Ex parte First National Bank

| Me. | Mar 1, 1880

Peters, <1.

The insolvent debtors, Thompson and Titcomb, were partners, .having no regular partnership name. All the promissory notes given by them in their partnership business were signed either by one partner as maker and by the other as payee and indorser, or by both partners as joint makers in their individual names. The note in the present case was given in the first named form, probably to give the appearance of there being two parties to the note instead of one. The officers of the bank who discounted the note were ignorant of the fact that a partnership existed between the parties. With the partners themselves, the transaction was the same as if the money had been borrowed upon their note in strictly partnership form. The money was borrowed for and applied to partnership purposes. But for failure, the partners would have paid the note from the money of the firm. One partner could have no advantage over the other, although one was indorser only. As between themselves, both were makerss and both indorsers. Presumably, they intended to give a partnership note. They have themselves treated it as a partnership liability under all circumstances. In executing the written evidencie of a partnership promise, they made an instrument which, for that purpose, may be regarded as. informal and literally incorrect.

Is the bank entitled, in insolvency, to prove its note, or, what is in substance the same thing, to prove its claim for the money given as a consideration for the note, against the partnership estate of Thompson and Titcomb ? We think it is. The borrowed funds are a part of the partnership estate. It is just and equitable that the same estate, proportionally to its sufficiency, should restore such funds to the lender.

. Th,e doctrine applicable to this question, and based upon considerable authority, is stated by Prof. Parsons in his work on Partnership, p. *498. Treating of estates in bankruptcy, he says : “It not unfrequeutly happens that persons who actually are- in partnership, and in one firm, appear to the world as distinct traders, or as distinct firms, for the convenience and advantage of using the names separately upon negotiable paper. Thus, if there are three partners, who call themselves so, they could use only the name of A., B. & Co. But, if not known as partners, A. may draw on B. in favor of C., and B. may accept and C. may indorse, and the paper have apparently three distinct liabilities. The question may then arise, may the holder proceed against the several estates of all these persons, or only against the joint fund of these firms ? The authorities on this point are conflicting; nor do they cover the whole ground. We would state the result, however, thus: .If the holder took the paper on the credit of the several names, and in ignorance of their joint interest, he certainly may prove against all the parties severally. But he may elect to proceed against the firm, or the joint fund, because what he held was in fact partnership paper.” See Story’s Part. § 388 ; note and eases.

It is said that an objection to this doctrine is the rule of law that oral evidence is not admissible, in cases of commercial paper, to prove any person a party to a bill or note who does not appear to be such upon the face of the paper itself. But equity looks more to the fact than to form. And the rule of distribution incorporated into our insolvent law is one imported from the principles and practice of courts of equity. In re Warren, Davies, 327. Ex parte Foster, 2 Story, 131" court="None" date_filed="1842-04-30" href="https://app.midpage.ai/document/ex-parte-foster-8631257?utm_source=webapp" opinion_id="8631257">2 Story, 131. In re Holbrook, 2 Lowell, 262. The cases in wdiich the strict legal view has been upheld will be found to be mostly actions at law, -where the effort has been by the holder of a bill or note to fix the liability upon some defendant whose name was in no manner written or indicated on the instrument itself, or where the facts differ in some other essential respects from the facts of the present case. Here the names of both partners are upon the note. Both areholden thereon.

It would not be pressing the facts too far, to bring the partnership estate within the limit of liability, upon the ground that this note was executed as and for partnership paper under a style adopted as a partnership signature. It is well settled that a partnership may adopt the name of a single partner as a firm name. It may have most any kind of a name, and moi’e names than one. The name may be expressly agreed upon, or it may come about in the course of dealing and by a usage of the firm. Pars. Part. *213. Story’s Part. § M2, and cases. In the case of Ex parte Nason, — In re Thompson et ah, ante, we have found that the law would authorize evidence to show that a note jointly signed by these parties (Thompson and Titcomb) in their individual names was a partnership note, and the cases cited in that case will shed light upon the present case. That was one mode of partnership signing. This is another mode. They were accustomed to sign in the one or the other manner for all partnership liabilities.

The bank, it is to be presumed, would have taken a note in a better commercial form had its officers known the fact of partnership, and had they preferred the paper of the firm. Not having p,n opportunity to make the election then, through misunderstanding, they should not be debarred from the right afterwards. In re Warren, cited supra. Paine v. Dwinel, 53 Maine, 52. Palmer v. Elliott, 1 Cliff. 63" court="None" date_filed="1858-05-15" href="https://app.midpage.ai/document/palmer-v-elliot-9299527?utm_source=webapp" opinion_id="9299527">1 Cliff. 63. Nor, taking the paper upon the faith of the several promises of the parties, should the bank be compelled to prove against the joint estate. It may pursue the contracts appearing upon the note. But it should not prove in both ways. There is nothing to indicate to our minds that joint and several promises were either made or understood to be made.

We think the bank- should have elected which remedy to pursue when the proof was tendered, had the views of the court upon the question of law involved in the matter been known at that time. Under the circumstances, a future day may be assigned for an election of proofs, the record to be amended and rectified accordingly. It will be noticed that the parties, by agreement, submit to us the right of making any final orders and decrees that may be proper in the premises.

Appleton, C. J., Walton, Barrows, Daneorth and Symonds, JJ., concurred.