Blake v. Third National Bank of St. Louis , 219 Mo. 644 ( 1909 )

GRAVES, J. —

For a long time prior to May 5, 1903, and on said date, there was in Clinton, Missouri, a copartnership composed of G. T. Salmon and H. W. Salmon, engaged in the banking business as private bankers, under the firm name of Salmon & Salmon. At all the dates of the transactions involved in this suit Thomas M. Casey was the man in charge and manager of the banking business of the said Salmon & Salmon. For a long time prior to May 5, 1903, and thereafter up to October 20, 1903, there existed a copartnership, composed of G. M. Casey and W. A. Towers, under the firm name of Casey & Towers, which said firm was engaged in the cattle business.

June 26, 1905, the banking business of the said firm of Salmon & Salmon was placed in the hands of a receiver by the State court. On the same date proceedings in bankruptcy were instituted in the United States District Court at Kansas City, and later an adjudication of bankruptcy followed, and the plaintiff, Daniel P. Blake, was made trastee in bankruptcy of tbe -estate of Salmon & Salmon, and all property, books and papers were turned over to him by tbe receiver of tbe State court.

Tbe plaintiff in tbis action, as trustee as aforesaid, instituted suit against defendant to recover more than $40,000 as for money bad and received. Tbe petition is in tbirty-four counts, but as all are practically identical, save as to tbe amount and dates, one count thereof will fairly state tbe petition. Count No. 30 reads:

“And for still other and further cause of action against defendant, plaintiff states that defendant is indebted to plaintiff, as trustee in bankruptcy of tbe es-. tate of. George Y. Salmon and Harvey W. Salmon, partners as Salmon & Salmon, in tbe sum of five thousand dollars, on account of money bad and received from said banking firm of Salmon & Salmon, by defendant, on tbe 23d day of September, 1904, to tbe use of said banking firm of Salmon & Salmon, which sum of money defendant agreed to repay to Salmon & Salmon. Wherefore plaintiff prays judgment against defendant in tbe sum of $5,000, together with interest and costs. ’ ’

Defendant after having unsuccessfully demurred to tbe petition, and after having unsuccessfully moved to make said petition more definite and certain, answered by way of general denial, with an admission of its corporate existence.

Trial was had before tbe court without tbe intervention of a jury, and tbe court, upon tbe conclusion of plaintiff’s evidence, gave a declaration of law in tbe nature of a demurrer to tbe testimony, as to each count, except numbers 1, 2, 14, 16, 17. 18, 25, 26, 27, and 28, which were dismissed by plaintiff. Judgment was entered for tbe defendant and from tbis judgment after an unsuccessful motion for new trial, the plaintiff appeals to this conrt.

The evidence in the record is short, and in substance shows the following:

On May 5, 1903, Casey & Towers executed and delivered to O. T. Salmon the following note:

Clinton, Mo., Mat 5th, 1903.

On Demand after date we promise to pay to the order of G. Y. Salmon Ten Thousand & no-100 dollars for value received, and payable at the hanking house of Salmon & Salmon, Clinton,. Mo., with interest from date at the rate of eight per cent per annum; and if interest he not paid annually to become as principal and hear the same rate of interest.

$10,000.00. Casey & Towebs.

P. o. -- G. M. Casey.

Due. -- W. A. Towebs.

(Endorsed as follows):

Demand, protest and notice waived.

G. Y. Salmon.

On the same day, the following letter was addressed to G. W. Galbreath, the cashier of defendant, at St. Louis, Missouri:

Dear Sir:

We enclose herewith note $10,000.00 Casey & Towers, et al., endorsed by our G. Y. Salmon, with the request that you please favor us by cashing same and passing to our credit the amount thereof. As collateral thereto you can hold the $20,000.00 real estate note now in your possession. Note is made on demand for the reason that parties expect to pay same soon.

Yours very truly,

Salmon & Salmon.

The evidence shows that the note was endorsed by G. T. Salmon, the payee, and the proceeds were credited to Salmon & Salmon on the books of defendant, and that upon receiving notice of this credit, Salmon & Salmon gave Casey & Towers credit on their books for a like amount.

On September 12, 1903, Casey & Towers made another note to G-. Y. Salmon, as follows:

No.- Clinton, Mo., Sept. 12tk, 1903.

On demand after due we promise to pay on the order of G. Y. Salmon Twenty Thousand & no-100 Dollars, for value received, and payable at the hanking house of Salmon & Salmon,' Clinton, Mo., with interest from date at the rate of eight per cent per annum; and if interest he not paid annually to become as principal and bear the same rate of interest.

$20,000.00. Casey & Towebs.

P. O. - G. M. Casey.

Due.- W. A. Towebs.

(Endorsed on hack as follows):

Demand, protest and notice waived.

G. Y. Salmon

This note, so endorsed, was sent to Mr. Galbreath in St. Louis, Mo., with the following letter of date September 12, 1903:

Dear Sir:

Enclosed herewith we send you demand note of Casey & Towers, G. M. Casey and W. A. Towers for $20,000.00, endorsed by our G. Y. Salmon, which we ask you to please handle and pass the amount thereof to our credit. Casey & Towers are shipping into their farm in this county a large lot of steers to sell to feeders, and in so doing are drawing on us for more than we can carry them for. And hence we ask that you please handle this note as a special favor to us. It will only run for a short time, as they are going to sell the steers right away, and out of the proceeds thereof take up this note. If you will kindly handle same for us, we hereby guarantee that during the time you carry it our credit balance with you shall not fall below $25,000.00, and that it shall be kept up to at least that amount as security for the payment of said note, and if it should fall below, or even fall to $25,000.00, you are at liberty to change our account with this note, and this letter shall be your authority for so doing.

Yours very truly,

Salmon & Salmon.

Tbe -proceeds of this note were likewise placed to the credit of Salmon & Salmon in the Third National Bank of St. Lonis, and Salmon & Salmon being so informed, placed a like credit to Casey & Towers in their bank.

These two notes were- held! by defendant nntil April 1, 1904. October 20, 1903, G. M. Casey died, thus dissolving the firm of Casey & Towers, which at that time was insolvent, and G. T. Salmon was endorser on their paper, and the paper of G. M. Casey, to the extent of $150,000. On April 1, 1904, a representative of defendant visited Clinton and procured from Casey and G. Y. Salmon, the following notes:

10,000.00. Clinton, Mo., April 1st, 1904.

On demand after date we promise to pay to the Third National Bank of St. Louis, or order, at the hanking house of said hank, at St. Louis, Mo., Ten Thousand Dollars, for value received, with interest at the rate of six (6) per cent per annum from date.

Salmon & Salmon.

20,000.00. Clinton, Mo., April 1st, 1904.

On demand after date we promise to pay to Third National Bank of St. Louis, or order, at the hanking house of said hank, at St. Louis, Mo., Twenty Thousand Dollars, for value received, with interest at the rate of six (6) per cent per annum from date.

Salmon & Salmon.

At the date of the trial, each of said notes had endorsed across the face thereof: “Paid Jan. 14, 1905. Third National Bank, St. Louis, Mo.”

With each of these notes the representative of defendant took a collateral security agreement signed by Salmon & Salmon, by which the two Cásey & Towers notes were put up by Salmon & Salmon as a pledge or securitv for the two notes last above set out. These two agreements are marked paid on the same date and in the same manner as the two notes aforesaid.

Under the evidence G. Y. Salmon signed the name Salmon & Salmon to these two notes and' those two agreements, and under the evidence Casey & Towers, G. Y. Salmon and Salmon ;& Salmon were in fact insolvent, although the insolvency of G. Y. Salmon and Salmon & Salmon was not disclosed to the defendant or its representatives. The only consideration for the last two notes signed by Salmon & Salmon was the two notes signed by Casey & Towers, wbicb notes were first herein fully set out. The evidence further discloses the fact that Gr. Y. Salmon, being endorser on the notes, had to take them up, or the bank: of Salmon & Salmon would have to close.

The record further discloses that the first of each month the interest on the Casey & Towers notes would be charged to the account of Salmon & Salmon by the defendant bank, and up to the failure of Casey & Towers the bank of Salmon & Salmon would collect the interest from said firm.

On the back of these notes signed Salmon & Salmon were endorsements of payments and credits of principal and interest at different and sundry dates, as paid by Salmon & Salmon, and the different counts of the petition are based upon these several payments. These payments were made by Salmon & Salmon and the amounts thereof taken from the assets of Salmon & Salmon. The' evidence discloses that Thomas M. Casey, as manager of Salmon & Salmon, had the full power to manage the business and sign the name of Salmon & Salmon. All the dealings as to these notes were between . Salmon & Salmon and the defendant. Casey & Towers did not act directly with the defendant.

There is some testimony from Major H. W. Salmon that Salmon & Salmon, or Thomas M. Casey, held some $150,000 life insurance of Gr. M. Casey, but as to how it was held and what was done with it does not clearly appear. This testimony of Major Salmon was what he got from Mr. Thomas M. Casey and he (Salmon) understood that out of the insurance he was to be reimbursed for an individual note for $70,000 held by him against Gr. M. Casey.

The record further discloses that Major H. W. Salmon had no knowledge about any of these note transactions; that he was never consulted as to them, nor informed about them; that he never consented to the taking of the firm’s (Salmon & Salmon’s) money to discharge the obligation of Gr. T. Salmon.

Snch are the facts disclosed by the record.

I. That one partner, without the knowledge and consent of the other partner, cannot use the partnership property or assets to discharge his own personal obligation, is well settled law. And that, if he does so use the property and assets of the copartnership, then the party receiving such property whether money or other property, in the payment of the individual obligation of one of the copartners, such party receiving the same is liable to the copartnership, is also well-settled law. [Flanagan v. Alexander, 50 Mo. 50; Ackley v. Staehlin, 56 Mo. 558; Price v. Hunt, 59 Mo. l. c. 263; Phelps v. McNeely, 66 Mo. 554; Forney v. Adams, 74 Mo. 138.]

As well said by the learned editor of the American State Reports, Vol. 7, p. 378, in a note to the case of Davies v. Atkinson: “The general rule then, as deduced from the above propositions — and this rule is settled beyond controversy — is, that a partner may not use the firm assets, or make a valid transfer of its property, in payment of his private or individual debts, or pledge the same for that purpose.”

Nor may he settle a private debt with the firm’s note. [Howell v. Sewing Machine Co., 12 Neb. 179; Parsons on Partnership, sec. 121; Lanier v. McCabe, 2 Fla. 32.]

And many of the cases go to the extent that knowledge upon the part of the creditor receiving partnership property from one of the copartners that the propertv so received on the individual debt was partnership property is not required. In other words, that the transfer passed no title, and the party receiving the firm’s property from one partner on an,individual debt, was liable to the firm, whether he knew at tlie time lie received it that it was the firm’s property or not.

In the early case of Rogers v. Batchelor, 12 Peters l. c. 230, Mr. Justice Stokst said: “In the case of a partner paying his own separate debt oiit of the partnership funds, it is manifest that it is a'violation of his duty and of the right of his partners, unless they have assented to it. The act is an illegal conversion of the funds; and the separate creditor can have no better title to the funds than the partner himself had. Does it make any difference that the separate creditor had no knowledge at the time, that there was a misappropriation of the partnership funds! We think not. If he had such knowledge, undoubtedly he would be guilty of gross fraud; not only in morals, but in law. That was expressly decided in Sheriff v. Wilks, 1 East 48; and indeed, seems too plain upon principle to admit of any serious doubt. But we do not think .that such knowledge is an essential ingredient in such a case. The true question is, whether the title to the property has passed from the partnership to the separate creditor. If it has not, then the partnership may reassert their claim to it in the hands of such creditor.”

After a review of the early cases, he concludes thus: “But we think that the true principle to be extracted from the authorities is, that one partner can not apply the partnership fund or securities to the discharge of his own private debt without their consent ; and that without their consent their title to the property is not divested in favor of such separate creditor, whether he knew it to be a partnership property or not. In short, his right depends, not upon his knowledge that it was partnership property, but upon the fact, whether the other partners had assented to such disposition of it or not.”

Much of the language above quoted was quoted and approved by this court in the case of Ackley v. Staehlin, 56 Mo. 558. Again, in the case of Phelps v. McNeely, 66 Mo. l. c. 558, where it is said:

“It was held in the case of Flanagan v. Alexander, 50 Mo. 50, that one partner has no power or authority whatever, without the consent of his copartners, to appropriate the assets of the partnership to the payment of his individual indebtedness. While a partner can dispose of the property by a bona-fide sale he cannot appropriate it without the consent of his copartners, to the payment of his individual debts, either with or without knowledge of the creditor that such property was partnership property. [Ackley v. Staehlin, 56 Mo. 561.] ”

It is true this case is in terms overruled in the case of Goddard-Peck Grocery Co. v. McCune, 122 Mo. l. c. 431, but only on the question as to the right of copart-ners prior to the dissolution of the partnership to bona-fide appropriate by consent of all the partners, the firm property to the payment of individual debts. We think there was a misunderstanding of the real point decided in Phelps v. McNeely, in the overruling thereof in the 122 Mo., supra. We do not understand the Phelps case to hold that with the consent of all the partners, partnership property cannot be applied to individual debts of copartners, but if it does so hold it was rightly overrnled. Nor did Judge Black understand the Phelps case as it seems to have been understood in the McOune case, supra, for in Sexton v. Anderson, 95 Mo. l. c. 381, he says: “With us each partner is liable for all the partnership debts. The partners may, so long as the firm exists, do with their property as they see fit. The firm creditors have no lien on the'partnership property for the payment of their debts, while the firm continues to exist. Partners have the right to have the partnership property applied to partnership purposes, but this is a right or lien which they may waive. Hence the great majority of adjudicated cases are to this effect, that all the partners may, by their joint act, dispose of partnership property in liquidation and payment of a debt owing by an individual member of the firm. The qualification is that the transaction must be in good faith and not for fraudulent purposes. Rogers v. Batchelor, 12 Pet. 221, 232; City y. Willey, 35 Iowa 323; Case v. Beauregard, 99 U. S. 124; Schmidlapp v. Currie, 55 Miss. 597, 30 Am. Rep. 530; Flanagan v. Alexander, 50 Mo. 50; Ackley v. Staehlin, 56 Mo. 558; Price v. Hunt, 59 Mo. 258; and Forney v. Adams, 74 Mo. 138, are all in accord with what has been said. These cases recognize the right of one partner to apply partnership property, with the consent of the other partners, to the payment of his debt. Nor is the authority of these cases shaken by thé subsequent case of Phelps v. McNeely, 66 Mo. 554, for they are in terms approved.”

But however this may be, the quotation we use from the Phelps case is upon a point not questioned in the McCune case, i. e., that where there has been no consent given by the other partners, one partner can not use firm assets in the discharge of individual debts, and it is immaterial whether the creditor knew or did not know that it was firm property he was receiving. So, too>, in Price v. Hunt, 59 Mo. l. c. 263, it was said: “It is settled that one member of a firm can not appropriate the partnership effects, without the consent of his copartners, to the payment of his individual debts, either with or without the knowledge of the creditors that the property belonged to the firm.”

To a like effect is the language of Smith, P. J., in Ewart v. Tootle & Co., 50 Mo App. l. c. 327, wherein he said: “While one partner can dispose of the property by a bona-fide sale, he cannot appropriate it without the consent of his copartner to the payment of his individual debts, either with or without the knowledge of the creditor that such property is partnership property. ’ ’

So that this court has followed throughout the rule laid down by Mr. Justice Stoby.

The reason of the rule is, that in the disposition of property a copartner is the agent of the copartnership, and whilst having full power to dispose of the firm property and assets in the course of the business of the firm, yet when a copartner undertakes to apply the assets of the firm to his individual debt, he is going beyond the scope of his authority as the agent of the firm, and his acts are void, and pass no title to the property, as against the firm or creditors of the firm, unless consent of the other copartners to such transaction is shown. So that in this case, if the obligation of the Third National Bank, on the Oasey & Towers notes, was the obligation of G. Y. Salmon individually, then he as copartner and agent of the firm of Salmon & Salmon had no right to execute the notes in question, and had no right to take the assets and funds of the firm to pay said notes, without the assent of H. "W. Salmon, and this the evidence shows he did not have.

Nor could Casey, as manager, go further than G. Y. Salmon. As manager he was but the agent of the firm and had full power to transact all business of the firm, but when he went beyond the scope of his authority and took firm assets to pay individual debts of one of the partners, without the knowledge or consent of the other, then his acts are not any more binding than if done by G. Y. Salmon himself. Both were agents of the firm. [Johnston v. Realty Co., 62 Mo. App. l. c. 160.]

The law seems to be well settled, but the real difficulty in this case is its application to the facts. This we undertake next.

II. We shall discuss the $20,000 note first. When Casey & Towers gave that note, it was to G. Y. Salmon, and not to the firm of Salmon & Salmon. When G. Y. Salmon placed his name on the back thereof as an endorser, it was. the act of G. Y. Salmon and not of Salmon & Salmon. Without further showing than the note itself, the liability was on the makers and the endorser G. Y. Salmon and not on Salmon & Salmon. When the note was sent to defendant it was with the letter of September 12, 1903, supra. This letter to our mind clearly indicates that the firm of Salmon & Salmon was not placing this note as their own., This letter clearly shows that Salmon & Salmon had not bought this note of G. Y. Salmon, for in effect it says that Casey & Towers wanted more money than they (Salmon & Salmon) could spare. If the firm had bought the note and it was their property, the regular* course would have been an endorsement of the firm if they desired to rediscount. The letter says: “ — and hence we ask that you please handle this note as a special favor to us,” not that they wanted to rediscount a note which they had purchased. This letter clearly indicates that Salmon & Salmon did not have the spare cash to invest in this note; that they wanted to help Casey & Towers get their money from some other source. The very fact that they undertake by the letter to guarantee the note instead of placing the firm name on the back thereof as an endorser indicates that the firm did not own the note.

When the defendant got this note and letter, it must have known (1) that Casey & Towers, and not Salmon & Salmon, wanted $20,000; (2) that Salmon & Salmon had not purchased the note because the letter indicates that the firm did not have the spare cash; (3) that the firm wanted defendant to discount the note for Casey & Towers, so that they might have the money in their cattle business and suggested that such action would be taken as a special favor to Salmon & Salmon. The only thing in the entire letter is the statement to pass the proceeds to the account of Salmon & Salmon with defendant bank. This to our mind is not against our theory of the case. This was but one of the several modern methods of transferring funds. The proceeds were so credited in St. Louis and when Salmon <fe Salmon were notified, they gave Casey <fe Towers credit for a like sum. This letter clearly indicated to defendant such would he done. Defendant could not read this letter without knowing that the money was ultimately to go to Casey & Towers, and so knowing, they would, as a reasonably prudent business house, have known that depositing the proceeds to the credit of Salmon & Salmon was simply the means of transferring the fund, and not otherwise. They could not read this letter and for a moment think that Salmon and Salmon were to get this money for their own use, but the letter to the contrary told them who was to get the money and how it was to be used and bv whom and how the note was to be paid, i. e., by Casey & Towers out of the proceeds of cattle to be sold. That funds, are frequently transferred in the manner directed by this letter is well known. As said in Bank v. Express Company, 93 U. S. 185, “¥e cannot close our eyes to- the well-known course of business in the country.” Defendant knew or ought to have known from the tenor of this letter that Salmon & Salmon would credit Casey <fe Towers with the proceeds when advised that they had received such credit. It is and was an ordinary method of transferring funds.

So that up to this point, i. e., the discounting of this note by defendant, we have Casey <fe Towers, as a firm, and Gr. M. Casey and W. A. Towers, individually, liable to defendant for $20,000 and the accruing interest. In addition Gr. T. Salmon was individually liable to them as an indorser. Thos. M. Casey, as agent and manager, had no authority to make the guaranty he did make in the latter part of the letter, because it was beyond the scope of his authority to bind the firm to pay either the lability of Casey «fe Towers, or the individual liability of Gr. Y. Salmon, one of the copartners.

So the matter stood until April 1, 1904, when the Salmon & Salmon notes were given. In the meantime G. M. Casey had died and the firm of Casey & Towers was dissolved, and not only so, hut was likewise insolvent, so the evidence rnns. Then we have the nnnsnal occurence of a city hank sending out a representative to one of its country correspondents to get a settlement. The settlement, so far as this note of $20',000' was concerned, was that G. Y. Salmon, who was liable as in-dorser to defendant, issued a new note in the name of Salmon & Salmon to defendant to discharge his own liability. This he did without consultation with his co-partner and without his knowledge or consent. Salmon & Salmon was not hound by the act of Casey expressed in the latter part of the letter, nor was the firm bound by this new note, which was the sole act of one partner in an attempt to use the assets of the firm to liquidate a personal liability. Defendant can not complain, because it must have known on April 1st that it had but two sources to look to for the payment of the $20,000 note, i. e., the property of Casey & Towers, insolvent, and so known to be a.t the time, and G. Y. Salmon, the indorser. With its agent present, defendant takes the note signed Salmon & Salmon, by G. Y. Salmon, without the consent of H. W. Salmon. After receiving the note, they received interest thereon and payment thereof out of the assets of Salmon & Salmon, a firm in fact insolvent, but not known to be insolvent, unless the singular action of defendant in sending a man out for an adjustment might indicate its knowledge of the firm’s condition. That the defendant got the sum of $20,000, and certain monthly interest payments from Salmon & Salmon is thoroughly shown. The conduct of defendant with the knowledge it had from the letter is such as to work a fraud upon the firm of Salmon & Salmon and its creditors, represented in this case by the trustee, plaintiff herein. We conclude that defendant is liable for the amounts, both principal and interest, received upon this note, unless relieved therefrom by certain other contentions by it nrged, which we next discuss.

III. Defendant urges several reasons why it should not be held liable.

(a). It first says that the notes, both the original and subsequent ones, were treated by Salmon & Salmon as representing their liabilities. What we have said about the letter sent with the $20,000 note, and the note tahen in lieu thereof, in paragraph two disposes of this contention.

(b). Next defendant says: “Even though the notes first discounted did not carry with them a partnership obligation, yet if, when their payment was demanded of the partnership by the defendant, the partnership, for, purposes of its own, admitted liability thereon, there was a valuable consideration for the giving of the new notes, which the partnership ultimately paid. ’

This contention is not borne out by the facts. The firm never admitted liability thereon. Under the evidence all that was done can be thus summed up: Gr. T. Salmon recognized his liability as endorser on the Casey & Towers note; that as a member of the firm of Salmon & Salmon he could not afford to be sued on his contract as an endorser; that without the knowledge or consent of his copartner, he undertook to cancel his liability by giving a firm note; that after so giving it, either he or Casey paid it out of the firm money. Cases cited by defendant are not in point and do not bear them out in this connection.

(c). It then contends that there was ratification by the firm. The evidence does not so show. Map H. W. Salmon said he never heard of the notes until some three or four days before the trial. G-. Y. Salmon, alone, could not ratify an unauthorized act, any more than he could divert the firm assets to pay his own debt. It would be a peculiar state of tbe law to say that G. Y. Sálmon alone could not legally bind the firm by giving the firm’s note to pay his individual obligation, which is the reading of the law, and yet say that after he had done so, he, alone, could so ratify the unlawful act as to make it binding. Consent and knowledge upon the part of the other copartners must be shown just as much in the ratification as in the original note. Without the consent of H. W. Salmon, his co-partner, G. Y. Salmon could not bind the firm by the notes given, nor without that consent can he bind the firm by attempted ratification. Thomas M. Casey’s powers were no greater than those of G. Y. Salmon. They were both mere agents of the firm — one, by reason of being a partner, and the other, by reason of being a manager. One had no greater authority than the other.

(d). Next, it is urged: ‘’'The moneys were paid voluntarily by Salmon & Salmon with a full knowledge of the facts, and can not be recovered by their trustee.”

This statement of the law is well enough if it accorded with the facts. The firm of Salmon & Salmon never voluntarily paid this money. It was paid by the agents of the firm in fraud of the firm’s rights, and without knowledge of one member of the firm. Had G. Y. Salmon or T. M. Casey on April 1, 1904, taken $20,-000 in cash out of the vaults of the bank without the consent of H. W. Salmon and paid G. Y. Salmon’s personal obligation as an indorser on this note to defendant, would it be said for a moment that the firm of Salmon & Salmon could not have recovered from defendant? We think not. Yet such a payment stands in no better light than the partial payments, made out of the firm assets, on this unauthorized note, and without the knowledge or consent of H. W. Salmon. When defendant took the note'from G. Y. Salmon, signed “Salmon & Salmon,” to discharge the individual liability of G. Y. Salmon, it was a fraud upon the firm, to which defendant was a party, and all subsequent transactions were tainted with this fraud.

(e). Lastly, it is urged: “This is an action for money had and received, and the plaintiff has made no showing to entitle him to recover moneys which in equity and good conscience the defendant should return.

If we have correctly analyzed the situation at the time the Salmon & Salmon note was given on April 1, 1904, and if the conduct of defendant in taking said note without the consent of Major Salmon thereto, operated as a fraud upon the firm, then.there is complete room for equity and good conscience. Defendant knew that it was getting the firm’s obligation for the debt of an individual debt, and when it got the money it knew it came from the firm assets.

We are clearly of the opinion that as to this note and the payments thereon, both principal and interest, ¡the court nisi was in error.

IV. As to the first $10,000 note given by Casey & Towers, the letter sent with it is not so strong as the letter accompanying the $20,000 note just discussed. Whilst this is true, we are of the opinion that the fact, therein indicated, to the effect that G-. Y. Salmon alone was the indorser and not Salmon & Salmon, was sufficient to put defendant upon inquiry as to the character of this note. This coupled with what was done 'on April 1, when defendant’s agent saw and knew that H. W. Salmon was not present, was sufficient to take the counts involving the sums paid on this note to the jury or to the court sitting as a jury.

The judgment should be reversed and the cause remanded to be further proceeded with in accordance with the views herein expressed. It is so ordered.

Valliant, C. J., Fox and Woodson, JJ., concur. Burgess and Lamm, JJ., dissent; Gantt, J., being a creditor of the Salmon estate, does not sit.