National State Capital Bank v. Noyes , 62 N.H. 35 ( 1882 )

The defendants are sued as copartners doing business under the firm name of M. C. Noyes Co. The declaration is to be treated as if it alleged that the defendants as such partners made and signed the note in suit. An admission that the signature is genuine, is an admission that the name attached to the note is the firm name of the defendants, and placed there by one of the defendants with the authority of the other; and the admission is conclusive. Williams v. Gilchrist, 11 N.H. 535; Nicholas v. Oliver,36 N.H. 218; Bank v. Farmington, 41 N.H. 32. The evidence offered was therefore inadmissible because in conflict with the admission, and because there was no evidence that the plaintiffs had any knowledge that the firm had received no consideration for the note. Every partner is, in contemplation of law, the general and accredited agent of the partnership, and may bind all the other partners by his acts in all matters within the scope and objects of the partnership. When the partnership is of a general commercial nature, one partner may buy and sell goods on account of the partnership; he may borrow money, contract and pay debts; may make, sign, and negotiate promissory notes and other negotiable paper in the name and on account of the partnership. Sto. Part., ss. 101, 125; Sto. Ag., ss. 124, 125.

It being within the scope of the partnership business to borrow money and negotiate promissory notes, it follows that one partner may misappropriate the money and still his firm be liable, unless the creditor knew or had reasonable ground to believe that the money was not borrowed for the use of the firm. Wagner v. French, 56 N.H. 495; Bank v. Rider, 58 N.H. 512; Hayward v. French, 12 Gray 457; Winship v. Bank, 5 Pet. 529; Bank v. Eldred, 9 Wall. 544. Justice requires that each partner, having put it into the power of his copartners to do an act which must be injurious to himself or to another innocent party, should himself suffer the injury rather than the innocent party who has placed confidence in him. Hern v. Nichols, 1 Salk. 289; Fitzherbert v. Mather, 1 T. R. 12; Nixon v. Brown, 57 N.H. 34,39; Sto. Ag., s. 127.

Upon the facts stated the plaintiffs are entitled to judgment. But the defendants ask for a new trial upon the ground that through misfortune they were prevented from making their defence, and that injustice will otherwise be done. Upon this motion a hearing has been had. The position is now taken, that the firm of M. C. Noyes Co. was a non-trading or non-commercial firm, and that there was no power, express or implied, for either partner to bind the firm by a promissory note. In a trading or commercial partnership, the extent of a partner's power to bind the firm is a question of law. By the commercial law each partner is presumed to be intrusted by his copartner with a general authority in all the partnership affairs. Any agreement among the partners restricting the authority of one partner as a general agent for the others is operative only between themselves. But in non-trading partnerships, such as farming and mining partnerships, and partnerships of practising lawyers and physicians, the power of a partner to bind his copartners is a question of fact. The partners are in no proper sense engaged in trade. In such a partnership a partner does not generally possess power to bind the firm, and consequently the extent of his powers is not fixed by the rules of law, but each case is left to be decided upon its particular facts. When, therefore, one seeks to hold a non-trading firm upon a negotiable instrument made by a single-partner, he must prove either express authority, or that the giving of promissory notes is the custom and usage in the same business, or such facts as will warrant the conclusion that the partner had been invested by his copartners with the requisite authority. Judge v. Braswell, 13 Bush 69; Smith v. Sloan, 37 Wis. 285; Pooley v. Whitmore, 10 Heisk. 629; Ricketts v. Bennett, 4 Man. Gr. S. 686; Hasleham v. Young, 5 A. E. (N.S.) 833; Hedley v. Bainbridge, 3 A. E. (N.S.) 315; Levy v. Pyne, 1 Car. Mar. 453; Bramah v. Roberts, 1 Bing. N.C. 469; Dickinson v. Valpy, 10 B. C. 128; Greenslade v. Dower, 7 B. C. 635; Dow v. Moore, 47 N.H. 419; Wagner v. Freschl, 56 N.H. 495; Bank v. Rider, 58 N.H. 512; Kimbro v. Bullitt, 22 How. 256, 268.

In Hedley v. Bainbridge, supra, where one of two attorneys in partnership gave the note of the firm in payment of their debt, the court remarked, — "Partners in trade have authority, as regards third persons, to bind the firm by bills of exchange, for it is in the usual course of mercantile transactions so to do; and this authority is by the custom and law of merchants, which is part of the law of the land. But the same reason does not apply to other partnerships. There is no custom or usage that attorneys should be parties to negotiate instruments; nor is it necessary for the purposes of their business." And the burden is upon the holder of the note given by such a firm to prove authority, necessity, or usage. Smith v. Sloan, supra. The same is true of a partnership of practising physicians. Crosthwait v. Ross, 1 Humph. 23. So one of a firm keeping tavern cannot bind his copartners except strictly within the business of the firm. Cocke v. Branch Bank, 3 Ala. 175. But if the business is of such magnitude as to require large capital and credit, the rule will be of doubtful application, and it will depend very much upon the usage of the particular firm, and others similarly engaged. 1 Dan. Neg. Inst., s. 358.

There is no implied authority in a member of a joint stock company to accept bills of exchange on the part of the directors of the company. Bramah v. Roberts, 1 Bing. N.C. 469. Nor can one partner in a firm formed for the purpose of carrying on the business of mining bind the others by giving the note of the firm. Judge v. Braswell, 13 Bush 69. Nor has one of several persons jointly interested in a farm power to bind the others by drawing or accepting bills. Kimbro v. Bullitt, 22 How. 256, 267, 268. In the case of trading partnerships, the law implies authority in one partner to bind the firm by drawing and accepting bills, because the drawing and accepting are necessary for the purpose of carrying on such a partnership; but it does not follow that they are necessary for the purpose of carrying on the business of a non-trading company Dickinson v. Valpy, 10 B. C. 128.

Upon the facts reported we think the partnership of the defendants comes within the class denominated non-trading or non-commercial partnerships. Whether the notes given for the stumpage were individual or firm notes does not appear. If they were individual notes, then the note in suit, and the one of which it was a renewal, were the only notes issued in the firm name. They were made without the knowledge or assent of Glines, and for the accommodation of a stranger. Their issue was clearly a fraud upon Glines. It does not appear that the firm ever hired or had occasion to hire money, or buy property upon credit, unless the stumpage above mentioned was so bought. It dealt in a single commodity, — lumber manufactured from their own logs. With the single exception of the stumpage purchased, the firm was not engaged in buying merchandize, but confined its business to manufacturing and selling lumber. It is true their correspondence was carried on in the firm name, and notes payable to the firm by their firm name were received in payment of the manufactured lumber sold, and were discounted at the banks. But in this respect they do not differ from a partnership of attorneys, or physicians, or miners, or farmers, who draw bills in the firm name upon clients, patients, and customers for services and disbursements, and checks upon banks for partnership funds, and transfer notes belonging to the firm by indorsement. In an action involving the validity of such a bill, check, or indorsement, as against other partners, the party asserting their validity would be bound to establish it by proof. Smith v. Sloan, supra, 285.

Our conclusion is, that the defendant Glines is entitled to a new trial, on the ground that through misfortune his defence was not presented at the trial. Upon a new trial the plaintiffs must show, in order to recover, authority from Glines to Noyes to give the note in suit, or knowledge on the part of Glines that it was given, or that it was necessary in the course of their business, or usual in similar partnerships for one partner to give promissory notes in the name of the firm. A new trial will be granted at the trial term, if the terms to be there settled are complied with.

It is no defence for Noyes that the plaintiffs took the note as collateral security. Tucker v. Bank, 58 N.H. 83; Paige v. Chapman,58 N.H. 333.

Case discharged.

STANLEY, J., did not sit: the others concurred.