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in all their partnership transactions. This rule becomes essential because the members of the partnership stand in a fiduciary relation to each other. 22 Am. & Eng. Ency. L. (2d Ed.) 114, and numerous authorities there cited. The doctrine thus announced bears upon the conduct of the appellant bank. Did it have the right to assume that the conduct and statement made by McIntire, as testified to by its president, were authorized by the members of the firm of McIntire & Mid'dleton? Was it not then and there put upon notice that it was doubtful, to say the least, if McIntire was authorized to make such a statement? It had no knowledge that Middleton knew the amount of McIntire's indebtedness to the bank. The amount was so large as to cast suspicion upon the part of the bank and its officers, and put them on inquiry as to the truth of McIntire's statement.
In 1 Lind. on Part. p. 413, § 171, the author says:
"A person who knows that a partner is using the name or assets of the firm for a private purpose of his own knows that he is prima facie committing a fraud on his copartners. Therefore, notwithstanding the implied power of a member of an ordinary trading firm to accept bills or make notes, if one partner accepts a bill or makes a note in the name of the firm, and gives the bill or note in payment of a private debt of his own, the creditor who takes the bill or note, knowing the circumstances under which it has been accepted or made, will not be able to enforce it against the firm, unless it was in fact given with the authority of the other partners, which it is for the creditor to prove."
In McNair v. Platt, 46 Ill. 211, 213, the court said:
"As a general rule, one partner is not bound by the unauthorized acts of his copartner; but, from the very nature of a partnership, each member of the firm is presumed to have and has authority to bind the firm within the scope of the business of the copartnership. Beyond the scope of its business, authority to act must be shown, precisely as if any other person had performed the act, or the firm will not be bound. The application of partnership funds or property to the payment of a debt of one member of the partnership is outside of and beyond the scope of its business, and assent to such application must be shown, or a subsequent ratification proved, or the firm will not be bound."
It is unnecessary to multiply authorities upon this point. The books are full of cases where this principle is announced. There are none to the contrary. It was this principle that authorized the allowance of many of the accounts by the court that were included by the bank in the McIntire Mercantile Company. The fact is that the court allowed all the accounts that were proven in good faith to belong to the partnership of McIntire & Middleton; otherwise all the accounts should have been disallowed on the general principle that they were charged to McIntire alone, and the appellant bank did not upon its books appear to be a creditor of McIntire & Middleton. The court took an equitable view of this matter in order to reach the ends of justice, and recognized the appellant bank as a creditor of the firm, and entitled to share with other creditors to the extent that it had proven it was in fact a creditor of the firm. This equitable view, however, could not be extended to the transaction of the renewal of the two notes unless the firm had agreed to assume the indebtedness of the McIntire Mercantile Company, because the bank knew that the renewal notes were given for the private debt of McIntire. The law is well settled that one partner
cannot bind the firm by giving a note to pay his individual debt unless authorized so to do by his partner. Such a transaction is treated as a fraud upon the partnership. 1 Bates on Part. §§ 347, 509, and authorities there cited; Elkin v. Green, 13 Bush, 612; Lanier v. McCabe, 2 Fla. 32, 48 Am. Dec. 173; Thomas v. Stetson, 62 Iowa, 537, 17 N. W. 751, 49 Am. Rep. 148; Howell v. Sewing Machine Co., 12 Neb. 177, 10 N. W. 700; Bank of Scott City v. Sandusky, 51 Mo. App. 398, 401; Brobston v. Penniman, 97 Ga. 527, 25 S. E. 350.
In Shirreff v. Wilks, 1 East, 48, decided in 1800, Lord Kenyon, C. J., said:
"This is an action brought against three persons, Wilks, Bishop, and Robson, as acceptors of a bill of exchange. It appears that the acceptance was in fact made by Bishop alone in the name of the firm. The consideration for this bill was some porter which had been sold by the plaintiffs to Wilks and Bishop only, at a time when Robson had no concern with the house. Then the plaintiffs, knowing this, draw the bill upon all the three partners, and knowingly take an acceptance from one of them to bind the other two, one of whom, Robson, had no concern with the matter, and was no debtor of theirs; no assent of his being found, and nothing stated to show that he had any knowledge of the transaction. It is hard enough for one partner in any case to be able to bind another without his knowledge or consent, but it would be carrying the liability of partners for each other's acts to a most unjust extent if we suffered a new partner to be bound in this manner for an old debt incurred by other persons. The plaintiffs therefore ought not, in justice, to have taken this security, by which they were to bind one who was not their debtor. The transaction is fraudulent upon the face of it."
There is nothing in the course of dealing of the firm of Mclntire & Middleton, irregular as it was, that could have misled the appellant bank, and induced it to accept the renewal notes under the belief that the firm had assumed the payment of McIntire's debt to the appellant bank.
In People's Savings Bank v. Smith & Co., 114 Ga. 185, 188, 39 S. E. 920, the court held that a partnership may frequently have drawn checks against its funds in bank for the purpose of discharging the individual debts of its members would not constitute such a course of dealing as would justify the bank in assuming that it was within the scope of the partnership business to pledge its credit and give its promissory note in satisfaction of a debt due by one of the partners to the bank.
In order to ratify the act of McIntire in giving the notes in question, it must at least have been shown that Middleton had knowledge thereof. The foundation upon which the principle of ratification is based is wanting in this case. In the very nature of the facts, as disclosed by the testimony, there could not have been any ratification upon the part of Middleton, for he never heard of the $2,500 note until a very short time before the proceedings in bankruptcy were instituted, and there is no pretense that he then consented to it. His first knowledge of the $4,000 note was at the first meeting of the creditors before the referee in the bankruptcy proceedings. In Reubin v. Cohen, 48 Cal. 545, the court held that the mere fact that a partner, upon being informed that his copartner had given a firm note for his individual debt, does not deny his liability thereon, does not per se amount, in point of law, to a ratification or adoption of the note.
Some reliance seems to be placed upon the point that it is the duty of the court to assume in this case that Middleton had access to the firm books, and obtained knowledge therefrom. Middleton testified that he could have had access to the books of the firm, but that he had never examined them. There was no evidence upon this point except the testimony of Middleton. No inference could therefore be drawn as to his knowledge of what the books contained. The books introduced in evidence in this case did not contain any entries with reference to the notes in question, and Middleton could not have obtained any knowledge in regard to them if he had examined the books. The ordinary presumption undoubtedly is that all the partners have access to the partnership books, and know of the entries therein; but this is a mere presumption from the ordinary course of business, and may be repelled by any circumstances which lead to a contrary presumption. States Bank v. Binney, 5 Mason, 176, Fed. Cas. No. 16,791. The judgment of the district court is affirmed, with costs.
FIRST NAT. BANK OF MILES CITY v. STATE NAT. BANK OF MILES
(Circuit Court of Appeals, Ninth Circuit. May 2, 1904.)
1. BANKRUPTCY EFFECT OF APPEAL ON JURISDICTION OF DISTRICt Court. Where an appeal has been duly taken and perfected under Bankr. Act July 1, 1898, c. 541, § 25a, 30 Stat. 553 [U. S. Comp. St. 1901, p. 3432], from a judgment allowing or rejecting a debt, the district court is thereby deprived of jurisdiction to further consider matters involved in the appeal, and cannot entertain a motion for a rehearing so long as the appeal is pending.
Appeal from the District Court of the United States for the District trict of Montana.
In Bankruptcy. On motion to dismiss appeal.
T. J. Porter and Davis, Kellogg & Severance, for appellant.
O. F. Goddard, for appellee.
Before GILBERT and ROSS, Circuit Judges, and HAWLEY rict Judge.
HAWLEY, District Judge. This is an independent appeal in the case just disposed of. 131 Fed. 422. The facts are that on August 17, 1903, the District Court rendered its judgment in the case upon its merits; that on August 25, 1903, the First National Bank, appellant herein, took and perfected an appeal from that judgment to this court; that on September 12, 1903-18 days after said appeal was perfected— it filed a petition, with affidavits in its support, and thereon moved the court for a rehearing upon the ground of alleged newly discovered evi
¶ 1. Appeal and review in bankruptcy cases, see note to In re Eggert, 43 C. C. A. 9.
dence cumulative in its character. The court denied the rehearing, and from that order the present appeal is taken.
Appellee moves to dismiss the appeal on the grounds (1) that it is not an appealable order; (2) that it was made and entered after the appeal in the case was taken; (3) that by reason of the appeal the District Court had no jurisdiction to act upon the petition for rehearing during the pendency of said appeal to this court.
It is proper to state that the record herein shows that counter petitions and affidavits were filed by the appellee in the court below, that the cause was regularly submitted to the court, and that after consideration the court made the following order:
"Wherefore it is ordered and decreed that said petition for rehearing be, and the same hereby is, denied. And thereupon exception was allowed to the court's ruling, and the First National Bank of Miles City allowed fifteen days within which to prepare, serve, and file bill of exceptions."
So far as the record shows, it appears that the court disposed of the motion for rehearing upon its merits, and it does not affirmatively appear that it erred in so doing. It was certainly largely within the sound discretion of the court, and depended upon the views that might be taken of the facts contained in the case as originally tried and as presented in the petition. But, independent of these matters, the question of practice, as adopted in this case and raised by the motion to dismiss, is one that ought to be disposed of. The overwhelming weight of authority of the state courts is that an appeal, properly perfected, absolutely removes the case from the trial court, and places it in the appellate tribunal. The case must, of necessity, either be in the appellate or lower court. It cannot very well be in both courts at the same time. Such a course would lead to endless confusion. Under all the ordinary rules of practice, the appellate court alone would have the jurisdiction. After the cause leaves the lower court, it is deprived of aking any action upon any question involved in the appeal. Many of the authorities in the state courts upon this point are collected and cited in Elliott's App. Pro. § 541. The federal authorities are substantially to the same effect.
The precise point here raised has not been discussed in the national courts, because the practice adopted by appellant in this case is virtually unknown; but it has been incidentally referred to in several decisions to the effect that the decree in the District or Circuit Courts, when an appeal has been taken therefrom, is suspended until the appeal is disposed of. This rule is frequently stated in admiralty and other causes. The Collector, Wilmot, Claimant, 6 Wheat. 194, 203, 5 L. Ed. 239; Bronson v. Railroad Co., 1 Wall. 405, 409, 17 L. Ed. 616; The Lottawanna, 20 Wall. 201, 225, 22 L. Ed. 259; The S. S. Osborne, 105 J. S. 447, 450, 26 L. Ed. 1065; Ensminger v. Powers, 108 U. S. 292, 302, 2 Sup. Ct. 643, 27 L. Ed. 732; Hovey v. McDonald, 109 U. S. 150, 157, 3 Sup. Ct. 136, 27 L. Ed. 888.
In Bronson v. Railroad Co., supra, the court said:
"They having appealed from the decree, it would be against all reason and principle to permit them to proceed in the execution of it pending the appeal. They assert the decree is founded in error, and for that reason should not be executed, but should be reversed and corrected in the appellate tribunal. The appeal suspends the execution of the decree."
In Ensminger v. Powers, supra, the court said:
"While the appeal was pending here, although there was no supersedeas, the Circuit Court had no jurisdiction to vacate the decree in pursuance of the prayer of a bill of review, because such relief was beyond its control."
The decisions in the District and Circuit Courts are to the same effect. Morgan's Louisiana R. R. Co. v. R. R. Co. (C. C.) 32 Fed. 525, 530; Kimberly v. Arms (C. C.) 40 Fed. 548, 550; Citizens' Bank v. Farwell, 56 Fed. 539, 6 C. C. A. 30; Western W. S. Co. v. Drinnen (C. C.) 79 Fed. 820; Morrin v. Lawler (C. C.) 91 Fed. 693.
In Citizens' Bank v. Farwell, supra, the Court of Appeals said:
"After the cause had been thus removed into this court, the plaintiff in error appeared at a subsequent term of the Circuit Court, and filed a motion in that court to 'vacate, set aside, and annul the said judgment' on various grounds. This motion the court overruled, and thereupon the plaintiff in error sued out this second writ of error in the same cause, and assigned for error the overruling of said motion. The removal of the case into this court under the first writ of error transferred the jurisdiction of the suit to this court, and the jurisdiction of the lower court over the case was at an end." In Morrin v. Lawler, supra, Thomas, J., said:
"When all the steps necessary to perfect an appeal to an appellate court have been properly taken, the action is within the control of that court, and the trial court should not engage in undoing or modifying the proceedings by which such jurisdiction has been obtained.”
The appeal here taken is not authorized or sanctioned by any of the provisions of the bankrupt act, or by any rule or practice adopted by the courts in bankruptcy proceedings.
Section 25a, Act July 1, 1898, c. 511, 30 Stat. 553 [U. S. Comp. St. 1901, p. 3432] provides:
"That appeals, as in equity cases, may be taken in bankruptcy proceedings from the courts of bankruptcy to the Circuit Court of Appeals of the United States * * * (3) from a judgment allowing or rejecting a debt or claim of five hundred dollars or over. Such appeal shall be taken within ten days after the judgment appealed from has been rendered."
It was by virtue of these provisions that the first appeal was taken. In the petition for a rehearing it was stated that the matters upon which a rehearing was asked were discovered “since the suing out an appeal in this court, and that, if a rehearing of this cause is granted by the court, petitioner will dismiss such appeal, and diligently prosecute its said claim before this court upon such rehearing." This was not sufficient. If appellant desired its petition for rehearing to be passed upon by the court below, it should have dismissed the appeal it had previously taken to this court. The authorities cited by appellant are to the effect that by so doing it would not have lost its right to take an appeal after the final action of the court below upon the petition for rehearing. In re Wright (D. C.) 96 Fed. 820; Stickney v. Wilt, 23 Wall. 150, 23 L. Ed. 50. Appellant cites Devries v. Shanahan, 122 Fed. 629, 58 C. C. A. 482, but that case only decides that the Court of Appeals, where the record is imperfect, may return the same to the District Court for correction. In re Abraham, 93 Fed. 767, 782, 784, 35 C. C. A. 592, is based on facts entirely dissimilar to the case at bar. The appeal was there taken from an order that was not appealable, and the Court of Appeals, in the exercise of its discretion, permitted the appellant, in lieu