Barber v. Van Horn

1. Paetneb- — Agent of the Firm. Every partner is a general agent of the firm to oarry out and transact its business in the usual and ordinary way. 2. Poweb oe Pabtneb —Apparent Authority. 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.) 3. Pabtnebship Mattees— Constructive Knowledge. The knowledge of one partner concerning partnership matters is constructively the knowledge of all the members of the partnership, although the other members are actually ignorant thereof. 4. Renewaii Note, Binding upon Firm. Where a private banking firm obtains money for the purpose of carrying on its usual and ordinary business from another person with the knowledge of all the members of the firm, and executes a firm note therefor, and afterward one of the partners of the firm withdraws from the assets of the firm sufficient moneys to pay the note, and falsely informs the other members of the firm that the note is paid, and such note is shown by the books of the firm to be satisfied and canceled, but is not in fact paid off, and such partner, without the knowledge of the other members of firm, continues to pay interest upon the note, and, when due, renews the same in the name of the firm, the new note, if the payee has no notice to the contrary, is binding upon the firm as a valid obligation thereof. ■5. Note, Signed by Individual Name and Firm Name. The fact that the partner signed his individual name to a renewal of the old note given by the firm before signing that of the firm may be considered by the trial court in - determining whether or not the payee had reason to know the new note was executed without the knowledge of the other partners, or in fraud of their rights.

Error fram Allen District Court. On the 31st of December, 1888, C. Van Horn commenced his action against E. A. Barber, as a member of the late firm of Dayton, Barber & Co., to recover $7,300, and interest. Trial at the March term, 1889, before the court without a jury. The court made the following special findings of fact: “1. On April 1, 1875, the defendant E. A. Barber and one B. H. Dayton formed a partnership in the business of private banking, at Humboldt, Allen county, Kansas. The business of the firm consisted in loaning money, discounting notes, issuing and selling bills of exchange, receiving money on deposit, and doing generally such business as ordinarily and usually comes within the scope of private banking. As an incident to their business, it was their custom also to borrow money, when the same was needed or required by them in the course of their banking business, for which money, so borrowed, it was their custom to execute and deliver the notes of the firm. From the time of the organization of the partnership up to some time in tbe fall of 1883, Dayton was the active manager of the banking business, and attended to the most of the correspondence of the bank. Barber was a practicing lawyer during said period, and practiced his profession as such, and in that connection attended to the collections of the firm. “2. The health of Dayton failed him, and, on September 1, 1884, the firm dissolved by mutual consent, Dayton withdrawing from the firm, while Barber continued in the business. Dayton died on the 6th day of October, 1885. The plaintiff, Van Horn, resided at Springfield, Mass., when the aforesaid partnership of Dayton, Barber & Co. was formed, and had for many years prior thereto, and has ever since. Dayton was his son-in-law, having married his only daughter. “3. The facts in relation to the note for $1,100, declared on in the petition as plaintiff’s first cause of action, are as follows: Van Horn, it appears, was a man of considerable means, and was dealing to some extent in Kansas securities, which he would buy, dispose of or collect through his son-in-law, Dayton. In February, 1878, he owned three notes made by persons in Kansas, to wit: A note of John Kile for $500, a note of R. H. Cunningham for $300, and a note of John Campbell for $300, and these notes he had placed in the hands of Dayton for collection. These parties paid their notes to Dayton in February and March, 1878, and on the 28th of November, 1878, Dayton executed in the name of the firm the said $1,100 note,- and forwarded it by mail to his father-in-law, Van Horn, stating to him what it was for, and at the same time sent him a draft for $97.20, the same being intended to cover interest on said $1,100 from the time it had been paid in up to November 29, 1878, the date of the said note. The correspondence out of which this transaction grew, so far as shown by the evidence, consists of Dayton’s letter to Van Horn of date February 8, 1878, marked ‘U’; Van Horn’s reply thereto, of date February 18, 1878, marked ‘No. 20’; Dayton’s letter to Van Horn of date November 28, 1878, marked ‘A’; and Van Horn’s reply thereto, dated December 3,1878, and marked ‘B.’ And said letters are referred to and made a part of this finding. It appears also from the correspondence that some oral negotiations took place between Dayton and Van Horn respecting the notes for which the note in suit was given, but what said oral negotiations were the evidence does not disclose. None of the money for which said $1,100 note was given went to the benefit of said firm of Dayton, Barber & Co., nor did Barber know of the existence of said note until after the death of Dayton, and, from all the evidence, facts and circumstances in the case, I find that this $1,100 note was a private and personal transaction between Dayton and Van Horn only. “3-J. The facts in relation to the $1,000 note, set out in the petition as plaintiff’s second cause of action, are as follows: About January 31, 1878, the said firm of Dayton, Barber & Co. became financially embarrassed, owing to the failure of their banking correspondent at Kansas City, Mo.; and thereupon Dayton wrote Van Horn a letter of said date, advising him of their embarrassment, and requested him to deposit $2,000 to the credit of Dayton, Barber & Co., in the bank of their New York correspondent, Gilman, Son & Co., and in compliance with said request, on the 6th of February, 1878, Van Horn deposited with Gilman, Son & Co. the sum of $1,000, to the credit of Dayton, Barber & Co. The letter of Dayton, making this request, is dated January 31, 1878, is marked ‘No. 8,’ and is hereby referred to and made a part of this finding. On February 6, 1878, Van Horn telegraphed Dayton advising him that he had made said deposit of $1,000, and thereupon, on said day, Dayton wrote a letter to Van Horn containing the following: ‘I have just received a telegram from you that you had forwarded $1,000 for our credit with G. S. & Co. I have sold you $1,000 in good notes, and taken them from ours and put them into an envelope for you, and will collect them when due for you. Accept my thanks.’ On the same day Dayton took a number of notes that belonged to the bank, aggregating a little over $1,000, and he marked said notes ‘paid’ on the books of the bank, and withdrew them from the assets of the bank and put them apart for Van Horn. No note was given to Van Horn at this time, and what answer or response he made to the aforesaid letter from Dayton of February 8,1878, does not appear. On February 18, Dayton wrote a letter to Van Horn, inclosing a draft for $216, of which $120 was interest at 12 per cent, for one year on the aforesaid $1,000, and he also inclosed the note of the firm for said $1,000. In his letter he stated the following in regard to the note and the original transaction generally: ‘I will also inclose our note for this $1,000, as I believe we have never done so. As I stated to you at the time we received it, we sold to you $1,000 in good notes, and have kept turning them on short time, and will continue to do so, in the same way, but will also send you our note, so that you can have something more to show, and probably can keep track of it better.’ Said letter is marked ‘O,’ and is made a part of this finding, and the answer of Van Horn of date February 24, 1879, marked ‘No. 21,’ is also made a part of this finding. On February 7, 1881, Dayton executed, in the name of the firm, and sent Van Horn, as a renewal of said above-named note, a note of date February 7, 1881, due in one year, and drawing 10 per cent, interest, which is the note sued on in plaintiff’s second cause of action herein. See Dayton’s letter to Van Horn- of date February 7, 1881, marked ‘No. 16,’ which is made a part of this finding. Barber knew at the time of this deposit by Van Horn of said $1,000 to the credit of the firm with Gilman, Son & Co., but he had no knowledge of the execution and delivery of either of the above-indicated notes until after the dissolution of the partnership. “ 4. The facts in relation to the $4,000 note set out in the petition as plaintiff’s third cause of action are as follows: Before the partnership of Dayton, Barber & Co. was formed, Dayton was in the banking business at Humboldt, Kas., with another gentleman, and Van Horn owned some $4,000 or $5,000 worth of Kansas notes and securities, some of which were in the hands of the last above-named firm for collection, and some Van Horn had in his possession, in Massachusetts. Dayton wrote Van Horn of the date March 3,1875, proposing that, in the event he formed a new partnership, with defendant Barber, the new firm should purchase about $4,000 worth of Van Horn’s notes and securities, for which the new firm should execute and deliver their note to Van Horn. Van Horn accepted the proposition. See Dayton’s letter above indicated, marked ‘No. 1,’ and Van Horn’s reply thereto, of date March 8,1875, marked ‘No. 15,” which are made a part of this finding. When the new firm of Dayton, Barber & Co. was formed, on April 1, 1875, this arrangement was consummated, and Dayton executed and forwarded to Van Horn the firm note for $4,000. See letter of Dayton to Van Horn dated April 14,1875, marked ‘No. 2,’ and Dayton’s letter to Van Horn dated April 16,1875, marked e No. 3,’ with ‘statement ’ attached, which letters and statement are made a part of these findings. Included among the notes the new firm bought, as above stated, was one given by the defendent, E. A. Barber, to Van Horn for $1,000, on which interest was due amounting $17.50. .Barber knew of the giving of this note for $4,000. This note was renewed April 1, 1879, by Dayton executing a new note in the name of the firm for the same amount, but with interest at the rate of 10 per cent, instead of 12, as in the original note. This last note was renewed again on the 5th of April, 1881, by Dayton executing* a new note for the same amount, which is the note in suit. He executed it both individually and in the name of the firm; that is to say, he wrote ‘ we promise to pay/ etc., in the body of the note, and then signed as follows: ‘B. H. Dayton. Dayton, Barber & Co.’ What the reason or motive might have been for executing the note in this manner does not appear. “ 5. The facts in relation to the note for $1,200, set out in the petition as plaintiff’s fourth cause of action, are as follows.: On or about December 6, 1877, the said firm of Dayton, Barber & Co. were financially embarrassed and needed money, and thereupon on said day Dayton wrote a letter to Van Horn requesting him to deposit $1,000 or $2,000 to their credit with the banking house of Gilman, Son & Co., of New York city. Van Horn so deposited $1,200, as requested, and thereupon, on being informed thereof, Dayton executed in the name of the firm, and sent to Van Horn, a note for $1,200, due in 60 days. See letter of Dayton to Van Horn of December 6, 1877, marked ‘No. 6/ Van Horn’s answer thereto, of date December 10, 1877, marked ‘No. 19/ and Dayton’s letter to Van Horn of date December 10, 1877, marked ‘No. 7/ which letters are made part of these findings. Barber knew of the giving of this note. On January 29, 1879', Dayton executed, in the name of the firm, a new note bearing date December 6, 1878, being a renewal of the first note, which he forwarded to Van Horn, and is the note sued on in the fourth cause of action. “6. From time to time, Dayton made payments on these various notes of the interest. On the $1,100 note he had paid the interest up to November 30, 1884; the last payment he made on said note while he was still a member of the firm of Dayton, Barber & Co. was of date December 6, 1883. On the $1,000 he has paid the interest up to February 7, 1885; the last payment he made on said note while he was still a member of the firm of Dayton, Barber & Co. was of date February 20, 1884. On the $4,000 he has paid the interest up to April 1, 1885; the last payment he made on said note while he was still a member of the firm of Dayton, Barber & Co. was of date April 21, 1884. On the $1,200 he has paid the interest up to December 6, 1884; the last payment he he made on said note while he was still a member of the firm of Dayton, Barber & Co. was of date December 6, 1883. His method of making these payments, so long as he was a member of the firm of Dayton, Barber & Co., was generally as follows: He had in his possession various notes as the agent of Van Horn, that he was collecting and seeing after generally, and he and Van Horn were also operating together to some extent in the buying and selling of grain, and Dayton, seemingly for his own convenience, opened up an account on the books of the banking firm of Dayton, Barber & Co. in the name of C. Van Horn; when he collected or realized anything for Van Horn, he would deposit it in the bank and credit it to his said account, and, when it became necessary to make Van Horn a payment, he, Dayton, would draw a check for the amount, to which he would sign the name of C. Van Horn, and then remit to Van Horn a draft, in the name of Dayton, Barber & Co., for the amount of the check, and charge Van Horn with the amount of the draft. Van Horn knew nothing' about this account in the bank kept in his name, and did not know that he was being paid in the above manner. He had the utmost confidence in the honesty and integrity of Dayton, and reposed implicit trust in him, and, from all the evidence, facts and circumstances in the case, it is evident that Barber did the same. In 1878, the said firm of Dayton, Barber & Co. owned in equal right about 64 acres of land in Paulding county, Ohio, and about 160 acres of land in Defiance county, Ohio, the title thereto of record standing in the name of said B. H. Dayton. For the purpose (as the defendant Barber believed at the time) of paying the $4,000 and the $1,200 notes, sued on herein, said Dayton and his wife, on January 15, 1878, executed warranty deeds of said Ohio lands to the plaintiff, Van Horn; that is, the deeds were duly made out, signed, and acknowledged, and transmitted by said Dayton to the proper office in Ohio for record, where they were duly recorded, and, in compliance with his request, returned to him. Van Horn knew nothing of this, and never heard of the deeds until upon the trial of this case. The deeds were never delivered to him, but were found by Barber, a short time before the trial of this case, among some old papers of Dayton’s that had been left in the bank. ” “ 8. There have been introduced in evidence on the trial of this cause what purport to be two original deeds of the aforesaid land in Paulding county, Ohio, and one deed purporting to be a duly certified copy from the record of a deed to the said land in Defiance county, Ohio. The deeds to the Paulding county land purport to bear date November 6, 1879, and February 20, 1882, respectively; the first to George W. Horn for 20 acres of said land, for the consideration of $550; the second to Perry B. Daugherty for 47 acres of said land, for the consideration of $800, purporting to be executed by Chester Van Horn, the plaintiff, and Eliza Van Horn, his wife. To each of said deeds is a certificate of acknowledgment, of the same date as the deeds, signed by said B. H. Dayton as a notary public, and authenticated by his notarial seal. Said deeds were duly recorded in the proper offices in Ohio — the first on the 11th day of June, 1880, and the second on the 29th day of July, 1882. The aforesaid deed that purports to be a certified copy of the record of the original purports to be dated March 5, 1881, to be signed by Chester Van Horn, the plaintiff, and Eliza Van Horn, his wife, and purports to convey the aforesaid Defiance county, Ohio, land to one James H. Frost, for the consideration of $5,000. A certificate of acknowledgment is attached to said deed, signed by said B. H. Dayton as a notary public, and authenticated by his notarial seal. Said deed was duly filed for record in the proper office on March 28, 1881. The said Chester Van Horn never signed either or any of the aforesaid deeds, nor did his wife. Said Chester Van Horn never saw either or any of said deeds or knew of them until they were introduced in evidence on the trial. His signature and that of wife were forged to each of said deeds; and in order that no cloud may rest upon the living, it is only justice to say that the responsibility for each and all of said forged deeds, in the light of all the evidence in the cause, rests solely upon B. H. Dayton. “ 9. I find that B. H. Dayton, acting in the name of the firm of Dayton, Barber & Co., on or about March 28, 1881, received from the proceeds of the sale of the Ohio land to James H. Frost the sum of $4,250, which he passed to the credit of the plaintiff, Van Horn, in the said bank of Dayton, Barber & Co., in the said account of Van Horn mentioned in these findings. Said Dayton, acting as above, received, on or about December 4, 1879, from the sale of the Ohio land sold to George W. Horn, the sum of $494.22. None of this last-mentioned sum went into the business of the firm of Dayton, Barber & Co., but what actual disposition was made of it does not clearly appear. Said Dayton further received, as above, on or about March 7, 1882, from the sale of the Ohio land to Perry B. Daugherty, about $748.50. Of this he deposited in the aforesaid bank, in the aforesaid account of Van Horn, to the credit of said Van Horn, $400. What disposition was made of the residue does not clearly appear. None of it, however, went into the business of said firm of Dayton, Barber & Co. Van Horn had no knowledge of these matters, or of the aforesaid deposits, and nothing has been paid him on the notes sued on, except as hereinbefore found and stated. “10. From the 1st day of September, 1885, up to the time of the commencement of this action, the defendant, E. A. Barber, was absent from the state of Kansas and outside of said state for at least 33 days. This action was commenced on the 31st day of December, 1888.” Thereon the court made the following conclusions of law: “1. The plaintiff is not entitled to recover on the notes for $1,100 and $1,000, being the notes set out in the first and second causes of action in plaintiff’s petition. “2. The plaintiff is entitled to recover on the $4,000 note, set out in the plaintiff’s third cause of action, the sum of $4,000, with 10 per cent, interest thereon from April 1,1885. “3. The plaintiff is entitled to recover on the $1,200 note, set out in plaintiff’s fourth cause of action, the sum of $1,200, with 10 per cent, interest thereon from December 6, 1884; and for the amount of the two last-mentioned notes, with interest as above indicated, and the costs of this action, judgment will rendered in favor of the plaintiff, and against the defendant.” Subsequently, judgment was rendered in favor of Van Horn against Barber upon two of the notes, one of $4,000, dated April 1, 1881, and one of $1,200, dated December 6, 1878, amounting, with interest, after deducting the amount Van Horn had received from the Dayton estate, to $6,193.40, bearing 10 per cent, interest. The court refused to give judgment against the defendant upon the other two notes, one of $1,100, dated November 30, 1878, and the other of $1,000, dated February 7, 1881. Barber brings the case here as to the judgment rendered againt him, and Van Horn has filed a cross petition in error as to the notes upon which judgment was denied. After proceedings in error were commenced in this court, C. Van Horn died, and Chester J. Dayton, the administrator of the last will and testament of C. Van Horn, was substituted as defendant in error.