Barber v. Van Horn

The opinion of the court was delivered by Horton, C. J.: C. Van Horn, a person of considerable wealth, resided at Springfield, Mass. B. H. Dayton was his son-in-law, having married his only daughter. On April 1, 1875, B. H. Dayton formed a partnership with E. A. Barber, under the firm name of Dayton, Barber &■ Co., to carry on the business of private banking at Humboldt, in this state. Dayton was the active manager of the banking business. Barber was a practicing lawyer, and attended to the collections of the firm. On September 1,1884, the firm dissolved by mutual consent. Dayton died the 6th of October, 1885. At the time of his death, Van Horn had in his possession four notes signed by Dayton, Barber & Co.: One for $1,100, dated November 30,1878; another for $1,000, dated February 7, 1881; a third for $4,000, dated April 1, 1888; and a fourth for $1,200, dated December 6,1878. After the death of Dayton, and on October 23, 1886, Van Horn filed in the probate court of Allen county his demands against the estate of B. H. Dayton, deceased. The property of the estate was insufficient to pay all his claims, and on the 31st of December, 1888, Van Horn commenced his action against E. A. Barber, as a member of the late firm of Dayton, Barber & Co., to recover the amount of these notes signed by Dayton, Barber & Co., aggregating $7,300 and interest. Barber claims, and the trial court found, that he was not [43] liable as a member of the firm of Dayton, Barber & Co., or otherwise, upon the $1,100 note or the $1,000 note. The $1,100 note was given for certain notes placed by Van Horn in the hands of Dayton for collection. None of the money for which this note was given went for the benefit of Dayton, Barber & Co., and Barber knew nothing of the exis’ence of the note until after the death of Dayton. The court seems to have found that the $1,000 note was without any consideration, as the amount it represented had prior to its date been paid or satisfied by Dayton taking for Van Horn, from the firm of Dayton, Barber & Co., $1,000 in good notes, which was to pay the firm debt. Van Horn, on February 6, 1878, was fully notified by Dayton by letter of his action, and in his letter to Van Horn he stated that he had “put the notes into an envelope for him and would collect them for him when due.” Barber insists that the $1,200 and $4,000 notes were paid from the proceeds of the sale of Ohio land belonging to the firm of Dayton, Barber & Co., in 1879, 1881, and 1882. The original $4,000 note was given April, 1875, and due in five years. He claims that on April 1,1879, that note, after it was paid, was surrendered, and a new one given by Dayton with the firm name, without his knowledge or consent; and that subsequently this second note was surrendered, and the $4,000 note sued on was executed, on April 5, 1881, by Dayton without his knowledge. He further claims, that the original $1,200 note was given December 6, 1877, due in 60 days; that on January 29, 1879, after the note had been paid, it was surrendered, and a new one executed by Dayton without his knowledge, and dated back to December 6, 1878. The books of Dayton, Barber & Co. show that the $1,200 and $4,000 notes to Van Horn were canceled at the time of the receipt of the proceeds of the sale of the Ohio land belonging to Dayton, Barber & Co., and thereafter Barber had no knowledge of the existence of the notes, or the renewal thereof, or that any interest had been paid thereon. The trial court rendered judgment in favor of Van Horn against [44] Barber upon the $1,200 and $4,000 notes and interest, aggregating $7,644.40, less the $1,451 collected upon the demand filed by Van Horn in the probate court against the estate of B. H. Dayton, deceased. This made the judgment, as rendered, $6,193.40. The facts attending the execution of the various notes sued upon are stated fully in the findings of the trial court and in the correspondence between Dayton and Van Horn. Since this case was tried in the court below, Van Horn has died, leaving as his heirs, his daughter, Mrs. B. H. Dayton, and her children. Chester J. Dayton, one of the children, is the executor of the last will and testament of Van Horn, and since his death has been substituted as the defendant in error. But this case, as presented to us, must be decided, as to all the legal questions involved in the review of the rulings of the trial court, as if C. Van Horn, the plaintiff below, were the defendant in error in this court. It is conceded that the money evidenced by the $1,200 and the $4,000 notes went into the firm of Dayton, Barber & Co. for the benefit of that firm, with the knowledge and consent of both of the members. This money has never been actually paid to Van Horn. The court expressly found that nothing has been paid upon these two notes except interest. It appears from the findings that $5,498.72, a sum sufficient at the time to pay the $1,200 and $4,000 notes, being the proceeds of land in Ohio belonging to Dayton, Barber & Co., went into the hands of B. H. Dayton, and that he placed $4,656 of this to the credit of Van Horn in the bank of Dayton, Barber & Co., the balance received by Dayton not being accounted for. If Dayton had notified Van Horn that he had received and held this money for his benefit, or if Van Horn had authorized him to deposit any money in the bank to his credit, or if, after the money had been deposited, he had been notified or had personally used any part thereof, then the contention that the notes were paid would be good. But Van Horn never saw the deeds of the Ohio land, and never [45] knew anything about them until they were offered upon the trial. He never gave authority to Dayton to take the deeds in his name, and never authorized Dayton to sell any land in Ohio for him. 1. Partner-agent of the firm 3. Partnership matters — constructive knowledge. The account which was kept by Dayton in the bank of Dayton, Barber & Co. to the credit of Yan Horn was for Dayton’s own convenience, and Yan Horn knew nothing about the account and never drew out any part of it. To pay interest upon the notes at various times, Dayton drew from this account by checks, which he would sign with the name of C. Yan Horn, and then remit the amount thereof to Yan Horn in a draft in the name of Dayton, Barber & Co., but Yan Horn did not know he was being paid in that way. Dayton, Barber & Co. were responsible for Dayton’s conduct as a member of the firm, not Yan Horn. Both Yan Horn and Barber had the utmost confidence in the honesty and integrity of Dayton, and imposed implicit trust in him. That confidence was grossly betrayed by Dayton. He fraudulently deceived Barber, his partner, in pretending to him that the proceeds of the Ohio land had been used for the payment of these notes. For this deception, Yan Horn was not responsible. Every partner is a general agent of the firm to carry out and transact its business in the usual and ordinary way. The knowledge of Dayton concerning the partnership matters was constructively the knowledge Dayton knew that the proceeds of the Ohio land had not been turned over to Yan Horn, and, in the eye of the law, Barber had the same information. of Barber. [46] 2. Power of partner-apparent authority. [45] In the transaction of the partnership business of Dayton, Barber & Co., Dayton was not acting as the agent of Yan Horn, and in order to charge Yan Horn with the deception practiced by Dayton, Yan Horn must have had notice thereof or participated therein. Yan Horn, not being a member of the partnership, cannot be charged with knowledge of the acts or conduct of the members not actually brought to his [46] attention. The original notes of $1,200 and $4,000 and their several renewals were the acts of the partners; for it is the general principle relating to commercial or trading partnerships that each partner is the lawful agent of the partnership in all matters within the apparent scope of the business. (Deitz v. Regnier, 27 Kas. 94.) It is argued that Dayton was the authorized agent of Van Horn to collect the money from Dayton, Barber & Co., and having received the money from the firm and applied it to his own use, that Van Horn’s notes have been discharged. But Van Horn gave no direction to Dayton, or to Dayton, Barber & Co., for Dayton to collect or receive for him the proceeds of either the $1,200 or $4,000 note; and the court expressly refused to find, although requested so to do by Barber, that Dayton was the general agent of Van Horn. Again, it is insisted, as Van Horn presented and was allowed his demand against the Dayton estate, which amounted to over $17,000, for money held by Dayton and retained by the consent of Van Horn, which included the notes sued on, that this established that Dayton received the proceeds of the Ohio land as the agent of Van Horn. But the demand by Van Horn against the Dayton estate was evidence only. It was not conclusive upon the trial court. At the time Van Horn filed his demand against the estate of Dayton, he was not fully informed of the deception and fraud practiced by Dayton while he was a member of the firm of Dayton, Barber & Co. The other evidence in the case showed that Dayton had not collected the $1,200 and $4,000 notes with the consent of Van Horn, or retained any of the proceeds of the Ohio land with his knowledge. Where there is positive evidence to sustain the findings of the trial court, this court cannot disturb the same. [47] 4. Renewal note binding upon firm. 5. Note, signed by individual name and firm name. [46] It is further insisted, that as the $4,000 note, dated April 5, 1881, was signed by “B. H. Dayton” as well as by “Dayton, Barber & Co.,” Van Horn was notified thereby that the note was primarily the debt of Dayton, and not of the firm, [47] and therefore that the firm was relieved, upon the ground that it is no part of the business of a firm to act as surety for others, or to pay the private debts of a member thereof. In this connection, it must be recollected that the original $4,000 note, of which the note of April 5, 1881, was a renewal, was given for the debt of the firm, not for the individual use of Dayton ; and Van Horn had the right to assume that the last note was executed for the benefit of the firm, not for the use of Dayton. If any evidence had been introduced that Van Horn had notice that Dayton had in his possession on April 5, 1881, moneys of the firm for the express purpose of paying the note, and had notified Barber that the same would be used for that purpose, and that thereafter he had accepted such a note, Barber might be released; but the effect to be given to the circumstance of Van Horn taking the joint and several note of H. Dayton and Dayton, Barber & Co. in eonsidering whether Van Horn knew or ought to have known the note was executed without the knowledge of Barber, or in fraud of his rights, was a question for the determination of the trial court. (Sherwood v. Snow, 46 Iowa, 491.) The suggestion that Dayton had notes and mortgages in his hands as collateral to secure the payment of the $4,000 note is not sustained by the findings of the court or the evidence, and, therefore, Van Horn was not compelled to attempt to exhaust such securities, which did not exist, before proceeding against Barber. Evidently the indorsement by Dayton upon the note to that effect was false and untrue. At that time, he did have the proceeds of the Ohio land with which to pay the note, but disposed of the same without paying Van Horn. None of these proceeds can be traced to Van Horn, except the interest which Dayton paid therefrom in the name of Dayton, Barber & Co. Finally, it is insisted that the notes were barred by the statute of limitations, upon the ground that the interest was paid by Dayton on account of his individual liability, and [48] not that of the firm. But when Dayton was paying interest on the notes he was acting for the firm, unless Van Horn had notice to the contrary. Van Horn had no such notice. In paying such interest Dayton was not the agent of Van Horn. This case was tried by a very able, experienced, and painstaking judge, who found in favor of plaintiff below on the two notes last referred to. After a careful examination of the facts disclosed upon the trial and the decision cited, we cannot find any solid ground upon which to rest a reversal of the judgment upon these two notes. Upon the cross petition, it is insisted that the plaintiff below, upon the findings of fact, was entitled to judgment upon the $1,100 note, of November 30, 1878, and the $1,000 note, of February 7,1881. Deitz v. Regnier, supra, is cited as decisive. All the equities are in favor of Barber being relieved from any liability upon these two notes. The wife and children of B. H. Dayton ought not to be assisted, in the nature of things, beyond the strict letter of the law in recovering any money or property from Barber on account of the fraud practiced by Dayton upon his partner. None of the money for which the $1,100 note was given went to the benefit of the firm of Dayton, Barber & Co. The court made the finding as to that note that it was a private and personal transaction between Dayton and Van Horn only. Dayton, with the knowledge of Van Horn, paid the debt for which the $1,000 note was given by taking from the firm good notes aggregating over $1,000, and agreeing with Van Horn to collect them personally for his benefit. Van Horn, after full notice, trusted Dayton, not the firm, for the collection of these notes, and if he has not received the proceeds of the same, Barber is not responsible. The prayer of the cross petition will be denied. The judgment will be affirmed. All the Justices concurring.