U.S. Supreme Court
Dowling v. Exchange Bank of Boston, 145 U.S. 512 (1892)
Dowling v. Exchange Bank of Boston
Argued April 29, 1892
Decided May 16, 1892
145 U.S. 512
An agreement of partnership between three partners for carrying on the business of sawing lumber, etc., in a village in Michigan, which provided that no part of the capital should be diverted or used by either partner otherwise than in the business, two of the partners to secure sawing for the mill and superintend the financial part of the business, the third partner to have the management of the work at the mill, did not create a partnership, each member of which had, under the settled rules of commercial law, and as between the firm and those dealing with it, authority to give negotiable paper in its name, and, one partner, without the knowledge of his copartners, having put the firm name to notes which were discounted by a bank in Boston, but not for the benefit of the firm, the other partners were entitled, in an action by the bank to recover on the notes, to have it submitted to the jury whether, under the circumstances, they were estopped to dispute the authority of their partner to make them and to put them in circulation.
The Court stated the case as follows:
Edward P. Ferry, of Grand Haven, Michigan, and George E. Dowling and Frank H. White, of Montague in the same state, entered, February 1, 1873, into written articles of co-partnership, "for the purpose of carrying on the business of sawing lumber, pickets, and laths at the said Village of Montague, in the steam sawmill lately there erected," the name of the firm being F. H. White & Co., and the partnership to continue for the full term of five years, unless sooner dissolved by agreement. Of the capital of the firm, Ferry contributed one-half, and Dowling and White one-fourth each.
By the written terms of the partnership, no part of the capital was to be diverted or used by either partner otherwise than in the business; the profits and losses were to be shared according to their respective interests; Ferry and Dowling were to have the care and charge of securing the sawing for the mill, the supervision of the financial part of the business, and of the firm's books, to be divided between them as they might agree, chanroblesvirtualawlibrary
without charge for their services, and White was to have full management of the work of sawing, of hiring and discharging of men, and fixing their wages, keeping double entry books, which should be open at any time for the inspection of the partners, and receiving for his services $1,000, to be paid by the firm. It was further provided that the books of the firm should be closed as of January 31 in each year, the profits then to be ascertained and passed to the credit of the respective partners, and applied in a specified way.
At the date of the several transactions out of which this litigation arose, there was a firm, Ferry & Bro., at Grand Haven, Michigan, engaged in business as manufacturers of and dealers in lumber and shingles. It was composed of Thomas W. Ferry and Edward P. Ferry.
The present action involved the question of the liability of F. H. White & Co. upon three promissory notes bearing date, respectively, Montague, Michigan, October 17, 1882, November 27, 1882, and January 15, 1883, and for the respective sums of $5,288.75, $5, 100.73, and $5,391.90, and payable each four months after date to the order of Ferry & Bro., "at the National Exchange Bank, Boston, Massachusetts, value received." Each note was endorsed by Thomas W. Ferry in the name of Ferry & Bro., and was sold by him, acting in the name of his firm, to that bank. Neither White nor Dowling -- whose firm continued in business under the above articles of partnership until May 31, 1883 -- had any knowledge of the existence of these notes until after their respective maturities nor until shortly before the commencement of this action. Neither authorized the notes to be given. They were gotten up by Thomas W. Ferry, with the aid of Edward P. Ferry and one Thompson, the bookkeeper of Ferry & Bro., the latter acting under the direction of Thomas W. Ferry. The proceeds were used for the benefit of Thomas W. Ferry or of his firm. The firm name of F. H. White & Co. to each note was signed by Edward P. Ferry, who did not communicate to White and Dowling that he had done so.
Separate actions having been brought by the bank upon the notes, they were, by consent, consolidated. Before the order chanroblesvirtualawlibrary
of consolidation was made, Dowling filed in each action his affidavit stating that
"on the 17th day of October, 1882, he was, and still is, a member of the co-partnership firm of F. H. White & Co., of Montague, Michigan; that said firm was at said time, and still is, composed of Edward P. Ferry, Frank H. White, and this deponent as co-partners;"
that "he never executed the promissory note, a copy of which was served upon him with the plaintiff's declaration;" that
"the signature thereto is not in the handwriting of this deponent, and that said promissory note was not executed by any person having authority to bind this deponent or to bind the said defendants, Edward P. Ferry, Frank H. White, and this deponent, jointly upon said promissory note."
A verdict was returned in favor of the plaintiff for $17,791.45, the court saying to the jury:
"Regretting very much that these defendants White and Dowling, who alone make defense here, are in such a situation that they must suffer from the wrongdoing of their associate, the court is unable to relieve them without violating principles of law which are essential to the security of mercantile business, and violating also the rights of parties innocent of the wrong. As there is, in the opinion of the court, no question of fact about which there is any conflict in the evidence, the court holds that, giving effect to the testimony, the plaintiff is entitled to a verdict, and you are instructed to find accordingly against all the defendants."
The opinion which preceded this charge is reported in 30 F.4d 2.
Judgment having been rendered upon the verdict, a severance was duly had between the defendants so as to authorize a writ of error in the name of Dowling alone. chanroblesvirtualawlibrary