Crawford v. Austin

The bank commissioner sued the defendants as partners on a note given to the Alto State Bank under the name of "Crawford Motor Company, by J. M. Crawford, Manager." The defendants Kerr and Berryman specially denied, under oath, the alleged partnership and the execution of the note by them or under their authority. The defendant Crawford relied upon the defense, in effect, that he signed the note as done purely for the accommodation, as the private debt, of J. H. Kerr, and that the bank received such note with notice of the consideration. And the principal question presented on the appeal involves the legal correctness of peremptorily instructing a verdict against the defendants, in view of the defenses and the uncontroverted proof offered in support thereof. The evidence relied on by the plaintiff to establish the alleged partnership was derived from the written articles of agreement of the defendants of June 25, 1920. This agreement, it is believed, attempts, by intendment of the immediate parties and in legal effect, to create the actual relation of partners, and to carry out a joint venture for their mutual profit, and can be enforced and construed as creating a partnership. By the articles of agreement all three parties named were assenting to "associate themselves" or act together in the relation, among themselves and in business dealings with third parties, of "a limited partnership" to consummate the purposes contemplated and declared to be "for the carrying on, in the city of Alto, the trade, business, and occupation of selling Oakland and Overland automobiles." And by the further articles of the agreement there was an agreed joinder of their interests in a common enterprise, its prosecution for their joint account, and an ensuing right in each of them to share proportionately in its net return as such.

Mr. Berryman dedicated to its purposes and aim his "contracts with the Oakland and Overland Automobile Companies," specially inuring in benefit to all three of the parties. No other inference can be indulged than that his intention was to make it a contribution to the capital. By a clearly implied agreement, he permitted his interest in such "contracts" to be put to work as capital in the business, with the expectation of sharing proportionately in whatever profits it might help to produce. Mr. Kerr was to advance the money to pay, in the first instance, the purchase price of the automobiles; and Mr. Crawford, under the name of "Crawford Motor Company," was to furnish his services and skill as a salesman — all being done with the expectation of sharing proportionately in whatever profits their joint contributions might help to produce. No cars could be purchased under the Berryman contracts except "as agreeable with Kerr and Berryman" and Mr. Crawford. Each one of them had a say as to "quantities and numbers" of automobiles they were "to buy." The original purchase price of the automobiles, when ordered by agreement of all the parties, was to be advanced by Mr. Kerr; but the automobiles so bought were to be devoted to the common object of the "business" of selling automobiles, for the carrying on of which business the parties agreed "to associate themselves." Mr. Kerr was to be repaid first out of the proceeds of the sale of the automobiles, and then share with the other two the net profits realized from the sale of the same. The title to the automobiles so purchased passed to the common business as such, and the profits realized from their sale were to be accounted to the business as such. All the parties were to share the general fate of the business as a common enterprise. If the business yielded no profits, then, in consequence, the parties shared in none. Consequently there existed by the agreement a common enterprise, its operation for the joint account, and the right of each in the community of interests to share as a principal in its profits as such. That is a recognized test of the relation of partners under the established rule in this state. Miller v. Marx, 65 Tex. 131; Stevens Andrews v. Bank, 62 Tex. 499; Kelley Co. v. Masterson, 100 Tex. 38, 93 S.W. 427; Dilley v. Abright,19 Tex. Civ. App. 487, 487 S.W. 548.

Accordingly by the articles of agreement the plaintiff established a prima facie case of partnership and therefore the liability of the members, through the authority of one partner to act for and bind the others for the presumed firm debt. The weakness in the proof lay in the fact that the articles do not show an agreement to use or carry on the partnership under the name of "Crawford Motor Company," the name signed to the note. And there was no extrinsic proof that the partners used that name in dealings with the public or third persons. That was the mere trade-name used by J. M. Crawford himself at the time of the signing of the agreement. It is mere conjecture that the defendants, as partners, used that name with authority to J. M. Crawford to do so as the manager of the business. But for the purpose of showing a prima facie case it can be presumed that such name purported to be the trade-name of the partners, sued as defendants. When it has once been established that particular persons are partners the presumption then is that they continue associated in that relation unless otherwise affirmatively proven. The burden was then placed on the defendants to relieve themselves of liability on the note. This burden was met in the proof, which was uncontroverted, at least as to Mr. Berryman and Mr. Kerr, that the partnership was finally terminated and dissolved, and that all the assets, consisting entirely of notes and accounts payable to the firm, were turned over to Mr. Kerr on December 1, 1921.

The only indebtedness unpaid at the time of the dissolution was the balance on the original purchase price of the automobiles for which Mr. Kerr was to be paid out of the proceeds of the sale of the automobiles. No other inference can be indulged than that the assets of the firm were turned over to Mr. Kerr and accepted by him in final settlement of this debt. The note to the bank was not executed until January 24, 1922, more than six weeks after the partnership was dissolved and its affairs wound up. The partnership had not carried on a course of dealing with the bank before its dissolution, as far as the record shows, and the bank did not act in the present note in the belief that the firm was still in existence. The bank, not having dealt with the firm before its actual dissolution, was not in a position to assert that the effect of the failure to give it notice of the dissolution was to continue the liability of each for the acts of the other partners in spite of the fact of dissolution. Green v. Waco State Bank, 78 Tex. 3, 14 S.W. 253. And the bank makes no such claim in this case by pleading or proof. Accordingly, in the proof, the former mutual agency of the partners did not continue in spite of the fact of dissolution, in this case, especially so since the affairs of the partnership were administered and wound up, as between themselves, and at that date no third person was a creditor. As between themselves, neither partner has any power whatever to act for or bind the other after dissolution. This is elementary. And, as regards third persons, the dissolution works an absolute revocation of all implied authority in either of the partners to bind the others to new contracts or obligations, or to create a new cause binding the firm. White v. Tudor,24 Tex. 639, 76 Am.Dec. 126; Bizzell v. Hill (Tex.Civ.App.) 37 S.W. 178; Lubbock Grain Coal Co. v. Ferguson (Tex.Civ.App.) 227 S.W. 539; 30 Cyc. p. 608; and numerous other cases. And this is true even where the consideration is the debt of the firm, and although the act is one which otherwise would have been within the scope of partnership business. Bell v. Morrison, 1 Pet. 351, 7 L. Ed. 174; Haddock v. Crocheron, 32 Tex. 276, 5 Am.Rep. 244.

Hence, in a suit, as here, to charge the defendants as partners, it is competent for them to prove that, at the time the note was made, the partnership had been finally dissolved. Since there was no longer any partnership, the giving of the note and signing the name of "Crawford Motor Company" by one of the former partners did not bind the firm as such. The bank, then, could not look to persons other than those with whom it was dealing for payment of the note. In legal result Mr. Berryman and Mr. Kerr would not be liable to the bank on the note, although Mr. Crawford would be, as the maker. Mr. Crawford executed the note, as he admits, as an accommodation note; and this fact renders him liable, even though the bank, being a holder for value, knew him to be only an accommodation party The Negotiable Instruments Act (Rev.St. 1925, art. 5933, § 29). This would also be true as to Mr. Crawford, although the note be regarded as executed by him in his own trade-name for the private debt of Mr. Kerr. And, even though such view of the evidence be considered, Mr. Kerr could not be held on the note in a suit strictly on the note. The statute expressly provides that "no person is liable on the instrument whose signature does not appear thereon." Article 5932, § 18. Whether or not Mr. Kerr could be held liable for the payment of the money received in virtue of the note is another question aside from this case, as the suit is strictly on the note and not in the alternative for the debt itself. In order to maintain the present action on the note, the note must be binding on all the defendants or the special maker thereof.

It is believed that the plaintiff's petition is good as against a general demurrer. It sufficiently alleges the facts, and to the effect that the bank, through the commissioner, was in possession of and holding the note as its "assets." The note was a negotiable note payable to the order of the bank, and was not indorsed by the bank. Prima facie the bank was the owner and holder of the note. In this situation it devolved upon the defendant to plead nonownership or wrongful holding by the bank of, or incapacity to sue on, the note, or make a purported claimant, if there was one, a party defendant to assert and establish his interest, if any he had. It is believed that no reversible error is presented by the record as to Mr. Crawford. Accordingly, the judgment is affirmed as to Mr. Crawford. The judgment is reversed as to Mr. Kerr and Mr. Berryman, and judgment is here rendered in their favor, with all costs incurred by them in the trial and the appellate courts; the costs of appellants Kerr and Berryman to be taxed against the appellee banking commissioner.

Affirmed in part, and reversed and rendered in part.