Morrison's Appeal

Mr. Justice Gordon

delivered the opinion of the court, May 3d 1880.

If we assume as true the facts found by the auditor, both his conclusion and that of the court are correct. For if indeed the notes of Boner, amounting now to some $22,000, were made and discounted for the firm of Lee & Walker, the claim of this firm, now in the hands of the appellant, amounting to $2743.78, cannot be allowed to participate in the distribution of the funds raised from the insolvent estate of Boner, and this for the very good reason that this estate is being compelled to pay for Lee & Walker a sum much larger than their claim. This conclusion, however, depends upon the fact, already stated, that the notes of Boner & Co. (Boner), now held by the Commonwealth National Bank and others, were made for the accommodation of Lee & Walker. On the other hand, if this pap.er was issued originally for the benefit of Julius Lee, and was afterwards, from time to time, renewed by Boner & Co., and discounted on the endorsements of Lee & Walker for the sole purpose of lifting the original or preceding notes, then it is just as clear that Lee & Walker owed Boner nothing, and the appellant’s claim ought to have had its share of the fund.

How, then, are the facts? For upon them the case depends; about the law there is no dispute. We gather from the testimony and the auditor’s report the following: There was the firm of William H. Boner & Co., composed of Boner and Julius Lee. This firm was dissolved on the 1st of October 1872, by the withdrawal of Lee, Boner, however, continuing the business under the old name of William II. Boner & Co. At the time of. this dissolution, Boner executed his bond to Lee in the sum of $20,000, in full consideration of Lee’s interest in the firm’s assets ; $5000 of this were afterwards paid. Furthermore, it was agreed by the parties that Boner & Co. (Boner) should, from time to time, make, and deliver to Lee, accommodation notes and renewals thereof, Lee, on the other hand, binding himself to protect the same as they matured. At this time, Julius Lee was carrying on a separate business of his own under the name of Lee & Walker. Afterwards, in the year 1874, Lee associated with himself as partners William N. Toy and James F. Morrison, the appellant, and this new firm continued the name of Lee & Walker. The claim in controversy originated from the indebtedness of Boner to this latter firm. Again, the auditor finds, and in this he is supported by the facts of the ease, “ that the accommodation notes, amounting to $22,094.88, made in pursuance of the agreement of the parties, are really but duplications of the indebtedness of 15,000 on the bond, which was not entered up against William H. Boner & Co.” In other words, the notes now sought to be charged against Lee & Walker were in fact made for the benefit of Julius Lee, and had for their consideration, in part, the unpaid balance of the Boner bond. Originally, therefore, the company last named had nothing whatever to do with these notes.; indeed, it does not appear that it was in existence when they were issued. It follows unless on some consideration, moving from Lee or Boner, Lee & Walker assumed the payment of these notes, the auditor was wrong in his finding: Babcock v. Stewart, 8 P. F. Smith 179; Shamburg v. Ruggles, 2 Norris 148. The auditor says Morrison had full knowledge of the issuance of these accommodation notes, and that his firm received the proceeds. To be sure, Morrison and his firm knew all about these notes and their renewals, for the latter were discounted on their endorsements, but that they received the proceeds to their own use is quite another question.

The only testimony on this subject is that of Morrison himself, and he says that the present notes were renewals of former ones similarly drawn, and that the proceeds were used to pay these former notes; that the money raised on the original notes, which were drawn to Julius Lee, as Lee & Walker, went to the use of Lee alone; that the new firm endorsed the renewals in order to lift the originals, and that his firm had the use of none of the proceeds thereof, neither was there any consideration for such endorsements from either Boner or Lee. How, under this evidence, the auditor could find an indebtedness from Lee & Walker to Boner is something I cannot understand. Such indebtedness certainly could not have originated from the endorsements by that firm of Boner’s paper by which, from time to time, it was saved from protest. And yet this seems to be all Lee & Walker had to do with this paper.

An attempt has been made to make something out of the fact that, in January 1875, the executor of Julius Lee gave his check to Lee & Walker, on the Philadelphia National Bank, for some $7800. But we cannot understand how this helps the matter. Mr. Smith, the executor, says, this money belonged to the firm of Lee & Walker, and the other partners having no right to draw chocks he drew as executor. This means nothing more than that the surviving partners were put into the possession of money belonging to their own firm, but it certainly does not prove an indebtedness by that firm to either Leo or Boner. '

The conclusion, then, is irresistible, that the court below erred in adopting the auditor’s report, in so far as it excludes the claim of the appellant from a participation in the fund for distribution.

It is now ordered that the decree of the court below be reversed; that a new distribution be had in accordance with the above opinion, and that the appellees pay the costs of this appeal.