dollars ($2,500) in cash,-all of which constituted the capital of the firm; that on the 20th day of September, 1907, the said McDonald wrote to one Elmer H. Haas, at New York, the selling agent of the said paper companies, the following letter:

We have your favor of the 19th, and thank you for the same. In regard to our responsibility, would say that our capital amounts to $5,000; as you know we are all young men, doing all our own work together, with small expenses so far as warehouse is concerned. We have dealt with mills only whom writer knows very well,

of Walter A. McDonald and Nathan B. Frank, was adjudicated an involuntary bankrupt. Subsequently, on the 25th day of November, 1908, said Nathan B. Frank filed his individual voluntary petition in bankruptcy, and on the same day was adjudicated a bankrupt. On January 2, 1909, he filed his petition praying for a discharge, and on January 18, 1909, the Michigan Paper Company and the Kalamazoo Paper Company, two corporation creditors of the firm of McDonald & Frank, filed their separate specifications of objection to the discharge of the bankrupt, Nathan B. Frank, setting forth that on September 30, 1907, the bankrupt firm of McDonald & Frank and no one has refused to give us a good (then McDonald. Frank & McDowell),, line of credit. For instance, we have been through McDonald, one of its members, wrote unto Elmer H. Haas, of New York, selling agent of both of said creditors, a letter in which said firm set forth that their capital amounted to the sum of $5,000, whereas said firm did not have the sum of $5,000 as their capital, but only had in their business about $2,500, as capital, and that the said creditors, upon said statement, "sold unto said firm of McDonald & Frank, of which said Nathan B. Frank was a member, large quantities of paper on credit, and that the said bankrupt firm, as aforesaid, have obtained the said property on credit upon a false statement in writing." To these specifications the bankrupt interposed his demurrer, and, the same being overruled, filed his answer, identical in form to the several specifications of objection filed by the corporate creditors. Upon the hearing before the district court, no evidence was introduced, but, in lieu thereof, the following agreed statement of facts was presented to the court:

"It is hereby agreed by Edward M. Hammond, attorney for the Kalamazoo Paper Company and the Michigan Paper Company, and E. Allan Sauerwein, Jr., attorney for the bankrupt, that the matters and facts upon which the specifications of the said paper companies, against the discharge in bankruptcy of the said bankrupt, shall be heard, are as follows:

buying right along from P. H. Glatfelter in the way of book paper. We have discounted every month, and now owe them about $2,000. We would rather you not to write Glatfelter, however, because we don't want him to know whom else we are buying book paper from, but we would refer you to N. Frank & Sons, No. 1402 Mullikin St., and Hubbs & Corning Company, both of Baltimore, and the Lee Paper Company of Vicksburg, Michigan. We have bought some little from Kalamazoo, you know, whom we have paid promptly. We also inclose herewith some letters which speak for themselves.

Now, while our capital is small, as stated above, our expenses are small, and we are going along carefully, not overstepping the mark. Of course, there may be times when we will have to ask some of our mills for a little time, but thus far we have been able to discount. Would further state that we are not selling anybody but those who discount and pay their bills promptly. We are getting a very good percentage of the business in Baltimore, and some little out of town business. Altogether, we feel very much encouraged, and confidently believe that your mill will make no mistake in placing their paper with us. Kindly return the inclosed letters, and let us hear from you by an early mail. Thanking you for past favors, we are,

Yours truly,

McDonald, Frank, & McDowell,
By McDonald.

That said letter was written by the said McDonald for the purpose of opening an account with the said paper companies, and that the firm did thereafter, by virtue of said letter, obtain goods from them to the amount of $

That Walter McDonald and Robert McDowell were engaged in the paper jobbing business prior to the month of April, 1907, and during said month the bankrupt, Nathan B. Frank, was invited to and did be come a partner, the firm name then being changed to McDonald, Frank, & McDowell; that McDonald invested two hundred and fifty dollars ($250) in cash, and gave his -, upon which credit paynote for a thousand; McDowell invested ments of $- were made; that the said two hundred and fifty dollars ($250) in McDonald had been engaged for some time cash, and gave his note for a thousand: in the paper business, and attended to the and Frank invested twenty-five hundred active management of the same for the firm

Re Hardie, 16 Am. Bankr. Rep. 313, 143 Fed. 607; Loveland, Bankr. 3d ed. 809, § 280a; Re Goodhile, 130 Fed. 782, 12 Am. Bankr. Rep. 380.

Keller, District Judge, delivered the opinion of the court:

and particularly to the purchasing of stock; | interposed as a bar to the discharge of a that the said McDowell was the bookkeeper partner who did not participate in the for the said firm, and that the said Frank, wrongful act, and had no knowledge thereof. who, at the time of the formation of the said partnership, was not twenty-one years of age, had no knowledge of the business, and, during the existence of the partnership, he attended solely and only to the selling of goods; that said Frank, during the existence of the partnership, undertook to buy out said McDowell's interest for Section 14b of the bankruptcy act (act $250, but, because he could not get his note July 1, 1898, chap. 541, 30 Stat. at L. 550, discounted at his bank, he gave his note to U. S. Comp. Stat. 1901, p. 3427), as amendthe firm, who indorsed it, and it was then ed in 1903 (act Feb. 5, 1903, chap. 487, § 4, discounted to Mr. Frank's father. The 32 Stat. at L. 797, U. S. Comp. Stat. Supp. firm then assumed the purchase of the inter1909, p. 1310), provides that upon the est. After bankruptcy Mr. Frank's father paid the note; that said Frank became judge shall "investigate the merits of the bankrupt's application for a discharge, the twenty-one years of age on the of ; that the said Frank knew noth- application, and discharge the applicant un(3) obtained property ing whatever of the writing of the said letter at the time it was written, nor at any timely false statement in writing made to such on credit from any person upon a material

day

thereafter, until the firm was thrown into

involuntary bankruptcy; that he did not know at any time prior to said bankruptcy of any statements whatsoever having been made to the said paper companies for the purpose of inducing a line of credit; nor did he know what was the inducing cause of the extension of credit by the said paper companies; nor did he ever wittingly derive any benefit from any credit so wrongfully

obtained.

Edward M. Hammond,
Atty. for Michigan Paper Company
and Kalamazoo Paper Company.
E. Allan Sauerwein, Jr.,

less he has

.

person for the purpose of obtaining such property on credit.

that a discharge in bankruptcy "shall reSection 17, as amended in 1903, provides lease a bankrupt from all his provable debts except such as

. . (2) are liabilities false representations. for obtaining property by false pretenses or

whether the action of McDonald in making The only question to be decided here is the statement of September 30, 1907, can ing of a discharge to Frank, upon proceedbe successfully urged to prevent the grantings growing out of his individual volunnection it becomes important to distinguish tary petition in bankruptcy. In this conbetween the right to a discharge and the effect of a discharge in bankruptcy. With

Attorney for Bankrupt. Argued before Goff and Pritchard, Circuit Judges, and Keller, District Judge. Mr. E. Allan Sauerwein, Jr., for ap- regard to the latter, we think it clear from pellant:

The discharge of the bankrupt should not be refused because the partner of the bankrupt, without his prior knowledge or his subsequent ratification, obtained from the firm a line of credit upon materially false statements.

Remington, Bankr. §§ 2467, 2562, 2563, 2567; Re Dresser, 13 Am. Bankr. Rep. 620; Neal v. Clark (Neal v. Scruggs) 95 U. S. 704, 24 L. ed. 586; Botts v. Hammond, 3 Am. Bankr. Rep. 775.

the language quoted from § 17 of the present bankruptcy act, as amended in 1903, that a false representation by one partner, by means of which property was obtained by the partnership, will in law be imputed to the other partners, to the extent of holding them civilly liable for the debt, and their discharge in bankruptcy will not discharge their liability as to such debt. Strang v. Bradner, 114 U. S. 555, 29 L. ed. 248, 5 Sup. Ct. Rep. 1038; Schroeder v. Frey, 60 Hun, 58, 14 N. Y. Supp. 71; Collier, Bankr.

The right to a discharge is distinct from 6th ed. p. 225. As applied to partnership the effects of the discharge.

Re McCarty, 7 Am. Bankr. Rep. 40; Re Marshall Paper Co. 4 Am. Bankr. Rep. 468. Mr. Edward M. Hammond, for appel

lees:

Where, in the regular course of a partnership business, one partner makes a materially false statement in writing, upon the faith of which property is obtained upon credit, the fraud thus committed may be

debts, these questions ought to be considered in connection with the fact that under the present bankruptcy act a partnership is a "legal entity;" consequently a materially false statement made in writing by one of the partners (without the knowledge of the others), for the purpose of obtaining credit on behalf of the partnership, and by means of which such credit is obtained, is (1) the act of the individual partner making it,

and (2) the act of the legal entity called that unfortunate class of debtors who are the "partnership," and hence both the part- unable to pay their debts, by giving them ner making such statement and the legal a discharge, thus affording them an opporentity called the "partnership" are charge-tunity to engage in business again, while, able with having done one of the acts, the on the other hand, it is manifestly intended doing of which will, upon objection being to deny a discharge to those whose conduct properly made, prevent the granting of a has been such as to show that they obdischarge, under § 14b, bankruptcy act tained credit by false statements calculated 1898, as amended in 1903; and it follows and intended to deceive and thereby defraud that any "party in interest" can success their creditors. Construing the act with fully oppose the discharge of the acting these ends in view, it would be manifestly partner and of the partnership. unjust to deny a discharge to a debtor, when it appears, as it does in this instance, that the statement which he made was not actuated by any fraudulent purpose. This finding of fact has been approved by the learned judge who heard the case below, and is within itself conclusive in so far as the question involved in this controversy is concerned."

Under the existing statute the question of what will bar a discharge has now been passed upon by at least three different circuit courts of appeals, and all of these decisions are in substantial harmony in holding that the bar to a discharge by reason of a false statement in writing is confined to such person or persons as actually made such statement with the intention to deceive, and to the partnership entity of which such person was a member.

In Gilpin v. Merchants' Nat. Bank, 20 L.R.A. (N.S.) 1023, 91 C. C. A. 445, 165 Fed. 607, the bankrupt, upon the request In Hardie v. Swafford Bros. Dry Goods Co. of a bank from which he had asked an 20 L.R.A. (N.S.) 785, 91 C. C. A. 426, 165 accommodation, for a financial statement, Fed. 588, the circuit court of appeals for signed a statement form in blank, and delivthe fifth circuit (Shelby, circuit judge, dis-ered the same to his bookkeeper, requestsenting), reversing the district court for ing him to make an exact statement of the western district of Texas (143 Fed. his condition, for the bank, to which the 607), in a case in every way similar to the bookkeeper replied that he could not (the one at bar, held that a materially false statement in writing made by a partner in the ordinary course of business of the partnership, for the purpose of obtaining goods on credit, and by means of which they were so obtained by the firm, is not ground for refusing a discharge in bankruptcy, under bankruptcy act July 1, 1898, chap. 541, § 14b, c. 3, 30 Stat. at L. 550, U. S. Comp. Stat. 1901, p. 3427, as amended by act Feb. 5, 1903, chap. 487, 32 Stat. at L. 797, U. S. Comp. Stat. Supp. 1907, p. 1026, to another partner who did not participate in the wrongful act, and had no knowledge

of it.

In W. S. Peck Co. v. Lowenbein, decided February 21, 1910, by this court (101 C. C. A. 498, 178 Fed. 178), it appeared that on September 14, 1907, Lowenbein, a member of the firm of Owens & Lowenbein, ad

dressed a letter to W. S. Peck & Company, Baltimore, Maryland, which letter contained a statement of the financial condition of the firm of Owens & Lowenbein; that said statement was based almost entirely upon information derived by Lowenbein from Owens in the preparation of it; that matters in the statement other than those furnished by Owens were not misleading, being, in the main, true. The court affirmed the judgment of the court below, refusing a discharge to Owens, and granting that to Lowenbein, saying: "It is the evident purpose of the bankruptcy act to protect

posting of his books being in arrear), but ment and send it to the bank. The statethat he would make an approximate statement was made by the bookkeeper, marked "approximate," and sent to the bank, and upon the faith of this statement the bank extended credit. The referee found that, although the falsity of the statement sent to the bank was proved, the fact that the bankrupt knew it to be false, or did not know it to be true, was not proved, and said in his report: "There is no evidence to support the contention that the bankrupt knew or had any reason to believe that the statement sent to the bank by the bookkeeper was false, or that the bankrupt intended in any way to deceive the bank.”

Upon these facts the circuit court of appeals for the third circuit, in an opinion by Gray, circuit judge, held that the word "false," as used in § 14b of the bankruptcy act, as amended by act February 5, 1903, which makes it a ground for denying a discharge to a bankrupt that he has obtained property on credit from any person upon a materially false statement in writing made to such person for the purpose of obtaining such property on credit, means more than merely erroneous or untrue, being used in its primary legal sense as importing an intention to deceive, and such a statement, in order to constitute a bar to a discharge,

must have been knowingly and intentionally | employment. The American cases have cor

untrue.

It must be manifest that the intent to deceive can never be imputed to one who not only takes no part in making the writ ten statement, but, as in the case at bar, knows nothing of it. We believe that the view taken by the circuit court of appeals for the third circuit, of the meaning of the word "false," as used in this section, is the correct one, and the decision above referred to is in entire harmony with the Lowenbein Case decided by this court. Taking the view that the right to a discharge is determined by the good faith of the bankrupt, and that the effect of such discharge is to be determined in accordance with a proper recognition of his civil liability for the acts of partners and other agents, we come to the conclusion that the court below erred in refusing to grant a discharge to the bankrupt.

respondingly extended the master's liability, and have considered it, not only from the master's point of view, but also from that of the person injured, and have placed emphasis, not so much on authority, real or apparent, as upon the violation by the servant of the duty owed by the master to the person complaining.

Same

when liability attaches.

2. Liability may attach to the master under one or more of two different classes of circumstances; namely, first, by virtue of personal commission, singular or joint, or by consent before or after the wrong; and, second, by virtue of relationship subsisting between the master and the person injured. or because of creation, ownership, custody, or control of instrumentalities intrinsically or potentially dangerous, or where the master's conduct, his implements and premises and facilities for doing business, or the course of his business generally, or of dealing with the party complaining, have a natural tendency to create, or to determine the extent of, damages involved; or by estoppel.

The order of the District Court for the District of Maryland, made and entered on the 22d day of January, 1910, sustaining the Many reasons, often divorced from the respecifications of objection to the dis-sulting standard, concur in imposing liacharge of the appellant, and refusing to grant him a discharge, is therefore reversed, with costs, and the cause is remanded to the District Court for further proceedings herein not inconsistent with this opinion.

MINNESOTA SUPREME COURT.

bility on the master.

Same- basis of liability.

3. The master's responsibility in the first class of cases rests on personal culpability through participation or authority, includ ing ratification. In the second class of cases it is largely independent of personal fault, and rests essentially on reasons of public policy, the principal ones of which are here referred to.

FRANK PENAS, by Guardian ad Litem, Same
Appt.,

1. In its early history, the law as to the liability of the master to third persons for the tort of his servant passed from holding the master absolutely liable, to holding him liable in case of particular command only. Later the liability was enlarged, and determined by general authority, express or implied, and was subsequently extended so as to result in the rule that the master is responsible for the tort of his servant, done in the scope of his authority, with the view to the furtherance of the master's business, and not for a purpose personal to himself, whether committed negligently or wilfully, and in excess of his authority, or contrary to his express instructions. The English courts now recognize a still larger responsibility in cases where the wrong complained] of was not within the scope of the servant's authority, but was done in the course of

Headnotes by JAGGARD, J.

authority-kinds.

4. The equivocation and uncertainty of the terminology of the subject is necessarily a prolific source of inconsistency in decision. "Authority" is used in the sense of (1) real or actual authority, express or naturally implied; (2) fictitious or imputed authority, or which (3) apparent authority is really one variety. "Scope of authority" and "course of employment," and their congeners, are often used indiscriminately and interchangeably, and sometimes as representing, respectively, the more restricted and the more enlarged, and usually the

Note. As to liability of master for malicious act of servant when master owes special duty to party injured, see note to Daniel v. Petersburg R. Co. 4 L.R.A. (N.S.) 485.

As to liability of master for tort com. mitted by servant in course of his employment, and with a view to the furtherance of his master's business, but contrary to the master's express instructions, see note to Barrett v. Minneapolis, St. P. & S. Ste. M. R. Co. 18 L.R.A. (N.S.) 416.

As to other aspects of the general subject of liability of a master to third persons for the torts of the servant, see Index to Notes, under topic, "Master and Servant."

most enlarged, criterion of liability of the | Martin, 33 Ky. L. Rep. 666, 110 S. W. master.

necessity for.

815; Wakefield v. Boston Coal Co. 197 Mass. 527, 83 N. E. 1116; Bassi v. Orth, 58 Misc. 372, 109 N. Y. Supp. 88; Waaler v. Great Northern R. Co. (S. D.) 18 L.R.A.(N.S.) 297, 117 N. W. 140, 18 S. D. 420, 70 L.R.A.

damages 5. The master's liability is conditioned on proof of damage consequent on the wrong committed by one who at the time is a servant of the master, and under such circum-733, 112 Am. St. Rep. 794, 100 N. W. 1097; stances that liability is attached to the Barmore v. Vicksburg, S. & P. R. Co. 85 master under the criterion prevailing in Miss. 426, 70 L.R.A. 629, 38 So. 210, 3 A. the jurisdiction and appropriate to the cir- & E. Ann. Cas. 594; Foster v. Essex Bank, cumstances involved. 17 Mass. 479, 9 Am. Dec. 168.

Jaggard, J., delivered the opinion of the court:

For present purposes it will be assumed that plaintiff and appellant's minor was really, though not apparently, a trespasser on defendant's passenger train. Plaintiff's contention was that a brakeman struck or

pushed him from one of its cars while in rapid motion, so that he fell to the ground in such a way as to have his right arm and part of his left hand severed. The jury found for defendants. This appeal was taken from the order of the trial court denying plaintiff's motion for a new trial.

I. This case involves a constantly recurring confusion in the law as to when a master is liable to third persons for the tort of his servant. That confusion is perhaps greater than in any other corresponding branch of our jurisprudence. The multiplication of authorities has not tended to clar ify, but to obscure, the subject. Usually a decision on the subject consists of an imperfect collation of the more or less nearly related cases, without consideration of op

The facts are stated in the opinion. Mr. Thomas C. Daggett, with Mr. D. posed opinions, and without inquiry into J. Keefe, for appellant.

the status of the rule in history or in reason.

Messrs. F. W. Root and Nelson J. One which contains even a bird's-eye view Wilcox, for respondents:

The tort, although done in the course of the brakeman's employment, with a view to the furtherance of the master's business, and not for a purpose personal to himself, was not within the scope of his actual authority, express or implied, and therefore the railway company is not liable.

Brevig v. Chicago, St. P. M. & O. R. Co. 64 Minn. 174, 66 N. W. 401; 2 Elliott, Railroads, § 1255; Barrett v. Minneapolis, St. P. & S. Ste. M. R. Co. 106 Minn. 57, 18 L.R.A. (N.S.) 416, 130 Am. St. Rep. 585, 117 N. W. 1047; Larson v. Fidelity Mut. Life Asso. 71 Minn. 106, 73 N. W. 711; Crandall v. Boutell, 95 Minn. 116, 103 N. W. 890, 5 A. & E. Ann. Cas. 122; Merrill v. Coates, 101 Minn. 46, 111 N. W. 836; Ellegard v. Ackland, 43 Minn. 352, 45 N. W. 715; Slater v. Advance Thresher Co. 97 Minn. 305, 5 L.R.A. (N.S.) 598, 107 N. W. 133; Soderlund v. Chicago, M. & St. P. R. Co. 102 Minn. 242, 13 L.R.A. (N.S.) 1193, 113 N. W. 449; Illinois C. R. Co. v.

of the principles involved is a rarissima avis. It has, indeed, become practically impossible to review all the decisions on the subject generally, and difficult even to refer to the opposed authorities on a particular point in issue.

The rules themselves originated from the law of master and servant and the law of principal and agent indiscriminately, at a time when torts as a general subject was practically unknown. In consequence their development has been largely, but not entirely, independent of many other necessarily related subjects. That evolution, however, has been in many respects radical. It is often ignored, and more often confused. Overruled cases and cases overruling them are constantly cited by eminent judges and writers as authority and reason for the overruled proposition itself, and almost as often for an inconsistent principle which has been repudiated times without number. In almost every state of the Union three or four stages of evolution may be found irre