National Bank of Chemung v. Ingraham

Potter, J.

The plaintiff'presents in his brief and argument but two objections to the ruling of the referee, on the trial, and we shall assume that he is satisfied with all the decisions except those presented to, and discussed before the court. In order to understand the objections presented, it is proper to say that the defendant Ingraham is sued upon the theory that though not a party, nominally, to the note in suit, he was a party by reason of his being a copartner in business with Sibson, the drawer of the note ; the copartnership business being carried on in the name of John Sibson. And the theory, of the defense is, that the copartnership was really formed at the date of the note; that the money raised by Sibson upon the note was for the purpose of furnishing Sibson with his share of the capital; and that it was raised and obtained for that purpose, and upon the individual credit of Sibson. The referee has found the defendant Ingraham’s theory to be true, as a fact, and there is satisfactory evidence in the case to sustain this finding. It may also be stated as undisputed, that of the two payees named in the note, the one was the cashier, and the other the assistant cashier of the plaintiff'; that the money obtained upon the note in question was applied in payment of goods purchased for the copartnership; and that the articles of copartnership were signed, and the capital of the partners furnished, on the 5th day of February, 1868, the date of the note.

On the trial, the defendant Ingraham was sworn as a witness, and testified to having seen this note on the 4th day of February, and was requested by Sibson to indorse it, which he declined to do ; and that in the afternoon of that day he saw in Sibson’s possession a certificate of deposit for $1800, in the handwriting of H. W. Beadle, the cashier of the plaintiff’s bank. Then this interrogatory was put to him: “ Was this $1800, the avails of the note, John Sibson’s individual share of the capital of the firm of John Sibson ?” To which the plaintiff-’s counsel objected, as immaterial and incompetent. “It calls for the opinion or conclusion of the witness. It does not appear that the witness has any knowledge as to whether the money was advanced by the plaintiff to Sibson, or to whom, or for what purpose, it was advanced, and the testimony cannot affect the plaintiffs.” Which objections the court overruled, and allowed the evidence ; and to which ruling and decision the plaintiff’s counsel excepted.

A, “It was his share of the capital of the firm; his share was to be $2000.”

This is the first objection that is claimed to be error.

It appears to me that this question called for a fact that was material to the case, viz: whether this money was the individual portion of one of the copartner’s capital. If, in answering it, the witness had sworn to an opinion, or to a conclusion, the answer should have been striken out.

. And it was in the power of the plaintiff by cross-examination, to test the knowledge of the witness as to this fact. As the answer stood, it purported to be an answer of fact, from knowledge, and a material fact. FTo objection was made to the form of the question. I do not think this ruling was error.

The second objection arises upon an interrogatory, and answer of John Sibson, the other defendant, who was sworn as a witness for Ingraham, as follows :

Fifth Interrogatory. “ Before you negotiated the note, did any of the officers of the national Bank of Che-mung, or either of the payees of the note, know for what purpose the money was procured by you ? If yes, state which ones knew it, and how they knew it. If by information from you, state fully what you said to them, and to whom you said it, and whether your statement was made to them before the note was negotiated by you.”

To which, and the answer thereto, the plaintiff’s counsel objected, as immaterial and incompetent, on the ground that declarations of Sibson, made to the payees of the note or the officers of the bank, before the note was negotiated, were inadmissible; which objection the court overruled, and received the evidence ; and to such ruling and decision the plaintiffs’ counsel excepted.

A. “ They did; I mentioned to both C. M. Beadle and H. W. Beadle that I wanted the money until such time as I could get money due me from parties in the west; which money I meant to apply to satisfy the note when it became due; this statement was made before the note was negotiated.”

I am equally unable to discover any error in this ruling of the referee. It was an inquiry for evidence upon the very point upon which the case, as against Ingraham, must depend. These are all the objections urged to the referee’s rulings, upon the trial.

The general objection, that the report of the referee is contrary to law, is only left for consideration. In discussing this question we must assume the facts found by the referee to be true: That the note in question was discounted, and the money procured, to enable Sibson to pay in his share of the copartnership capital; that Sibson did not represent to the plaintiff that, it was a firm note; that the payees of the note, as officers of the plaintiff’s bank, knew, or had good reason to believe', that the note was not the note of the firm, but was the individual note of John Sibson.

It requires no extended argument to demonstrate that the legal conclusion of the referee was sound and correct. Even if this note had been discounted after the copartnership had commenced business, the legal presumption would be that it was the note of the individual who signed it, and not of the firm. To entitle the plaintiff' to recover in such case against the partners, they must go further, and prove either that the money for which the note was given was borrowed on the credit of the partnership, or that it was used, when obtained, in the business of the partnership. (Oliphant v. Mathews, 16 Barb. 610, and cases cited.) The burthen of proof was upon the plaintiffs, to show that the note was discounted upon the credit of the copartnership. (Manufacturers' Bank v. Winship, 5 Pick. 13.) If the lender did not know of the partnership, or if the money was loaned on the individual credit of the drawer of the note, the fact that the money was applied to the business of the firm does not create a liability of the firm. (Story on Part. § 139. 5 Mason, 176.)

[Third Department, General Term, at Elmira, September 6, 1870.

The written contract in this case was made between the plaintiff and Sibson ; the avails were for the private benefit of Sibson. The law is well settled, that Ingraham was not liable. Such a loan, though the borrower applied the avails to pay debts of the firm, does not constitute the lender a creditor of the firm. (Green v. Tanner, 8 Metc. 411. 15 East, 6.) The judgment should be affirmed.

Miller, P. J., concurred.

Parker, J., concurred in the result.

Judgment affirmed.

Miller, P. J., and Potter and Barker, Justices.]