Davis v. Smith

7 N.W. 731, 27 Minn. 390, 1880 Minn. LEXIS 111

• Court: Supreme Court of Minnesota
• Decided: December 30, 1880
• Status: Published

Opinion

Gilfillan, C. J.

The draft of plaintiffs on J. S. Huntley for $814.51 was upon a debt from him to them. They sent it for collection to the Lake City Bank.' The bank was agent for them to collect the draft, and the knowledge which the bank had of a misappropriation by J. S. Huntley of the funds of the firm of J. S. Huntley & Co., in paying the draft, was in law knowledge of the plaintiffs. One partner cannot,, without the consent, express or implied, of the other partners, use the funds of the partnership in paying his individual debt. A creditor receiving funds so misappropriated, knowing that they are so misappropriated, cannot retain such funds; and if he knows that such funds are partnership funds, the onus is on him to show the consent of the other partners. Bank of Commerce v. Selden, 3 Minn. 99 (155.)

This brings the case down to the question of fact, Did J. S. Huntley, in paying the draft, use the funds of the firm without authority of his partner, Smith ? Of the draft, $500 was paid by him with his own funds, — that is, by his check drawn against his own account; $323 was paid by him with funds of the firm — that is, by the check of the firm drawn by him against the firm account. It appears that Smith, the defendant, at the time of entering the copartnership, paid Huntley $558, to be used by him in paying his debt to plaintiffs.' From this fact authority in him to draw upon the firm funds to that amount in paying his debt is claimed. Whether it shows such authority depends on how it was paid by defendant to Huntley. If, as plaintiff contends, it was paid into and became part of the partnership assets, and, if deposited in the bank, was deposited to their credit, there can be no doubt Huntley had authority to draw on the firm funds to the amount of $558 to pay the specified debt. On the other hand, if, as defendant contends, it was paid to Huntley as his own money, and never went into and became part of the firm assets, but was retained by him in his individual account, then there was no part of the firm assets which he had authority to draw against to pay this debt. The evidence on the point is not clear, but leaves it in doubt whether the $558 was paid by defendant to Huntley as his individual property, or to become part of the capital and assets of the firm. It was a question for the jury, and should have been left to them to decide as best they could from the evidence.

Judgment reversed, and new trial ordered.