Miller v. Manice

6 Hill & Den. 114

Opinion

Walworth, Chancellor.

The object of this suit is to recover from the defendant Manice the amount of three promissory notes which B. F. Phelps, either with or without the knowledge and concurrence of Manice, obtained from the plaintiff by fraud, and converted to the use of himself and Manice, by delivering them to M. Bullock in payment of two checks of the firm of Manice, Phelps & Co. These two checks were given about the middle of March, 1833, to Bullock, in the name of the firm of which Manice was a member, for moneys tiren lent and advanced upon the credit of those checks. And as Bullock knew that Manice was a member of that firm, and had no reason to suspect that the money was not advanced for his benefit as well as for the benefit of Phelps, and for the use of the firm, I have no doubt that Manice and Phelps were jointly liable to Bullock for the payment of the checks ; and that Bullock could have recovered the amount thereof against them, if the checks had not been paid with the plaintiffs’ notes, or in some other way. For where a third person lends money to one of the co-partners upon the check or notes of the firm, he has a right to presume it is for the use of the firm; unless there is something to create a suspicion that the money is not borrowed for the firm, and that the borrower is committing a fraud upon his co-partners. And where money is thus borrowed upon the note or check of the firm, the members of the firm, or those of them to whom the credit was given by the lender, are bound to show not only that the money was not applied to their use, but also that the lender had reason to believe it was not intended to be so applied at the time it was lent. (Band v. Gibson, 1 Camp. Rep. 185; Whitaker v. Brown, 16 Wend. R. 505.)

In this case the evidence fairly authorized the presumption that the money received of Bullock, upon the checks, was not applied to the use of the firm of Manice, Phelps & Co., and that Bullock at the time he lent the money did not know that Foote was a member of the firm, and therefore did not lend it upon his credit. But he did know that Manice was the partner of Phelps, and that they were doing business together under the name or firm subscribed to the checks. He therefore advanced the [120] money on their joint credit, without notice of any intended misapplication of the money by Phelps, and had a legal and equitable claim against both for the money lent. The right to recover in this case then does not depend upon the question whether Manice was an actual party to or was cognizant of the fraud by which Phelps, in the name of the firm, obtained the notes of the plaintiffs which were turned out in payment of those checks. For if he was .entirely ignorant of that fraud, the notes were converted to his as well as to Phelps’ use, by being applied in discharge of a debt contracted in the name of the firm for the payment of which he was jointly liable with Phelps.

The copartnership could not acquire any property in these notes, which were fraudulently obtained by one of the partners, even if the other partners were not privy to the fraud. (Kilby v. Wilson, Ry. & Mood. N. P. Rep. 170.) And according to the decision of the court of king’s bench in the case of Stone v. Marsh and others, (6 Barn. & Cress. Rep. 551,) if the proceeds of these notes had been applied to the payment of a debt for which Manice, Phelps and Foote were all legally or equitably liable to Bullock, the plaintiffs might have recovered upon the money counts in the first suit, upon proof of such joint liability. Or they might recover in an action of trover, for the conversion of the notes to the use of the members of that firm as it existed at the time of such conversion. And as the evidence in this case clearly shows that the proceeds were applied to the payment of a debt to Bullock, for which Manice and Phelps were jointly liable, an action of assumpsit may be maintained, against those two persons, for the money paid for them, or received by them for the use of the plaintiffs. Or an action of trover may be maintained against both or either of them, for the conversion to their use of the notes fraudulently obtained by Phelps acting in the name of the firm of which Manice was a partner. For in such case the maxim applies, quifacit per aliumfacit per se. (Watson On Part. 235.)

And it makes no difference in this case that the action of trover was brought against Manice alone. For in all actions of [121] tort, whether against partners or others, the action may be brought against all or any of them who are liable, at the election of the plaintiff. (Story On Part. 159.) The plaintiffs, therefore, were entitled to recover in this suit on the count in trover, unless the judge who tried the cause was right in supposing the verdict and judgment in the former suit against Ma-nice, Phelps and Foote jointly, in an action of assumpsit, could be given in evidence, in this cause, under the general issue and without notice, and that it formed a flat bar to the recovery in the present form of action. These questions I will next proceed to consider.

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Miller v. Manice, 6 Hill & Den. 114 (N.Y. Super. Ct. 1843).

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