions and qualifications to it, and that at any rate it is wholly inapplicable to the facts of this case. It may be that there are many things which will qualify the application of this principle to any given case. The partners may have expressly consented to such transaction. The course of prior dealing may have been such as to authorize it. The one partner may have obtained, by the consent of the others, an exclusive interest in the particular property. Probably, too, where the amount is small, and the interest of the partner making the disposal is so great that no reasonable danger to the interests of the others can be apprehended, the transaction will be sustained. It will then be regarded as simply the exercise by the partner of his right to draw out funds for his own support. But none of these exceptions or qualifications appear in this case. It was unnecessary therefore for the court to notice them in his instructions. [463] 4. Fraudulent ?quit3?seiiTOr to be disregaraed. [462] We think also that the facts of the case warranted this instruction. The plaintiff, by his own testimony, knew of the partnership, contracted with one of the partners for $6,400 worth of property, about all the partnership owned, paid $350 down, took a receipt in full from him in the name of the firm, and agreed with the one partner to whom he had paid the [463] $350 to secure to him individually the balance. His own words are, “The reason I had the bill of sale receipted in full, when only $350 had been advanced was, that my settlement for the remainder of the amount due, when ascertained, should not be with the firm, or with Bailey or Weightman, whom I did not know, but with Butts, with whom I was well acquainted; it was to make the remainder of the transaction an individual,, not a firm matter." The instruction was eminently appropriate. The views we have thus stated seem to us decisive of this case, and to avoid the necessity of further examination. It is unnecessary to inquire into the validity of the transfer to Harris, Hutchinson & Co., or the title or right of possession of defendant. The plaintiff must recover upon his own title and right of A ° # possession; and if it appear from his own testimony, as \ye think it does, that his claim is based upon a transaction which the law will not tolerate, it matters not what errors may be in the record, the judgment against him should not be disturbed. We have hitherto said nothing about the terms of the partnership between Bailey, Weight-man & Butts, but have treated the case as though there, were nothing in it differing from those of any ordinary partnership, as affecting this question. The partnership was for the purchase and sale of corn. The contract was reduced to writing. Bailey & Weightman were to furnish $10,000, and Butts was to attend to the purchasing and shipping of the corn. Twice in the contract, which only fills a single page of legal cap, is it stipulated that all the corn shall be purchased in the name of Bailey & Weightman. This written contract the plaintiff had seen and read, and had been consulted with by Butts as to its effect. While by its terms Bailey, Weightman and Butts were unquestionably partners, and a sale by Butts to a bona fide purchaser, ignorant of the terms of the contract, would have passed good title, it is nevertheless evident that the parties intended to vest the control of the corn purchased in Bailey & Weightman, and the plaintiff purchased with notice of such [464] intention. This makes the case against him all the stronger. The judgment will be affirmed. All the Justices concurring.