DeTemple v. Rohrbach
DeTemple v. Rohrbach
Opinion of the Court
The general rule is, that, if a partner borrow money and give his individual note for it, it does not become a partnership debt by reason of the application of the money to partnership purposes. But if there be a dormant partner, the law is otherwise, and the firm is chargeable with the debt if the money was applied to the business of the partnership. The reason for the distinction is thus stated in Graeff v. Hitchman, 5 Watts, 454: “A dormant partner is liable, not because credit is given to the firm, for the firm is not here known to exist; but because he is a participant in the profits, and takes from the creditors a part of the fund which is the proper security to them, for the satisfaction of their debts, and upon which they have a right to rely for payment: Grace v. Smith, 2 Bl. R. 998. No inference can be drawn, as in the case of a known and ostensible partnership, that the advances were alone made on the credit of the persons whose names are on the bill, nor can it be intended, that the holder agreed to forego his right of action against others who secretly partook of the profits. When there is a dormant partnership, consisting of two persons, it becomes the debt of the firm, although the bill is necessarily signed by one only. Where it is intended for partnership purposes, and is so applied, it is substantially a loan to the company, which super-induces their liability.” Applying this principle to the facts of the present case, as found by the jury upon sufficient evidence, there is no room for doubt that the firm, of which Weidner was dormant partner, was liable for the money which was borrowed for the use of the firm and was used for firm purposes. Hence, when, upon ascertaining that Weidner was a partner and . as such was liable for the debt, the plaintiff obtained from Rohrbach,
The assignments of error are overruled and the judgment is affirmed.
Reference
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- Partnership—Dormant partner—Promissory notes—Note under seaL 1. If a partner borrows money and gives his individual note for it, it does not become a partnership debt by reason of the application of the money to partnership purposes, but if there be a dormant partner the law is otherwise and the firm is chargeable with the debt if the money is applied to the business of the partnership. 2. Where there is a dormant partnership consisting of two persons, and the active partner makes a note in his own name and applies the proceeds thereof in the partnership business, and afterwards at the request of the payee of the note, and in substitution thereof, he makes a note under seal and signs it with the name under which the firm trades, no fraud is committed on the dormant partner, and he will be liable on the second note although it was made without his knowledge.