Campbell v. Huffines, 151 N.C. 262 (1909)

Nov. 11, 1909 · Supreme Court of North Carolina

151 N.C. 262

R. G. CAMPBELL v. D. K. HUFFINES.

(Filed 11 November, 1909.)

Partnership — Duplicated Agreement — Annulment of Partnership— Fraud — Innocent Persons.

One who has entered into a partnership with another, expressed the agreement in duplicated and signed writings, and then agreed to annul the partnership, leaving the duplicate agreement in the hands of the other party, is liable to a stranger who is thereafter fraudulently induced by the other partner to lend money, in good faith, upon exhibition of the duplicate partnership agreement, within the period of its stated duration, and for purposes within its expressed scope. He has put it within the power of the other partner to commit the fraud, and should suffer loss rather than an innocent stranger who has advanced the money in good faith.

Appeal by defendant from Long, J., June Term, 1909, of GrtTILFORD.

The evidence discloses the following facts : One Wv II. Harp, on 23 May, 1903, applied to plaintiff for a loan of $500. Harp was in the retail whiskey business, in Greensboro, and doing business in a building owned.by defendant. Harp called plaintiff into his place of business. The plaintiff, at first declined to make the loan; that Harp was not considered solvent. Harp took from his safe a written contract of partnership between him and defendant, dated 5 June, 1902, which, among other things, stipulated that Harp should manage the business, do the buying, pay tbe bills, make all contract, sign all checks and liave entire control of tbe business; tbat eacb of tbe partners w.as tbe owner of one-balf; tbat defendant bad loaned Harp tbe money to buy a one-balf interest in tbe business of C. A. Miller & Co.; tbat tbe business should be'Conducted under its'then name, C. A. Miller & Co., until 1 July, 1902, and after then should be changed to such name as might be agreed upon; tbat tbe partnership should continue until 1 July, 1903. Plaintiff testified tbat be knew tbe signature of. D. K. Huffines, and, after seeing the written agreement, loaned tbe money and took note, signed “Harp & Huf-fines” ; tbat Harp told him tbe money was needed to pay bills; tbat Huffines was out of town; tbat tbe money would be repaid in a short time;'that $200 was rej)aid him by Harp, by check given him by Harp in tbe place of business. Tbe defendant admitted signing the contract of partnership; tbat on the next day thereafter be decided not to proceed further; that be agreed with Harp to cancel tbe contract; tbat be tore up bis copy and Harp promised to tear up and destroy bis copy; tbat he did furnish Harp tbe money to buy a one-balf interest in the business of C. A. Miller & Co. and took bis note for $1,200, and that Harp bad paid him $700. Tbe jury found, in response to issues submitted without objection, tbat tbe defendant and Harp were partners at tbe time plaintiff loaned the money, and that tbe defendant and Harp were both indebted to plaintiff for tbe balance due. Tbe defendant Huffines alone appealed from the judgment rendered on tbe verdict.

John A. Barringer for plaintiff.

A. L. Brooks and Thomson & Hoyle for defendant.

MANNING, J.

We think tbe judgment of tbe court below is sustainable by tbe application of a few well-settled principles. Tbe first headnote (which tbe opinion sustains) of Cotton v. Evans, 21 N. C., 284, declares: “A mercantile instrument, given in tbe partnership name, binds all tbe partners, unless tbe person who took it knew or bad reason to believe tbat tbe partner who made it was improperly u'sing bis authority for bis own benefit, to tbe prejudice, or in a way tbat might bo to the prejudice, of bis associates.” Again, it is declared in that ojfinion: “In such a case there is a loss to fall on one of two innocent persons; and tbe question is, which of them ought to bear it? Manifestly he who entrusted tbe power. It was susceptible of abuse, and be knew that when be conferred it. It is not, in point of form, exceeded; and if it has been employed for a different purpose than tbat for- which it was created, tbat is a risk that must have been seen and undertaken from the beginning.” ' This case has been, at this term, cited with approval in Powell v. Flowers, in which other cases are cited sustaining the same principle. The defendant signed the articles of partner-, ship; gave Iiarp, his copartner, a duplicate original; permitted him to keep it; Harp took it out of the iron safe in the place of business, showed it to plaintiff, and plaintiff, knowing the defendant’s signature, loaned the money on the faith of it. The date of the loan was within the time stipulated for the duration of the 'partnership. The defendant put it in the power of his associate, Harp, to mislead the plaintiff and to defraud himself. The question simply is, which should suffer the loss, the plaintiff or the defendant? It is well settled by many adjudications, here and elsewhere, that the party putting it within the apparent power of another to commit a fraud should suffer a loss, rather than a stranger who has innocently and in good faith acted upon this apparent power. Ellison v. Sexton, 105 N. C., 356. By the written contract the defendant was an actual partner, not simply an apparent partner. What the partner, Harp, did was strictly within his power, under the written agreement and within the time stipulated for the duration of the jpartnership. “Where a man holds himself out as a partner, or allows others to do so, he is properly estopped from denying the character he has assumed, and upon the faith of which creditors may be presumed to have acted.” 22 Am. & Eng. Enc., 55; Thompson v. Bank, 111 U. S., 529. The defendant could easily have seen that the duplicate original held by Harp was destroyed, and the protection of himself from liability would clearly seem to have demanded it. We have carefully examined the exceptions taken by the defendant at the trial, both in the taking of the evidence and to the charge of his Honor, and the authorities cited in the able brief of his attorney, and we find no error. The judgment is therefore

Affirmed.