Estate of the Van Haagen Soap Co. , 141 Pa. 214 ( 1891 )

THIRD N. BANK’S APPEAL.

Opinion,

Mr. Justice Clark:

The controversy in this case arises upon the distribution of the assets of the Van Haagen Soap Manufacturing Company in the hands of John H. Connellan, assignee for creditors, in the Common Pleas No. 1 of Philadelphia. At the hearing before the auditor, the National. Security Bank of Philadelphia presented a claim for $5,000, the amount of a loan alleged to have been made to the company in June, 1885, for which the bank at the time of the loan took the note of Anthony Van Haagen, payable to the order of John Hunter, and by him indorsed. William H. Lambert also presented a claim of $5,000, a loan alleged to have been made on May 15, 1885, for which he took the note of John Hunter. Both of these notes were from time to time renewed until February, 1887, the interest thereon being paid by John Hunter. Both claims were objected to on the ground that they were loans, not to the Van Haagen soap company, but to Anthony Van Haagen and John Hunter, respectively, and that there was no liability on part ■of the soap company to pay them. The appellees’ contention, however, is that the respective loans were in fact negotiated for and on behalf of the company; and, although the notes of Van Haagen and Hunter were, for supposed prudential reasons, taken as a security for payment thereof, the company actually incurred the debt and is liable therefor; and that the claims should therefore be allowed in this distribution.

The auditor apparently determined the question of the company’s liability upon the fact that upon neither of the notes did the name of the Van Haagen Soap Manufacturing Company appear, either as maker, indorsee, or otherwise; he was of opinion, therefore, “ that the relation of debtor and creditor was not created, and at no time existed between these claimants and the soap company.” Referring to the Lambert claim, he says, in substance, there was some testimony that the money was wanted for the soap company, but as the company was known to be in a not very promising state, he could readily understand why, although having a friendly feeling for the company, Lambert would see to it that the person to whom he advanced the money would be able to repay it when it became due. This he thinks Lambert did. “At the date of these transactions,” he says, “ Mr. John Hunter’s name and credit in the commercial world was without blemish. He occupied the ■position of receiver of taxes of Philadelphia, was in receipt of a large annual salary, and was otherwise supposed to be a man •of great influence and large wealth. It is very certain that at •the time indicated he had not the slightest premonition of the financial and family calamity by which he was subsequently overwhelmed. It is quite natural, therefore, that individuals and banks could be found who would be willing to lend their money upon the faith and credit of John Hunter’s paper, whilst they would be unwilling to advance it to a corporation which was admittedly hanging on the ragged edge of a stoppage of ■•its operations.....A man who lends his money to another may or may not approve of the use to which his debtor intends to devote the money, but he has the right to say before he. parts with the cash, and he generally does say, upon what terms and on what security he will make the loan. When he stipulates and exacts terms and security, clearly and distinctly expressed in writing, it would be taking great liberty with him and his contract to say that he did not mean what he had caused to be written, but he meant something else of an entirely different character.” This is substantially the view taken by the auditor. He fails to find, in any explicit form, what is the controlling fact in the cause, whether the loan of the money in each case was in fact to the company, or to the parties on the note; that is to say, whether the notes were received as a consideration for the money or as a security merely.

It is undoubtedly true, if in June, 1885, Hunter had taken the note of Van Haagen to the bank, and there had it discounted, the proceeds passing to his individual credit, without more, the bank would have been obliged to rely upon the parties to the note for payment; or, as stated in Ex parte Blackburne, 10 Ves. 204, cited by the appellants, “If there is no antecedent debt, and A carries a bill to B, to be discounted, and B does not take A’s name upon the bill, if it is dishonored there is no demand, for there was no relation between the parties except that transaction, and the circumstance of not taking the name upon the bill in evidence of a purchase of the bill.” It is true, also, and the appellants contend that an analogous principle should prevail here, that if a partner borrows a sum of money, and gives his own security for it, it does not become a partnership debt merely because it is applied to partnership purposes: Graeff v. Hitchman, 5 W. 454. “ It is entirely competent for one partner to borrow money, or to buy goods, or to enter into contracts on his sole and exclusive credit with third persons; and, on the other hand, it is equally competent for them to rely on that exclusive credit, and either to refuse to contract with the firm, or to exonerate the firm from all liability'- upon any contract which would otherwise bind the firm as being for their account or benefit: ” Story on Partnership, 134-136. It may be, also, as was held in Bond v. Aitkin, 6 W. & S. 165, and North Penna. Coal Co.’s App., 45 Pa. 181, that where there is no antecedent debt, and the partner executes his bond, which is a security of a higher nature, as a consideration for money loaned, it would require stronger proof to establish an express agreement by parol that the partnership was nevertheless to be held for the debt. Similar principles, perhaps, apply in certain cases to companies or corporations. “ It may therefore be taken to be established,” says Lindley on Partnership, 364, “that a partnership or company, not liable on a contract when entered into, does not become liable upon it by reason of having benefited by it; and, further, that a company or partnership, which has benefited by a contract not binding on it, is not to be deemed to have thereby ratified that contract, nor to have incurred an obligation quasi ex contractu, similar to that which would have been incurred if the contract had been binding on the firm or company in the first instance.”

As the giving of the note was in this case contemporaneous with the creation of the debt, the presumption, we think, was that the note was discounted, or that it was given as a consideration, and not as a security for the money. But this is only a presumption of fact, and may be rebutted by showing the actual intent of the parties to have been otherwise. It is not disputed that Van Haagen and Hunter had the power to bind the company for borrowed money. It was competent, therefore, for the National Security Bank to show that the money was, in fact, loaned to the company for the company’s use; that the transaction was not the discount of a note, but a loan of money to the company, the note being ip the nature of a collateral security for the repayment thereof: Maffet v. Leuckel, 93 Pa. 468. In the case cited, the facts found by the referee were as, follows: Maffet & Rhoads, the defendants, during the year 1866 were partners, engaged in building a section of the Lehigh & Susquehanna railroad. Rhoads applied to the plaintiff, Leuckel, for $200, representing that he wished the same for the purpose of paying the men in the defendants’ employ, and thereupon the said amount was advanced by the plaintiff, and the sum was used by Rhoads for the purpose mentioned, he giving the plaintiff his own individual note for the amount. Suit was brought, not upon the note, but for the recovery of the money advanced, and judgment was entered for the plaintiff. When the cause came here, this court, in a per Curiam said: “ There was nothing in the form of the note produced in evidence to preclude the plaintiff from showing that it was given for a partnership debt; that it was not accepted in satisfaction, but merely as a collateral security. It matters not that the making of the note was contemporaneous with the partnership debt. On the facts found by the referee we are of opinion that the judgment was right.”

There can be no doubt but that the money in both cases at bar was borrowed for the use of the company. Both loans were solicited in the first instance by V an Haagen, to provide means for the purchase of stock and materials for the company. It is of no consequence that the money was put to the credit of John Hunter, for John Hunter was the company’s banker: he owned practically all of the stock, and the company’s funds were, up to that time at least, supplied from and deposited in his private account. The testimony of Van Haagen, Lambert, and Connellan, in the one case, and of Van Ilaagon, Maguire, Connellan, and Cox, the cashier, in the other, is clear and convincing on this point. The only contradiction is by John Hunter, whose answers to questions put to him are so manifestly equivocating and evasive as to render his testimony very unsatisfactory. But, from the tenor of the testimony as a whole, there can be no conclusion of fact more clear than that both these loans were effected for the use and benefit of the Van Haagen Soap Manufacturing Company. It is equally clear, not only from what occurred at the time, but before and after, that this was the understanding of all the parties concerned; not only of Van Haagen, Hunter, and the soap manufacturing company on the one side, but of the bank and Lambert on the other; and also that the money ultimately went into the company, and was used in the business. It is unnecessary for us to refer in detail to the evidence. In so doing, we would be obliged to extend the bounds of this opinion to an undue extent. What we have said is the result »f a careful study of the testimony, and it is only required that we should state our conclusions.

In rebuttal of the presumption which is supposed to arise in such a case, we have, to begin with, the fact that the loans were for the company’s use, that all the parties concerned so understood it, and that the money was in fact so applied. As to the contemplated liability of the company to repay the debt, we may, in addition to what has already been said, refer briefly to the testimony. The bank officers regarded Van Haagen and Hunter as the company. Mr. Gelbach, at the time of the loan, when Cox, the cashier, expressed surprise that the company’s name was not on the paper, replied that the parties to the note were the whole company. When Maguire came to renew the note, the last time, he asked Cox if the bank would be willing to renew it. Mr. Cox inquired how the soap manufacturing company was getting along. Maguire replied that they were getting along very well, and that the “company” would not want the note renewed again; that this was the last. Mr. Connellan, the assignee, testifies that shortly after his appointment as assignee, in June, 1889, he had a conversation with Mr. Hunter in the president’s room of the Keystone National Bank, and that Hunter said he was very sorry for the National Security Bank; that they had been very kind to him, and the note which they discounted at the request of Mr. Van Haagen was really for the benefit of the Van Haagen Soap Manufacturing Company, and should be a claim on the fund in his hands as assignee. . “ He also told me,” says Mr. Connellan, “ there was another note, which had been given to Mr. Van Haagen’s son-in-law, Mr. William H. Lambert, and that that should also be a claim on this fund. I told him that I had been over the books of the company, and that, on the face of the matter at least, the company was not liable for this loan. He said that Mr. Lambert, at the time he took this note, thought that he, Mr. Hunter, was stronger than the company, and that that was why the note was signed that way instead of the company’s note being given.”

That the notes were taken- for greater security than if signed by the company cannot be questioned, but if the contract was with and for the company the notes would stand as a collateral security for the company’s debt. The learned judge of the court below was of opinion that the testimony was sufficient to rebut the presumption that the notes were taken as a consideration for or in payment of the debt, and we are satisfied that he was right.

The decree of the Common Pleas is affirmed, and the appeal dismissed at the cost of the appellants.

—For the reasons given in the foregoing opinion, the decree of the Common Pleas was affirmed in the appeals of Rutschman Bros., Maguire & Sons, and Fourth St. National Bank.