Fosdick v. Van Horn
Fosdick v. Van Horn
Opinion of the Court
Prior to the year 1848, L. B. Lewis and William Eichelberger, under the firm name of Lewis & Eichelberger, had been partners in the flouring mill business in the town of Lawrenceburgh, Indiana, and in July of that year, Samuel • Fosdick, the plaintiff in error, came into the firm as a dormant partner. He continued his relations with the firm, as dormant partner, having a one third interest in the concern, until September 17th, 1868, when his connection with the firm was dissolved, and notice of the dissolution was published in a Lawrenceburgh newspaper. Fosdick resided in Cincinnati, and there managed the financial affairs of the firm, and by accepting its drafts, making sales of flour, and raising the requisite funds for carrying on the business, rendered unnecessary the borrowing of money in Lawrenceburgh. With the exception of a few bank officers and directors in that town, very few if any of the residents appear to have known that he had any interest in the firm of Lewis & Eichelberger. In addition to the business of manufacturing flour, L. B. Lewis and William Eichelberger, under the same firm name of Lewis & Eichelberger, were engaged in Lawrenceburgh in other branches of business— in prosecuting other enterprises — in which Fosdick was in no manner interested. As a firm engaged in other than the flouring mill business, they were paying out on an average
The material question however arises, did Lewis & Eichelberger borrow the money from Van Horn upon the credit of the firm in which Fosdick was a dormant partner ? At the time of the loan, Van Horn, in common with those who had monetary dealings with Lewis & Eichelberger not connected with their flouring mill business, might be presumed to know that they could not carry on their milling business without a supply of wheat. But, at the time of the transaction, when the money passed and the note was made, Lewis said nothing as to the use or purpose for which he wanted the money. He did not then represent to Van Horn or any one else that he was borrowing the money on the credit of Lewis & Eichelberger, as co-partners in the Homing mill business; nor does it appear that he represented Fosdick to be a member of the firm. The only conversation on the occasion seems to have been in regard to the time the paper should run, and the rate of interest to be paid. The testimony as to an alleged statement of Lewis, on the day of the transaction or the day before, that’ he wanted the money borrowed from Van Horn for the purpose of buying wheat, is too contradictory to sustain a reliable opinion. The fact that Van Horn loaned the money in the office at the mill, cannot place him upon a footing
The liability of dormant partners to the creditors of the firm, is determinable by well settled legal principles. Those who jointly participate in the profits of business ostensibly carried on by another for his sole use and benefit, are equally liable when discovered, with the ostensible owner, to all creditors of the concern whose debts were contracted during the term of such participation. Bigelow et al. v. Elliot, 1 Clifford C. C., 28. According to the weight of judicial authority, where a partnership of two persons is carried on in the name of one partner only, and he gives & note for borrowed money.in his individual name, the firm is not bound thereby, unless it is proved that the money for which the note was given was borrowed on the credit of the
These principles find an analogous application, where, in the same community, there are two firms of the same name, each consisting of the same persons, but each engaged in different kinds of business, one of which contains a dormant partner and the other does not. If suit is brought on a promissory note for borrowed money bearing the signature of the common firm name, the presumption is that it is the note of the firm not containing the dormant partner. The plaintiff, to recover against the dormant partner, must prove either that the consideration of the note was obtained on the credit of the firm in which the dormant partner was interested, or that it inured to the benefit of that firm. That it was upon the credit of that firm that the money was borrowed, may be proved by the declarations to that effect of the ostensible partners at the time of the loan, or it may be. proved by circumstances. As said by Thesiger, L. J., in Yorkshire Banking Co. v. Beatson, supra, “When once it is established that a name common to a firm and an individual member of it has been put to a
The liability of a dormant partner grows out of the principle, that by taking a part of the profits, he takes from the creditors a part of that fund which is the proper security to them for the payment of their debts. Waugh v. Carver, 2 H. Black, 247. But this principle can have no force where it is shown that one claiming to be a creditor has not contracted upon the credit of the firm having the dormant partner, and the property or money advanced by such alleged creditor has not gone into the business'of the firm, or inured to the benefit of the dormant partner. As to putting property into the concern, and thereby inducing others to contract with his copartners upon the faith that they are the sole owners of the property, the dormant partner is to be regarded as doing no more than a creditor who lends his money or sells his goods to the firm. There is great force in the language of the court in Banking Co. v. Beatson, supra. “ In actions founded upon purely personal contracts, the law does not recognize the mere moral right which a creditor may attempt to assert against one person in consequence of his having intrusted to another property, in the belief of his ownership of which, the creditor may have contracted with him; in other words, in a ease like
From an application of the foregoing legal principles to the facts in this case, we are led to the conclusion, that the plaintiff below should not have had judgment upon the issues joined. But the plaintiff in error — Fosdick—alleges as a ground of error, that the court of common pleas erred, in excluding evidence offered by himself when defendant below. At the time of the trial, the “ mill books ” of Lewis & Eiehelberger were in Lawrenceburgh, Indiana, in the hands of their assignee in bankruptcy — the person then entitled to the possession of the same, and who was beyond the jurisdiction of the court. It was material to the defence to establish, that the money borrowed of the plaintiff never went into the milling business of Lewis & Eiehelberger. For that purpose, the defendant offered in evidence certain interrogatories propounded to Lewis himself in reference to the books of that firm, and the answers thereto, contained in his deposition, which, upon objection by the plaintiff, were excluded as irrelevant and incompetent. The answers set forth, that the mill ledger contained the entire business of the mill; and that the note to Van Horn, the plaintiff, was never entered in that book, because it did not belong to the milling business or account. The answers contained relevant and under the circumstances competent testimony, the case being, as we think, a proper one for the admission of secondary evidence. In excluding the testimony, we are of opinion, the court erred. In Burton v. Driggs, 20 Wallace, 125, it was held, that when it is necessary to prove the results of-an examination of many books of a bank to show a particular fact as ex. gr. that A. B. never at any time lent' money to a bank, and the examination cannot be conveniently made in court, the results may be proved by persons who made the examination — the books being out of
The judgments of the district and common pleas courts will be reversed, and the canse remanded to the court of common pleas.
Judgement accordingly.
Reference
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