Sorg v. Thornton

1 Cin. Sup. Ct. Rep. 383

• Court: Ohio Superior Court, Cincinnati
• Decided: April 15, 1871
• Status: Published

Opinion

Storer, J.

It is evident from the testimony, as well as the admission of counsel in argument, that Thornton committed a fraud in obtaining the loan, but there is no pretense of any complicity on the part of the other defendants with him in the act. It is claimed, however, there could have been no recovery upon the note given to plaintiffs by Thornton, Potter & Co., as the partnership name of the defendants was Potter & Co., and by that designation alone a liability against the defendants could be created.

If this assumption is admitted it does not follow, we think, that this action is not well brought, for the plaintiffs declare for money loaned and offer the note which was discounted by Thornton, he receiving the proceeds, only as evidence of the transaction.

We think it is immaterial whether the plaintiffs gave a check for the money borrowed, or furnished the means by which it was realized; the note was equivalent to a loan — it produced the same result the borrower desired to accomplish when the plaintiffs were asked to extend the accommodation. And such would seem to be the opinion of our Supreme Court in the case of Gano & Thoms v. Samuels, 14 Ohio, 592, where it was held that “ an acting partner, for the benefit of his firm, and in order to raise money, might use the name of the firm by accepting a bill of exchange to be exchanged for the acceptance of another firm.” If, however, a loan or its equivalent is proved to have been made to, or received by, one partner on the faith that all the partners are thereby benefited, and a note is given by the individual partner in a name which the other members have not adopted, the liability of all the members ought not to be denied if the note itself should be valueless.

! The note could not extinguish the liability. It must be admitted that every member of a copartnership is authorized, by the relation he has entered into with the other members of his firm, to borrow money as one of the incidents of the co-partnership itself, and this, too, if the partners were restricted by the partnership articles from borrowing money, if this was not known to the lenders at the time the loan was made.

The whole question is elaborately discussed, and the law announced in Winship et al. v. Bank of the United, States, 5 Peters, 529, “ that the status of copartnership itself holds out to the world the right of one partner to bind the firm; and it is on the general principle of commercial law, and not on the copartnership articles, that the other partners are liable.” If, then, we assume the representations made by Thornton to be false, they nfhst nevertheless bind his copartners. Story on Contracts, sec. 224; Lindley on Partnership, 250; Rapp v. Latham, 2 B. & A. 795.

The case before us resolves itself into these questions:

First. Did’ the plaintiffs loan the money, sought now to be recovered, to Thornton for the benefit and on the credit of all the defendants who are admitted to have been partners in business, and was it within the scope of his authority to do so?

Second. Did the plaintiffs advance the money to Thornton on the supposition that the proper firm name was signed to the note he gave, or did they not rather rely on the credit of all the partners whose names they knew, one of whom was represented by Thornton to have put $60,000 of capital in the new firm?

Third. Were there any facts connected with the transaction between the plaintiffs and Thornton that should have put them on their guard as to the truth or falsity of' his representations?

Fourth. If Thornton, as is admitted, committed a gross fraud, who shall suffer for his acts, the defendants, his copartners who held him out to the world as their agent, to act for the interest of them all, and in every proper case to create a firm liability, or the plaintiffs, who, confiding in his representations, however false they were, advanced the money sought to be recovered ?

On the whole case we feel compelled to resolve each proposition in favor of the plaintiffs, and render judgment against the defendants for the amount demanded.