Stevens v. McLachlan

Grant, C. J. (after stating the facts). The rules of law applicable to the commercial paper here in controversy are well established. As briefly as I am able to state them, they are as follows: — 289 — 1. D. A. McLachlan & Co. being a trading or commercial partnership, each member of the firm, and especially ■ the one intrusted with the transaction of its business, was authorized to bind his partner in all transactions pertaining to the business of the firm. Among these was the right to borrow money for the firm, and to issue notes therefor, or to draw drafts for the same purpose. The lender was entitled to assume that the money was borrowed for the use of the firm. Winship v. Bank, 5 Pet. 529; Stimson v. Whitney, 130 Mass. 591; Kimbro v. Bullitt, 22 How. 256; Dowling v. Bank, 145 U. S. 512; Smith v. Collins, 115 Mass. 388; Sherwood v. Snow, 46 Iowa, 481 (26 Am. Rep. 155); 4 Am. & Eng. Enc. Law (2d Ed.), 176; Feurt v. Brown, 23 Mo. App. 332. ; 2. If plaintiff took the paper in good faith, for value, before maturity, and without knowledge, either actual or constructive, that it was tainted with fraud, his title thereto is perfect. In such case it is no defense that the money was misapplied by one of the partners. Nichols v. Sober, 38 Mich. 678; Fuller v. Percival, 126 Mass. 381; Atlas Nat. Bank v. Savery, 127 Mass. 75 (34 Am. Rep. 345); First Nat. Bank v. Morgan, 73 N. Y. 593; Beal-Estate Investment Co. v. Smith, 162 Pa. St. 441; Phillips v. Stanzell, (Tex. Civ. App.) 28 S. W. 900; Whitaker v. Brown, 16 Wend. 505; Mechanics’ Bank v. Foster, 44 Barb. 87; Gale v. Miller, Id. 420. 3. The taker of a promissory note or bill of exchange may lawfully presume that it is a partnership transaction. Schwanck v. Davis, 25 Neb. 196; Doty v. Bates, 11 Johns. 544; Whitaker v. Brown, 16 Wend. 505; Haldeman v. Bank, 28 Pa. St. 440 (70 Am. Dec. 142); Littell v. Fitch, 11 Mich. 525; Carrier v. Cameron, 31 Mich. 373 (18 Am. Rep. 192). 4. The fact that such paper is payable to a member of the firm is no evidence that it is not a partnership transaction. Ihmsen v. Negley, 25 Pa. St. 297; Haldeman v. Bank, 28 Pa. St. 440 (70 Am. Dec. 142); Feurt v. Brown, 23 Mo. App. 332. — 290 — 5. The onus probandi was upon the defendant to show any fraud, lack of authority, or that the paper was not given for partnership purposes. Littell v. Fitch, 11 Mich. 525; Carrier v. Cameron, 31 Mich. 373 (18 Am. Rep. 192); Doty v. Bates, 11 Johns. 544; Whitaker v. Brown, 16 Wend. 505; Sherwood v. Snow, 46 Iowa, 481 (26 Am. Rep. 155); Phillips v. Stanzell, (Tex. Civ. App.) 28 S. W. 900. 6. When such fraud is shown, the onus probandi then shifts to the plaintiff to show that he took the paper in good faith and for a valuable consideration. Vosburgh v. Diefendorf, 119 N. Y. 357 (16 Am. St. Rep. 836), and authorities there cited. 7. Proof of circumstances which would be sufficient to put a prudent man upon inquiry is not sufficient to defeat recovery. The circumstances must be such as to show mala, fides on the part of the holder. This may be shown by evidence of actual knowledge of the purposes for which the paper was given. Nichols v. Sober, 38 Mich. 678; New York Iron Mine v. Citizens’’ Bank, 44 Mich. 344; Miller v. Finley, 26 Mich. 249 (12 Am. Rep. 306); Borden v. Clark, 26 Mich. 410; Chapman v. Remington, 80 Mich. 552; Goodrich v. McDonald, 77 Mich. 486; Atlas Nat. Bank v. Savery, 127 Mass. 75 (34 Am. Rep. 345); Goodman v. Harvey, 4 Adol. & E. 870. 8. If the plaintiff was a bona fide holder of the original paper, his right -to recover is not defeated by renewals, and McLachlan was not released thereby. Tilford v. Ramsey, 37 Mo. 563; Preston Nat. Bank v. Pierson, 112 Mich. 435; Wilson v. Richards, 28 Minn. 337; Hopkins v. Boyd, 11 Md. 107. We have cited only a few- of the authorities referred to in the briefs of counsel. Mr. McLachlan saw fit to enter into a trading partnership with Mr. Linn, which expressly provided for the borrowing of money, the making of promissory notes, and the procuring of indorsements. Mr. Linn, both by express contract and by implication, had the power to borrow the money and make the paper in contro — 291 — versy. If there is any competent evidence in the record that the money obtained from plaintiff was not used in the partnership business, it has escaped my attention. Mr. Linn testified that it was. The only testimony to the contrary is that of Mr. Gourlay on redirect examination, who testified that Mr. Linn, after the controversy over these notes had arisen, said to him that “he put fifteen thousand or twenty thousand dollars into the elevator scheme.” This testimony might be legitimate to impeach Mr. Linn if the proper foundation had been laid, but it is not affirmative evidence of a diversion of the money obtained upon these notes from the business of McLachlan & Go. If, however, there were such evidence, the record is barren of testimony tending to show that plaintiff was guilty of any mala fides in the transaction, or that he had any knowledge that the moneys obtained from him wereto be, or ever were, diverted from the partnership. Linn informed him of the partnership, told him what he wanted the moneys for, and plaintiff took the paper in full reliance upon Linn’s representations. In some cases he advanced the money; in others he indorsed the paper, and the money was obtained at the bank. When the notes became due, he paid them. The mere fact that he was engaged in other transactions, and had indorsed other paper, and had loaned other moneys to Linn and Mattullath, is no evidence of bad faith, and does not tend to show that any of these moneys were appropriated for other purposes. Upon the record, the court properly directed a verdict for the plaintiff. Some of these notes were renewed after McLachlan had notified plaintiff by letter, repudiating his liability upon them, and stating that Linn had no authority to make them. The partnership at the time was in existence, and, under the authorities above cited, McLachlan was not relieved by the mere renewals. Having power to make them, he had also the power to renew them while the partnership lasted. The only remaining question is whether the court erred in the exclusion of testimony. The defendants offered in — 292 — evidence other notes of similar character to these, which are also in suit, and also certain letters which passed between the parties. There is nothing in them which could be construed to show notice to plaintiff of any of the defenses set up, or any knowledge thereof on his part. They were properly excluded. Defendants made a motion for a new trial upon the ground that they had been deprived of certain evidence given by plaintiff upon a former trial. This evidence consisted of testimony which had been taken between the same parties in a suit tried just before the trial of the present case, which lasted nearly a week. The same attorneys tried that case; the same stenographer took the testimony. This testimony was subsequently written out, and the claim is now made that it was impossible for the defendants to have had a copy of it for use upon the present trial, and that plaintiff gave testimony upon the other trial material to the defense in this case. If this were so, the stenographer could easily have had his attention called to it, and the testimony read over, during the progress of this trial. We think the court properly refused to grant a new trial upon this showing. Judgment affirmed. Montgomery and Long, JJ., concurred with Grant, C. J. Hooker and Moore, JJ., did not sit.