Bank of Morton v. Ethridge & Hardee

HoldeN, J., delivered the opinion of the court. It,appears that E. T. Ethridge and J. L. Hardee operated a turpentine business near Morton, Miss., as a partnership under the firm name of Ethridge & Hardee. Mr. Hardee lived in another part of the state, and the business was managed by Mr.' Ethridge, who transacted all the business of the concern, paying off the hands, making contracts for turpentine rights, borrowing money at different times with which to run the business and pay the hands, and selling the products and purchasing the crude materials to be used in the business. Ethridge executed a note for one thousand dollars in the name of the firm -to the Bank of Morton, received the money and used it in the regular course of the business of the partnership, the money being used to pay the debts of the concern contracted for turpentine rights, labor, and other necessary expenses in connection with the operation of the plant. When the partnership became insolvent, Hardee, the only solvent member of the concern, took over the assets and disposed of them, and refused to pay the note here in question, claiming that he was not individually liable for the amount of the note because he did not authorize its exécution, but, on the contrary, that he had previously notified the Bank of Morton that he would not be individually responsible for ány loán that it might make to the firm of Ethridge & Hardee. The Bank of Morton [215] admitted having received this notice from Mr. Hardee several months before the loan was made, bnt the bank introduced proof, showing that Mr. Hardee subsequently authorized this loan of one thousand dollars to the firm by telephone and otherwise, which was denied by Mr. Hardee.. The chancellor found in favor of Mr. Hardee in the lower court on this disputed question of fact, which finding we do not disagree with. But we disagree with the chancellor in his holding, under all the facts in this case, that Mr. Hardee is not liable for the amount of the note. It appears conclusively from this record that Mr. Hardee instructed Ethridge to borrow money for use in the business; and, further, it is shown that Ethridge was managing and conducting the business and had full authority to contract debts and borrow money to carry it on, and that this was done with the knowledge of the appellee Hardee. The money that was obtained from the bank was used to pay the debts of the firm in the regular course of its business, and it inured to the personal benefit of Hardee in paying the necessary expenses and debts of the business which otherwise he would have had to ultimately pay. The money was thus used in carrying on the business of this concern with the knowledge and consent of Mr. Hardee, and he was, according to his own testimony, notified of the existence of this loan to the firm at the time the money was being used to pay the debts incurred in the usual course of the business, and he did not then object or protest, but impliedly acquiesced therein, with full knowledge of the use that the money was being put to and the benefit he was receiving therefrom. Therefore Mr. Hardee by his conduct impliedly ratified the loan and became responsible for it as a partner in the business. We think it would be contrary to equity and good conscience to hold that a partner may escape liability, even though he had several months prior notified a bank to not loan money to his partnership, [216] when such loan is made to the partnership by his instruction, in the usual course of the business, and where he knowingly received the benefit of the money by using it to carry on the business and pay the debts of the firm for which this member would otherwise be individually liable. Am. & Eng. Enc. Law, vol. 22, pp. 140, 161; Story on Partnership, p. 223, sec. 37, p. 44; 30 Cyc. 477, 478, 485-487, 489-504; Cummings v. Parish, 39 Miss. 412; Langan v. Hewett, 13 Smedes & M. 122; Sylverstein v. Atkinson, 45 Miss. 81; Anderson v. Wanzer, 5 How. 587, 35 Am. Dec. 170. In view of these conclusions, the decree of the lower court, dismissing the bill as to Mr. Hardee, is reversed, and a decree entered here for appellant. Reversed.