McLaughlin v. Mulloy

47 P. 1031, 14 Utah 490, 1897 Utah LEXIS 12

• Court: Utah Supreme Court
• Decided: March 10, 1897
• Docket: No. 762
• Status: Published

Opinion

Baetch, J.

(after stating the facts):

It seems to be conceded on both sides that this action is in the nature of a suit in equity, to determine the plaintiff’s right to money in the hands of the defendant, and is controlled by the principles governing the distribution of partnership funds in case of insolvency. Nor is there any dispute that, when a co-partnership becomes insolvent, its creditors have a preference, in the payment of their claims, over creditors of individual members, and that, in case of insolvency, the creditors of individuals have preference over claims against the co-partnership.

The principal contention of the appellant appears to be that the firm of Kidder & Bro. was not bound by the action of G-eorge C. Kidder in signing the firm name on the note as surety, without the knowledge of the other member of the firm, because, as is insisted, such action was not within the scope of the co-partnership. No doubt one firm may become a partner in another firm, and in that event such partner will be treated as a constituent member of the new firm, and division of profits made to the constituent co-partnership, and not to its members, as individuals, unless the intention of the parties be otherwise. So, liabilities may attach to the constituent members of the new firm. Bates, Partn. § 150; In re Hamilton, 1 Fed. 800; In re Gilbert, (Wis.) 68 N. W. 863; Bullock v. Hubbard, 23 Cal. 496.

The firm of Kidder & Bro. having become a constituent member of the firm of Mason, Kidder & Co., which is conceded, it became a part of its business, and was to its interest, as sucb co-partnership, to sustain and promote the business oí Mason, Kidder & Co. Therefore anything which the firm oí Kidder & Bro. did to that end was within the scope of its business, and could be done in the usual manner of transacting partnership business. As a co-partnership, Kidder & Bro. had embarked in the business of Mason, Kidder & Co., both firms being in the same line of .business. The new firm manufactured and furnished lumber, in which Kidder & Bro., as a firm, were dealing. The purpose was to make profits for Mason, Kidder & Co., which would inure to the use and benefit of Kidder & Bro. In transacting the business of Mason, Kidder & Co., debts were legitimately created; and, to pay these obligations, the loan was obtained by the firm through George C. Kidder, from the Bark City Bank, with the agreement that Kidder & Bro. and H. P. Mason should sign the note to be giren for the loan, as sureties for Mason, Kidder & Co. Under all these circumstances, we are of the opinion that George C. Kidder had the lawful right, he being a member of the firm of Kidder & Bro., to sign the firm name on the note as surety, and that the firm of Kidder & Bro. was bound by such signature.. Turnpike Co. v. Gulick, 16 N. J. Law, 161, 169; Gulick v. Gulick, 14 N. J. Law, 578.

It is also insisted that, regardless of whether the firm of Kidder & Bro. is liable on the note in question, the respondent has no cause of action against the assignee, until it shall appear that he has funds in his possession, belonging to the insolrent firm, after all its firm debts haye been paid. The firm of Kidder & Bro. being bound by the execution of the note, the amount thereof remaining due and unpaid constitutes a valid claim against that firm, and must be regarded and treated by the assignee the same as any other firm debt, in the payment of percentage on the firm’s liabilities. The cases on which the appellant relies tor a reversal do not appear to be applicable to the facts of this case. We find no reversible error in the -record. The judgment is affirmed.

ZaNE, C. J., and Miner, j., concur.