U.S. Supreme Court
Moran v. Prather, 90 U.S. 23 Wall. 492 492 (1874)
Moran v. Prather
90 U.S. (23 Wall.) 492
1. Where a firm with several persons styling themselves, as a firm in this case did, "creditors of the steamboat B.," agreed to release P. (owner of 17/22 parts of the boat, the rest being owned by two other persons) "from all indebtedness due us by the said steamboat so far as the said P. is concerned," and where, on P.'s being about to sell to C. for a price greatly below its value had it been clear of debts, his interest in the steamer on condition that C. would assume and pay all debts, the firm executed an agreement by which they bound themselves to defend and save the said P. free and harmless of any and all claims and demands that may arise or be brought against said steamboat excepting those above signed,
(a) That it was not allowable to show by oral testimony that the expression "steamboat debts" was a well known term among steamboat men chanrobles.com-red
and merchants in the port where the vessel was, and meant "debts that made a lien on the boat for supplies and material," though only for six months, and that when a debt could not be enforced by any of the conservatory processes allowed by the laws of the state, it ceased to be "a debt of the boat," though it might remain a debt of the owner.
(b) That the expression in the paragraph but one above "defend and save the said P., free and harmless of any and all claims and demands that may arise or be brought against said steamboat" referred to debts existing at the date of the sale, and not to debts that might be contracted after it, and meant to protect the owner from all liability arising from his part ownership of the boat irrespectively of the fact whether the debts were liens on the boat or not.
(c) That it was allowable to show that the boat was a very valuable one, and that the money price paid for her was insignificant in comparison with it, in order to infer that the purchaser had assumed the payment of existing debts against her.
2. The right of a partner to sign the firm name to a contract of indemnity in favor of third persons must be strictly proved, but it need not necessarily to be proved by a written authority to him.
Error to the Circuit Court for the District of Louisiana, in which court J. G. Prather filed a petition against Moran & Noble, setting forth in substance a case thus:
That he, the said Prather, with one Thoregan and two others, were joint builders in 1864, and jointly engaged in 1868 in navigating the steamboat Bartable; that the boat was a very valuable one, worth more than $50,000, but was liable to debts for a large amount incurred by the said owners in building and in repairing or in navigating her; that on the 25th of September, 1868, Thoregan sold his interest in the steamboat to the petitioner, the petitioner then binding himself to hold Thoregan free and harmless from all debts of the boat and owners existing at the date of the sale and to reimburse him for any payment that he might be compelled to make of debts then existing; that the petitioner having thus and otherwise become owner of the largest interest -- that is to say, 17/32 of the boat -- he did in about one year afterward -- that is to say, on the 21st of September, 1869 -- sell such interest to one Mrs. Mary Barker for the sum, as mentioned in the bill of sale, of $6,000, but that in consideration of a sale at a price so much below the value of his interest in the boat, the said Mrs. Barker was to chanrobles.com-red
assume and pay all the debts existing against the same at that time, and was to protect the petitioner against them; that not relying, however, absolutely on her ability to do this, and in order to be sure of protection against all the debts existing against the steamboat at that time the petitioner demanded an agreement of indemnity from a commercial firm in New Orleans named Moran & Noble; that certain persons whose names appear to it had, by the instrument first given below, released the petitioner from liability, the said instrument being thus:
"NEW ORLEANS, September 20, 1869"
"We, the undersigned creditors of the steamboat Bartable, do hereby agree to release J. G. Prather, of St. Louis, from all indebtedness due us by the said steamboat so far as the said Prather is concerned."
"MORAN & NOBLE"
"McCLOSKY & MASON"
"BRADY & PALMER"
"J. S. SIMONDS"
That the said persons having previously released the petitioner, the said Moran & Noble, on the day previous to the sale and as a consideration for the petitioner's making sale of so very valuable as boat for the small sum of $6,000, executed in this form the instrument of indemnity which he required:
"NEW ORLEANS, September 20, 1869"
"We, the undersigned, of the city and state aforesaid, do hereby bind ourselves and our heirs in solido to defend and save the said J. G. Prather, of St. Louis, State of Missouri, 17/32 owner of the steamboat Bartable, free and harmless of any and all claims and demands that may arise or be brought against said steamboat excepting those above signed."
"MORAN & NOBLE"
The petitioner further set forth that Mrs. Barker did not pay the debts according to her contract; that on the contrary, a judgment for $1,139 was rendered in the courts of Louisiana at the suit of one Stevenson, and another for $1,127 at the suit of one Edwards against him, the petitioner, Thoregan and the other former owners; that execution chanrobles.com-red
issued on these judgments, and that he, the petitioner, was compelled to pay and did pay them; that the debts on which these judgments and executions issued were claims and demands that arose and were brought against the steamer and were existing prior to the 20th day of September, 1869, and were embraced under the said agreement of indemnity given by Moran & Noble; that the petitioner having been thus obliged to pay the same, the said Moran & Noble under said agreement were bound to defend and save him free and harmless from said debts, but that they refused to do so, to the petitioner's damage &c.
To the allegations of this petition there was a general denial.
The evidence showed that Mrs. Barker did not pay the debts, and that Stevenson and Edwards, not being among the creditors who released, sued Thoregan on the 22d June, 1872, and got judgment against him, which he had to pay, and that Prather repaid him what he was thus out of pocket.
The points of law and of fact, which, on the trial, seemed to be involved, were these:
I. Whether the agreement of indemnity, which had been executed by one partner for the firm, bound the firm, unless he had authority in writing from the other partner to execute it.
II. The true meaning of the agreement of the defendants, Moran & Noble.
The petitioner asserted that it meant that they indemnified him against any claims then existing on account of the boat -- whether a lien on the boat or not -- and moreover that it referred to debts to accrue after the 20th of September, 1869 (the date of the agreement of indemnity), but to debts which, then existing, might be thereafter presented -- all claims and demands, in short, which had been contracted on account of the boat and for which he, Prather, was liable as owner.
The defendants, on the other hand, contended that the terms "all claims and demands that may arise or be brought" referred only to claims and demands that should arise in futuro, i.e., should arise after the 20th of September, 1869, chanrobles.com-red
and that those terms could not cover debts due by the owners of the boat years before the execution of the instrument. They contended also that the terms "that may arise or be brought against said steamboat" did not include debts of the owner which could not be brought against the boat itself -- in other words, debts incapable of being enforced in rem.
In the course of the trial, the plaintiffs, with a view of showing the truth of the allegation of the petition that Mrs. Barker had contracted to pay the then existing debts and that the agreement of Moran & Noble referred to them, offered a witness (one Bell) to prove that on the 21st of September, 1869, when the vessel was sold by Prather to Mrs. Barker, he was the agent of Prather to make the sale, and that he did as such agent make it; that the boat was then a very valuable vessel; that the interest of Prather in her was worth much more than the amount for which she was sold and set forth in the bill of sale from Prather to Mrs. Barker, and that it was understood at the time of said sale that Mrs. Barker should assume and protect the plaintiff from all existing debts of the boat and give a bond to that effect.
This testimony the court allowed to be given, and the defendants excepted.
The defendants on their part offered witnesses familiar with the custom among steamboatmen and merchants in this city and others dealing with steamboats in New Orleans to show that the word "steamboat debts" is a well known term among them, and that the meaning of that word is debts that are a lien on the boat for necessary supplies, materials, repairs, and wages, and in the year 1869, and for some years before and after that date, was confined to and existed according to the laws of the state but six months against a domestic vessel, like the Bartable, from the date when the debt accrued. And that when a debt could not be enforced against the boat by any of the conservatory processes allowed by the laws of the State of Louisiana, it ceased to be a debt of the boat, though it might remain a debt of the owners. chanrobles.com-red
The purpose of this offer apparently was to show that the defendants had only engaged to protect Prather from debts that could be brought in rem and against the steamboat, and to escape liability on the ground which they might purpose to show that the debts which he had paid were not such debts.
The court refused to receive the testimony, and the defendants excepted.
In charging, the court said:
"1st. The law is that one member of a commercial firm has no authority to bind the firm by signing the firm name to a bond executed for the benefit of third persons unless he has been especially authorized by his co-partner to do so, or that his act in doing so has been ratified since it was done by his co-partner, and in that event the parties would only be liable each for his share -- that is, one-half each where there are two -- as solidarity in obligations is never presumed, and commercial partners, though liable in solido, are so only in transactions connected with their commercial business. The party alleging this authority or ratification of this act must show it clearly and positively to your complete and entire satisfaction by competent evidence. It cannot be inferred and ought to be shown."
"2d. That defendants in this cause are sureties, and sought to be made liable as such. The law is that there are no presumptions against sureties; they can only be held to the precise terms of their obligation; their contract is to be construed strictly, and cannot be extended by implication beyond its express terms."
"3d. Legal agreements having the effect of law upon the parties, none but the parties can abrogate or modify them. The words of a contract are to be understood like those of a law, in their common and usual signification. Terms of art or technical phrases are to be interpreted according to their received meaning with those who profess the art or profession to which they belong."
"Now all debts of the owners of a steamboat are not debts of the boat. In order to ascertain what are debts of a boat, you must examine the evidence and ascertain from it what is understood by the words 'debts of the steamboat,' as contained in the contract, for if the debts claimed in this suit were not such debts as could be enforced against the steamboat, then they are covered by the bond [sic]. A claim against a steamboat is
stale when the creditor has an opportunity to enforce it and neglected to do so for a reasonable time."
The court, having charged as first above mentioned, refused:
1st. To charge that the party alleging an authority or ratification from one partner to another to bind the firm by signing the firm name, must show such authority or ratification in writing.
2d. To charge that the petitioner could not recover unless he proved that the debt arose and was brought against the steamer since the date of the bond, to-wit, September 20, 1869.
3d. To charge that if the debts for payment of which indemnity was claimed in this suit were not such debts as could be enforced against the steamboat, they would not come within the terms of the agreement of indemnity, even though they should have arisen or been brought since the date of the bond, 20th September, 1869.
Verdict and judgment having been given in favor of the petitioner for the full amount of both the debts which his petition alleged that he had paid, the defendants brought the case here on exceptions to the admission of the evidence admitted and to the rejection of the evidence rejected, as also to the charge given, and the charge refused. chanrobles.com-red