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the same personal assurance, or guaranty; or if such assurance could be implied from the nature of the case.(j)
THE relation of partnership, and the law which grows out of, and which regulates, that relation, are very peculiar. Partly, it is the law of agency, because each partner is the agent of the whole firm, with full power to represent all the members, in all transactions which relate to the business of the copartnership. Partly, it is the law of property, because the several partners own jointly all the copartnership property. It is, in fact, a system of law excellently adapted to its precise scope and purpose, and peculiar thereto.
A partnership exists when two or more persons combine their property, labor, and skill, or one or more of these, in the transaction of business, for their common profit.
The law clothes each partner with authority to bind all the partners in all business transactions which actually concern the firm; or which are so far within the scope of the actual or pretended business of the firm as to justify third parties in believing them to belong to the business of the firm. And this applies to signing, indorsing, accepting, presenting, demanding and receiving payment of, and discharging negotiable paper. And a partner who accepts, in his own name, a bill drawn on a firm, binds. the firm.(k) Nor is it any objection to a note given in good faith
(j) See 1 Parsons on Cont. 104, et seq.
(k) Mason v. Rumsey, 1 Camp. 384. In this case the bill was drawn upon "Messrs. Rumsey & Co.," and accepted by T. Rumsey, Sen. It was contended for the defendant, that, 'if a bill was drawn upon a firm, it must be accepted in the name of the firm, or by one partner for himself and his copartners; otherwise the holder might protest the bill, as the mere signature of a single partner was binding only upon himself." But Lord Ellenborough said: “There is no foundation for the doctrine contended for. This acceptance does not prove the partnership; but if the defendants were partners, they are both bound by it For this purpose it would have been enough if the word 'accepted' had been written on the bill, and the effect cannot he altered by adding 'T. Rumsey, Sen.' If a bill of exchange is drawn upon a firm, and accepted by one of the partners, he must be understood to exercise his power to bind his copartners, and to accept the bill according to the terms in which
for a partnership debt, that it was given without the knowledge of the other partners. (1) And the signature of a partner, in the name of the firm, to negotiable paper, for a transaction not in their business, or their line of business, would bind the firm, if the proceeds thereof were received and held by the firm, because this would be a ratification.(m) But if the other partners did not know of the transaction at the time, and, as soon as they did, gave up the proceeds and repudiated the contract, this would discharge them. A considerable delay in giving notice of their dissent, after they are informed of the transaction, would be equivalent to their assent, and would bind them accordingly.(n)
it is drawn " In Jenkins v. Morris, 16 M. & W. 877, a bill was drawn on "E. M. and others, Trustees of Clarence Temperance Hall, Liverpool," and accepted thus: "Accepted, E. M." The defendants, with E. M and another, were the trustees of a body of persons associated together for the purpose of building the Temperance Hall. E. M. had authority from all the trustees to accept the bill on their behalf. Held, that the defendants were bound by the acceptance, though it did not show on the face of it that E. M. intended to accept, not individually, but for himself and four others. Pollock, C. B. said: "Mundy accepted the bill, and the jury found that he had authority from all the trustees to do so. Then his acceptance did not import that he accepted merely as an individual, but that he was the party whose hand performed that duty by direction of the rest; and the mere fact that he needlessly added his name to the acceptance made no difference." In Dougal v. Cowles, 5 Day, 511, it was held, that the act of drawing a bill of exchange, by one partner in his own name, upon the firm of which he is a member, for the use of the partnership concern, is, in contemplation of law, an acceptance of the bill, by the drawer, in behalf of the firm; and the holder of the bill may sustain an action thereon against the firm, as for a bill accepted. And see Beach r. State Bank, 2 Ind. 488
(4) Smith v. Lusher, 5 Cowen, 688.
(m) In Richardson v. French, 4 Met. 577, where an administrator, who was a member of a partnership, applied to the concerns of the partnership money which belonged to the estate of his intestate, and afterwards gave the note of the firm to the creditor of the intestate, to whom such money was due, in discharge of such creditor's claim upon the estate of the intestate; it was held, that the firm was liable on the note, although the money was not in the hands of the firm when the note was given. And see Jaques v. Marquand, 6 Cowen, 497; Whitaker v. Brown, 11 Wend. 75, 16 Wend. 505; Clay v. Cottrell, 18 Penn. State, 408.
(n) Thus, in Foster v. Andrews, 2 Penn. 160, it was held, that if a note be given b one partner in the name of the firm, for his own private debt, and the other partner, upon being informed of the transaction, does not dissent or give notice to the payee that he will not be liable, he shall be bound. But in Elliott v. Dudley, 19 Barb. 326, it was held, that to render the firm liable under such circumstances, where there has been no previous usage to justify such a use of the partnership name, their subsequent assent must be proved; that proof of knowledge of the transaction on their part, after it has taken place, and nothing more, is no proof of assent; that they are not bound to deny their liability until they are prosecuted. In Gansevoort v. Williams, 14 Wend. 133, it was held, that where one member of a mercantile firm gives a note in the name
If a partner by his signature defrauds the firm, this does not discharge them from their liability to an innocent third party, because their entering into partnership with the wrong-doing partner enabled him to commit the fraud. (o) Not so where the third party is not innocent, but is party or privy to the fraud; for then the firm is discharged. Thus, if one partner signs or indorses a note with the partnership name, but in payment or security of his private debt, and the taker knows it to be so, the other partners are not bound without their assent, or some act which justified the taker in supposing their assent; (p) and the
of the firm for his individual debt, the assent of the firm may be implied from facts and circumstances; an express assent need not be shown. In Mercein v. Andrus, 10 Wend. 461, it was held, that a partner is not liable to the payment of a note indorsed by his copartner in the name of the firm, out of the course of the partnership concerns, although he be present and hear the arrangement respecting the indorsement; his assent must be proved, and will not be presumed. And see Sweetser v. French, 2 Cush. 309. (0) Catskill Bank v. Stall, 15 Wend. 364; Whitaker v. Brown, 16 Wend. 505; Hawes v. Dunton, 1 Bailey, 146; Bascom v. Young, 7 Misso. 1; Cotton v. Evans, 1 Dev. & B. Eq. 284; Winship v. Bank of United States, 5 Pet. 529; Flemming v. Pres cott, 3 Rich. 307; Miller v. Manice, 6 Hill, 115; Duncan v. Clark, 2 Rich. 587; Emerson v. Harmon, 14 Maine, 271; Waldo Bank v. Lumbert, 16 Maine, 416; Parker v. Burgess, 5 R I. 277; Hopkins v. Boyd, 11 Md. 107. In Arden v. Sharpe, 2 Esp. 524, Lord Kenyon said: “One partner certainly may indorse a bill in the partnership name; and if it goes into the world, and gets into the hands of a bona fide holder, who takes it on the credit of the partnership name, and is ignorant of the circumstances, though in fact the bill was first discounted for that one partner's own use, in such case the partnership is liable." And see next note.
(p) The principle is clearly stated by Lord Kenyon in Wells v. Masterman, 2 Esp. 731: "When a man enters into a partnership, he certainly commits his dearest rights to the discretion of every one who forms a part of that partnership in which he engages; and if a bill is drawn upon the partnership in their usual style and firm, and it is accepted by one of the partners, it certainly binds the partnership to the payment of it; but if a man has dealings with one partner only, and he draws a bill on the partnership on account of those dealings, he is guilty of a fraud, and in his hands the acceptance made by that partner would be void; but it would be otherwise in the case of a bona fide indorsee. In his hands, the acceptance of one of the partners binds the partnership, as he is ignorant of the circumstances under which it was created, and takes it on the credit of the partnership name." To the same effect is Shirreff v. Wilks, 1 East, 48. It was there held, that two (of three) partners, who had contracted a debt prior to the admission of the third partner into the firm, could not bind him without his assent by accepting a bill drawn by the creditor upon the firm in their joint names; but such security is fraudulent and void as against the third partner. And see Ex parte Goulding, 2 Glyn & J. 118; Ex parte Bonbonus, 8 Ves. 540; Green v. Deakin, 2 Stark. 347. The same rule is settled in this country by a great number of cases. See Liv. ingston r. Hastie, 2 Caines, 246; Lansing v. Gaine, 2 Johns. 300; Livingston v. Roose. velt, 4 Johns 251; Dob v. Halsey, 16 Johns. 34; Foot v. Sabin, 19 Johns. 154 Laverty v. Burr, 1 Wend. 529; Williams v. Walbridge, 3 Wend. 415; Bank of
admissions of the partner signing are no evidence to prove the assent of the others. (q) In this country it is clearly settled that the taker must prove the assent of the other partners, for prima facie such a transaction is a fraud both on the part of the debtor
Rochester v. Bowen, 7 Wend. 158; Gansevoort v. Williams, 14 Wend. 133; Joyce v. Williams, 14 Wend. 141; Wilson v. Williams, 14 Wend. 146; Whitaker v. Brown, 16 Wend. 505; Huntington v. Lyman, 1 D. Chip. 438; Chazournes v. Edwards, 3 Pick. 5; Munroe v. Cooper, 5 Pick. 412; Baird v. Cochran, 4 S. & R. 397; Cotton v. Evans, 1 Dev. & B, Eq. 284; Weed v. Richardson, 2 Dev. & B. 535; Mauldin v. Branch Bank, 2 Ala. 502; Smyth v. Strader, 4 How. 404; Long v. Carter, 3 Ired. 238; N. Y. F. Ins. Co. v. Bennett, 5 Conn. 574; Andrews v. Planters' Bank, 7 Smedes & M. 192; Rogers v. Batchelor, 12 Pet. 221; Clay v. Cottrell, 18 Penn. State, 408; Lanier v. McCabe, 2 Fla 32. In Livingston v. Roosevelt, 4 Johns. 251, it appeared that in 1803 A and B entered into partnership as sugar-refiners, and published in two of the Gazettes printed in the city of New York (and which were taken by C), that they had entered into partnership in the sugar-refining business, under the firm of A & Co. In April, 1805, B, without the knowledge or consent of A, purchased a quantity of brandy of C, for which he gave his individual note payable to the firm, and indorsed by him with the name of the firm. The bill of parcels, by the direction of B, was made out in his name only, and the brandies were shipped to the West Indies in a vessel belonging to B, and on his own account; and C, in order to obtain the drawback, made oath at the custom-house that the brandy was sold to B. A and B had entered the name of the firm at two of the banks in the city of New York, and B drew checks and made and indorsed notes in the name of the firm, which were regularly paid, and the banks had considered A and B as general partners. C, when he sold the brandy, required the partnership security, and it did not appear that he knew of the limitation, until after its dissolution in June, 1805, notice of which was also published in two of the newspapers. Held, that the partnership was not liable on the note. In Davenport v. Runlett, 3 N. H. 386, R. and T. were partners in trade, and while they were thus partners, T. boarded with D. and gave to the latter a note, in the name of the firm, for the price of the board, without the knowledge of R. Held, that the personal expenses of partners could not be presumed to be a partnership concern, and that R. could not be held upon the note, until the plaintiff should show affirmatively that T. had authority thus to bind the firm. In Gansevoort v. Williams, 14 Wend. 133, where, upon the renewal of an accommodation note, the borrower presented to his accommodation indorser for signature a note to which he had affixed the name of a firm of which he had recently become a member, as makers; it was held, that the indorser was chargeable with notice that the note was given for the individual debt of the borrower, and could not, upon the dishonor of the note, recover against the firm. In Tanner v. Hall, 1 Penn. State, 417, where a partner made a note in his own name in favor of a third person, who indorsed it for his accommodation, and the partner then added the indorsement of his firm, and had the note discounted at a bank and the proceeds carried to his separate account; it was held, that the bank was chargeable with notice that the transaction was not within the course of the partnership business. And see Manning v. Hays, 6 Md. 5. In Cooper v. McClurkan, 22 Penn. State, 80, where a partner drew a bill of exchange in the name of the firm on himself, payable to the order of the firm, accepted it in his own name, indorsed it in the name of the firm, and placed it in the hands of a bill-broker,
(9) Hickman v. Reineking, 6 Blackf. 387.
and the creditor.(r) In England, it seems, perhaps, that this authority is presumed until they prove the contrary. (s) We have some doubt, however, whether the authorities which indicate this can be sustained upon any well-established principle; and we regard them as departing from the rule applied by Lord Kenyon and Lord Eldon.(t)
who negotiated it; it was held, that the form of the bill was sufficient to put the holder upon inquiry, and that the firm might defend by showing that it was not a partnership transaction, but that the bill was drawn and negotiated by the partner for his individual use. But in Ihmsen v. Negley, 25 Penn. State, 297, where an individual, who was a member of two firms, made a note in the name of one firm, payable to himself, and indorsed it with the name of the other firm; it was held, that this was not such a case as to require the plaintiff, a holder for value before maturity, to prove the assent of the partners to such indorsement, or that the proceeds were applied to the benefit of the firm. See Murphy v. Camden, 18 Misso. 122. And see ante, p. 108, note w.
(r) Dob v. Halsey, 16 Johns. 34; Foot v. Sabin, 19 Johns. 154; Sweetser v. French, 2 Cush. 309; Kemeys v. Richards, 11 Barb. 312; Noble v. M'Clintock, 2 Watts & S. 152; Mecutchen v. Kennady, 3 Dutch. 230. And see cases, supra.
(s) We state this upon the authority of Swan v. Steele, 7 East, 210, and Ridley v. Taylor, 13 East, 175.
(t) In Swan v. Steele, A, B, and C traded under the firm of A & B in the cotton business, C not being known to the world as a partner; and A & B traded as partners alone under the same firm in the business of grocers, in which latter business they became indebted to D, and gave him their acceptance, which, not being able to take up when due, they, in order to provide for it, indorsed in the common firm of A & B a bill of exchange to D, which they had received in the cotton business, in which C was interested; but such indorsement was unknown to C, of whom D, the indorsee, had no knowledge at the time. Held, that such indorsement in the firm common to both partnerships of a bill received by A & B in the cotton business bound C, their secret partner in that business, and that consequently C was liable to be sued by D on such indorsement, the latter not knowing of the misapplication of the partnership fund at the time. In Ridley v. Taylor, it was held, that if one partner draw or indorse a bill in the partnership name, it will prima facie bind the firm, although passed by the one partner to a separate creditor in discharge of his own debt; unless there be evidence of covin between such separate debtor and creditor, or at least of the want of anthority, either express or to be implied, in the debtor partner to give the joint security of the firm for his separate debt. Lord Ellenborough placed considerable reliance upon the special circumstances of the case. He said: "This bill had an existence, according to its apparent date, eighteen days before the time of its delivery to the plaintiffs; it was drawn for a sum considerably exceeding the debt, and was not only drawn and indorsed, but accepted also, before it was produced to them; and although it is stated in the case, that in fact the bill was drawn and indorsed by Ewbank in the partnership firm, it does not appear that the plaintiff's knew that it was drawn and indorsed by him. Under these circumstances it might reasonably be supposed, by the party to whom it was given, to be a partnership security, of which Ewbank, the partner in possession of it, had for some valuable consideration, or in virtue of some arrangement with Ord, the other partner, become the proprietor, so as to be authorized to deal with it as his own. At any rate, the contrary does not either actually or presumptively appear." See Green v. Deakin, 2 Stark. 347.