Rouse v. Pollard

Brief Fact Summary. Rouse, (Plaintiff), brought suit against Pollard, (Defendants), based on the fraudulent actions of Thomas E. Fitzsimmons, a partner with Defendants in a law firm.

Synopsis of Rule of Law. Where one partner by fraudulent promises made in a transaction within the scope of the partnership business, obtains money from a third person and misappropriates it, the other partners are liable. If the transaction is outside the partnership business, the other partners are not liable and they are not bound by a statement of the partner who conducts such a transaction that he is acting on behalf of the firm.

Facts. Thomas E. Fitzsimmons, (Fitzsimmons), was a partner with Defendants in a law firm. Fitzsimmons induced Plaintiff to cash her securities and turn them over to him as a representative of the law firm to invest. Instead of investing the money, he converted it for his own use. Defendants had no knowledge that Fitzsimmons had done so and were not in the habit of generally investing money for their clients. The law firm dissolved and six years later, Fitzsimmons was arrested for embezzlement.

Issue. Whether the receipt of Rouse’s money by Fitzsimmons was a transaction within the scope of Pollard’s business.

Held. No. The receipt of money for the purpose of investing it as soon as a good mortgage can be found, is not part of the practice of law and therefore, Fitzsimmons’ partners are not liable to Rouse

Discussion. Defendants were not in the habit of receiving and indeed never received money from a client to place on mortgage at their discretion. Receipt of money for the purpose of investment generally or to invest it in a mortgage as soon as a good mortgage can be found is not an incident of an attorney’s business. Therefore, Fitzsimmons’ partners are not liable for his actions.