Story Case

Clifton Roe and Bernard Kerr were partners, dealing in motor trucks. It was agreed between the partners that Roe should be the active man of the business and should have possession of the property. Later, however, they could not agree with reference to the control of the business; Kerr sold two of the motor trucks belonging to the business to Henry Dupont, who did not know of the dispute between the partners. Dupont paid a reasonable value for the automobiles. When Roe learned that Dupont had possession of the trucks under a sale from Kerr, he brought an action against Dupont for their possession, claiming that, since Kerr had no right to possession of the trucks, he had no right to sell the property, and that Dupont did not take good title. Dupont answered that he was a purchaser in good faith from a partner who had possession and, therefore, good title was passed; that the contract between Roe and Kerr was not material in this case, since he, Dupont, had no knowledge of it, and since each partner has the apparent right to possession of the firm property and a right to sell that which is held for sale. Is this a good defense?

Ruling Court Case. Crosswell Vs. Lehman, Volume 54 Alabama Reports, Page 363; Same Case, Volume 25 American Reports, Page 684

Pierce, Manning & Company was a partnership, of which the plaintiff, Crosswell, was a member. In the management of their business, a dispute among the partners arose. It was contended that Pierce had overdrawn, and the other partners were seeking some excuse to force a dissolution of the partnership and get a settlement of its affairs. In order to accomplish this, Crosswell stored cotton, belonging to the partnership, with the defendant, a warehouse man, and took a receipt for the cotton in his own name.

When Pierce was informed of what Crosswell had done he immediately set about to get possession of the cotton. He persuaded Bidell, a reputable cotton buyer, to give an order to the defendant to turn out the cotton in question for shipment. In accordance with a local custom, the defendant executed the order without asking for the receipt which he had given to Crosswell. Bidell, having acquired possession of the cotton, turned it over to Pierce, who sold it on his own account and retained the money. This action was brought against the defendant, Lehman, for damages caused by the alleged wrongful delivery of the cotton to Bidell, an act which gave Pierce the possession of the cotton.

Decision

The defendant is not liable for damages in this case. Possession of partnership property cannot be exclusively controlled by one partner. Each partner has an equal right to its possession. Delivery in this case, which was really for Pierce, one of the partners, was not wrongful. Therefore, the defendant is not liable.

Mr. Brickel, Chief Justice, said in delivering the opinion of the Court: "A partnership is an entirety; the title to its property resides not in the individual members but in the partnership. Every partner owns the whole property subject to the equal ownership of his associates. No one partner can convert his ownership into a separate absolute ownership. Not only does the title to partnership property reside in the partnership but the possession also, and each partner has an equal right with his associates to possession, from which he may not be rightfully excluded without the interference of a court of equity."

It was, accordingly, held that the defendant was not liable as alleged.

Ruling Law. Story Case Answer

Just as title to partnership property is in the firm collectively, so possession resides in the firm in the same manner. But since the partnership, as such, can act only through its members or agents, each partner has the right, subject to the equal right of each other partner, to the possession of the firm property. The partners, as between themselves, may validly agree that possession of the partnership property shall be held by one or more of the partners to the exclusion of the others. But third persons are not bound by such an agreement, when they have dealt with a partner in good faith, who has possession of the firm property. The answer of Dupont in the Story Case is good.