may fairly be considered within the scope of the partnership business.1 And as each partner may contract to this extent, so, too, he has, as to the public, the absolute jus disponendi, or right to dispose of any and all of the partnership effects; and he may sell, assign, or transfer any or all of the personal property belonging to the concern (the transfer of its real estate being otherwise restricted by law) in the way of regular business, though in fraud of his partners, so long as knowledge of the fraud is not brought home to the purchaser.2 If such full transfer be bona fide on his part, the equities of his copartners are extinguished correspondingly. But all such transactions, in order to be binding, should be done in the regular and ostensible course of business of the firm; and third parties are not absolved from the necessity of prudent inquiry and caution when dealing with an individual who professes to act on behalf of the partnership, especially where the transaction is such as ought of itself to excite suspicion.* § 188. The Same Subject; Instances considered. Thus, there are numerous instances in which it is held that a partner may bind the firm by borrowing money, even though he should misapply after receiving it; and by lending money." One partner may bind the firm by effecting insurance on the partnership property. And all the members of a trading firm are responsible for bills of exchange or promissory notes drawn and signed or accepted by one of its members in the 1 Ib. 40-46, and cases cited; Story Partn. §§ 107, 108; Pars. Partn. §§ 114-130. 2 Bright. Fed. Dig. Partnership, IV.; Lambert's Case, 1 Godb. 244; Marshall, C. J., in Anderson v. Tompkins, 1 Brock. 460; Story Partn. § 94; Pars. Partn. § 108; 3 Kent Com. 41; Locke v. Lewis, 124 Mass. 1. But as to such transfers outside the scope of business, see § 188, post. 3 Huiskamp v. Wagon Co., 121 U. S. 310. Wells v. March, 30 N. Y. 344; Rogers v. Batchelor, 12 Pet. 221; 5 Winship v. Bank of United States, 5 Pet. 529; Whitaker v. Brown, 16 Wend. 505; Etheridge v. Binney, 9 Pick. 272; Rothwell v. Humphreys, 1 Esp. 406. 6 Alexander v. Barker, 2 Cr. & J. 133. 7 Hooper v. Lusby, 4 Campb. 66; Foster v. United States Ins. Co., 11 Pick. 85; Hillock v. Traders Ins. Co., 54 Mich. 531. firm name.1 But a farming or non-trading partnership implies no such authority. Sanction or usage should appear.2 Nor can one member of a firm of attorneys, as such, bind the firm by a post-dated check drawn in its name. And the surrender of shares of stock, partnership property, to the corporation issuing them, has been held fraudulent and void, when made by one partner under suspicious circumstances.* One partner has power to represent and act for the firm in legal proceedings.5 From the mere fact that the partnership relation exists, one partner has no implied authority to bind the firm to others by opening a bank account in his own name.6 Nor to draw a bill of exchange or note in his own name, even though he apply the proceeds for partnership purposes. Nor to pay his private debt by a check in the firm's name.8 For a creditor may be charged with constructive knowledge that the transaction is out of the partnership scope; and whenever a person deals with one of the partners in a transaction of this sort, the law concludes, unless there are circumstances or proof in the case sufficient to destroy the presumption, that he deals with him on the partner's private account, notwithstanding the partnership name be assumed. 1 Kimbro v. Bullitt, 22 How. 256; Tolman v. Hanrahan, 44 Wis. 133; Wagner v. Simmons, 61 Ala. 143. Borrowing money on the credit of a partner's individual note does not create by presumption a partnership debt, though the money be applied to partnership purposes. Peterson v. Roach, 32 Ohio St. 374. Unless the firm name is used in the same connection in an apparently proper way. Redlon v. Churchill, 73 Me. 146. See also 48 Iowa, 503; 44 Wis. 133; Pars. Partn. §§ 131-146. 2 McCrary v. Slaughter, 58 Ala. 230; 22 How. 256; 33 La. Ann. 196; Dowling v. Bank, 145 U. S. 512. 163. & Forster v. Mackreth, L. R. 2 Ex. 4 Comstock v. Buchanan, 57 Barb. 127. 25. Pars. Partn. § 118; 8 T. R. 6 Alliance Bank v. Kearsley, L. R. 6 C. P. 433. 7 Le Roy v. Johnson, 2 Pet. 186. See Pars. Partn. § 138; Gansevoort v. Williams, 14 Wend. 133; Peterson v. Roach, 32 Ohio St. 374; Lill v. Egan, 89 Ill. 609. 8 Davis v. Smith, 27 Minn. 337. A presumption of fraud arises in cases where one partner uses the name and credit of the firm in settling up what are manifestly his own private transactions. Pars. Partn. § 112, and cases cited; Ellston v. Deacon, L. R. 2 C. P. 20; Story Partn. § 172 et seq. 93 Kent Com. 43, and notes; Story Partn. § 133; Doty v. Bates, 11 Johns. 544. The attempt of a partner to apply the partnership property in payment of his private debt will not therefore, under all circumstances, divest the title of the firm in favor of the creditor, even though the latter had no express notice of fraud. The rule is otherwise where a partner acts in fraud of his associates with strangers in a matter within the apparent scope of the partnership authority. And it is a material circumstance against the other partners that they so entrusted goods or the transaction to the partner in question as to enable him to deceive the public as to his authority in the premises, and that he did deceive the third person accordingly.8 As to negotiable paper in general, which bears the firm name, the act of one partner binds all, whether it be by drawing, accepting, or indorsing, so far as third persons acting in good faith and without due notice are concerned, provided once more the transaction appear to have been fairly within the partnership scope. But there are instances where the presumption of authority would be negatived by the facts; as in the case where paper is indorsed which does not belong to the firm, by way of accommodation or as an interchange of credit, which is much like attempting to place the firm in the position of a surety. Of course the firm is liable where such use of its name was authorized; and even accommodation paper bearing an indorsement by a single partner would be binding in the hands of a bona fide holder for value without knowledge of the circumstances under which it was procured. A note given by a firm is not technically a joint and several obligation; the partners in all cases assume joint liabilities. So too a note payable to A. and B. prima facie imports a note to a partnership.7 1 See Rogers v. Batchelor, 12 Pet. 221; 21 Hun, 178; Forney v. Adams, 74 Mo. 138. 23 Kent Com. 46, citing Willet v. Chambers, Cowp. 814, &c. See Hutchins v. Turner, 8 Humph. 415. Locke v. Lewis, 124 Mass. 1; Kelton v. Leonard, 54 Vt. 230. 4 * Michigan Bank v. Eldred, 9 Wall. 544; Arden v. Sharpe, 2 Esp. 523; Etheridge v. Binney, 9 Pick. 272; 5 Early v. Reed, 6 Hill, 12; Waldo Bank v. Lumbert, 16 Me. 416. 6 Mason v. Eldred, 6 Wall. 231; Perring v. Hone, 4 Bing. 28. See Doty v. Bates, 11 Johns. 544. 7 Murphy v. Stewart, 2 How. 263. Among the general rights of each partner as concerns the partnership property are those of making payment for the firm of the partnership debts, and of receiving payment of any and all debts due to the firm. And incidentally one partner may compromise a debt, or authorize legal proceedings for its recovery. The liability of all the members of a firm in a suit prosecuted to judgment against them on the partnership account, with or without attachment of the partnership property, will be strictly enforced. One partner may appoint an agent with authority to transact the joint business. And a firm being by name empowered to act for a third party, one partner may sufficiently execute the agency.4 But from a general power granted to one of two partners, the other can derive no authority." The rule has been that one partner cannot submit the interests of the firm to arbitration; the submission binding only himself. The same exception seems to have existed at the civil law. But why a partner should be specially restrained in this respect, it is hard to say.7 There are, however, technical objections to the power of a partner to bind the firm by executing a deed; the ancient rule of our law being that a partnership has no seal, while authority to seal should be conferred by seal. A general partnership agreement under seal could confer no such authority. But this does not prevent one partner from executing a valid deed on behalf of the firm if his copartners are present and consent. And the old rule is now greatly In some States a partner may thus bind, as matter of law, by his unsealed agreement. 3 B. Mon. 435; 12 S. & R. 243; Pars. Partn. § 121, n. 7 See Pars. Partn. § 121; Southard v. Steele, 3 B. Mon. 435; Taylor v. Coryell, 12 S. & R. 243; 3 Kent Com. 49, and n.; Story Partn. § 114. 82 Kent Com. 47, 48, and n.; Pars. Partn. §§ 122-124, and notes; Tom v. Goodrich, 2 Johns. 213. 207. Harrison v. Jackson, 7 T. R. relaxed in American practice, through the intervention of equity doctrines. Even an absent partner is held bound by a deed executed on behalf of the firm by his copartner, if he gave either a previous parol authority or subsequently confirmed the act.1 So the seal to an instrument is sometimes held mere surplusage, as in the case of a mortgage of personal property, or an assignment for the benefit of creditors, or the release of a debt.2 And though one partner for want of authority may not bind his copartners by the execution of a sealed instrument in the name of the firm, yet in conformity to the general doctrines of agency he necessarily binds himself. Yet in several late American cases the general power of one to bind the others of his firm by a specialty is still emphatically denied, and he binds accordingly only himself, unless authorized.4 § 189. The Same Subject. The power to dispose of the partnership property may be exercised by a single partner in a variety of ways; always assuming that the case is free from collusion, and the transaction within the general scope and ordinary objects of the partnership. A partner may pledge, or, if no seal be requisite, mortgage, the personal effects as well as sell them, and under corresponding restraints. Fraud and collusion would perhaps be more readily presumed in case of an assignment of the stock by way of pledge or mortgage by a single partner, than where goods are sold on delivery, or money paid over; and yet there are instances where a pledge or mortgage of the whole stock in trade by one of the partners to secure a firm creditor has been upheld, the creditor having acted reasonably and in good faith. It 1 See Kent and Parsons, supra; Anthony v. Butler, 13 Pet. 423, 433; Story Partn. §§ 119-122; Worrall v. Munn, 1 Seld. 221. 2 Milton v. Mosher, 7 Met. 244; Harrison v. Sterry, 5 Cr. 289; 47 Wis. 261; Wells v. Evans, 20 Wend. 251; Ex parte Hodgkinson, 19 Ves. 291; Schmertz v. Shreever, 62 Penn. St. 457. 3 Bowker v. Burdekin, 11 M. & W. 128; Elliot v. Davis, 2 Bos. & P. 338. VOL. I. 16 ; 4 Gibson v. Warden, 14 Wall. 244; Walton v. Tresten, 49 Miss. 569 Williams v. Gillies, 75 N. Y. 197; Russell v. Annable, 109 Mass. 72; Pars. Partn. § 124. It is held that a partner may bind the firm by a sealed note executed in the name of the firm; at least to a certain extent. Walsh v. Lennon, 98 Ill. 27. 5 See 3 Kent Com. 46, and n.; Tapley v. Butterfield, 1 Met. 515; Pars. Partn. §§ 177-183, n.; Sweet241 |