Hastings v. Hopkinson , 28 Vt. 108 ( 1855 )

The opinion of the court was delivered by

Isham, J.

Upon the facts stated in this case two questions have been urged upon our consideration. In the first place, is the defendant Hopkinson liable, as partner, for the plaintiffs’ account ? and, in the second place, was the deposition of Bockwell, taken by the defendant Hopkinson, properly received in evidence ?

It is obvious that Hopkinson is not liable in this action, in consequence of his name and credit having been held out to the world as a partner. To. render a person responsible on that ground, a positive consent, or at least a knowledge by him of such a use of his name, from which his acquiescence may be inferred, must be shown. Gow on Bart. 12, 24, 129. The facts fully appear, in this case, that Hopkinson never purchased any goods himself for the firm, nor did he ever consent that any should be purchased on his credit or responsibility. The business of the firm was transacted in the name of George H. Baúl. No consultations were had with Hopkinson in relation to the business of the firm, nor were any directions given by him in relation to its management ; but, on the contrary, soon after the copartnership was formed, he left this state, and did not return until after the failure of Baul. If, by his consent, his name had been used in that manner, his liability for this account would have followed, on principles of general policy, though he might not have received any portion of the profits of the business. Waugh v. Carver, 2 H. Blac. 235.

If Hopkinson is liable in this action, it is upon the ground that he was a party to the articles of copartnership, and, as such, entir tied to receive his proportion of the profits of the business. As a general rule, when goods are sold to, and upon the credit of a firm, all the members of that firm are individually responsible for them, and that individual liability is not affected by any reservation or agreement between themselves, that one of the firm shall not be responsible. In such case it will make no difference whether the business was carried on for the benefit of the partners, or for the benefit of others ; nor is it material that the business was transacted in the name of all the partners, or in the name of one of them. The liability of each partner for the debts of the firm rests upon principles of commercial policy. It arises from the necessity of those commercial operations for which partnership relations are formed, and from the principle also, that, as they receive a portion of the profits, and thereby subtract to that extent from the assests of the firm their means for the payment of debts, they shall be responsible for the debts of the firm. Waugh v. Carver, 2 H. Black. 235. 1 Smith’s Lead. Cas. 831 — note. In such case the principle applies which has been urged in the argument of this case, that an agreement, between the partners, that one of the members of the firm shall not be liable for the debts of the partnership, and that no purchases shall be made on his responsibility, is a regulation purely inter se, and has no effect upon the individual liability of every partner to the creditors, when in good faith the debts were contracted upon such responsibility. Story on Part. § 104^5. If this case, therefore, rested upon the facts stated in the two depositions of Rockwell, which were taken and used by the plaintiffs, that Hopkinson was one of the partners, and entitled as such to a portion of the profits, and'that these goods were sold on the credit of the firm, the liability of the Hopkinson would clearly exist, and it would not be affected by any provision in their articles of co-partnership, that the goods were to be purchased on the responsibility of Paul, and that Hopkinson was not to be liable for such purchases to the creditors. Such a provision would have no effect as against the creditors ; each individual member of the firm would be liable to the creditors, though, as between themselves, they Would have no right to charge Hopkinson with the amount. That was the express decision of the court in the case of Waugh v. Carver, 2 H. Black. 235, and the various cases to which we were referred.

But there is another fact which enters into the consideration of this case, which did not exist in those cases; and that is, that these plaintiffs were informed, at the time these goods were purchased by P.aul, that, under the articles of copartnership, the goods were to he purchased; by the other members of the firm, and on their responsibility alone, and that Hopkinson was not to be liable fqr goods purchased for the use of the company. "With the distinct and express knowledge of that fact, communicated by the members of this firm, when the goods were purchased, the plaintiffs had no right to make the sale of those goods in any reliance upon the responsibility of Hopkinson for payment, without his personal consent.

The authorities on this subject are express in their language, and too numerous for us to entertain any doubt on this subject. In Story on Part. § 128, the rule is given, that “ every contract, in order to bind a firm, must be made with a party who has no knowledge or notice that the partner is acting in violation of his í£ obligations and duties to the firm, or for. purposes disapproved of, “ by or in fraud of the firm. For any such contract, made with such knowledge or notice, will be void as to the firm, however binding it may be upon the individual partner making it. This doctrine,” he observes, “ follows from the known limitations of the laws of <£ agency; for no agent can bind his principal in any transaction, “ in which he knowingly exceeds his authority, or knowingly col- “ ludes with another person, having notice of any violation of the “rights of his principal.” In Collyer on Part. § 98, 387-8-r9, it is said, that “ when the creditor has express notice of a private agreement between the partners, by which either the power of ££ one partner to bind the firm, or his liability for partnership cqn- “ tracts, is qualified or defeated, it is clear that the creditor himself f£ must be bound by the arrangement between the partners.” The same doctrine is sustained by many decisions in England as well as in this country, and it would seem that the justness of the rule has commended itself to the laws of most commercial countries, Willis v. Dyson, 1 Starkie 164, Gallway Mathew, 10 East, 264; Vice v. Fleming, 1 Y. & Jer. 227. Leavitt v. Peck, 3 Conn. 125 15 Mass. 339. 12 N. H. 275. 1 Camp. 404

In many cases it lias been held, that notice to a creditor not to deal on the credit of a firm, given by one partner, will protect him from any future liability to that creditor, though no provision of that kind is contained in the articles of copartnership. It is obvious, that this case is much stronger, where that limitation is one of the fundamental articles of their copartnership, and was an original limitation of their agency.

This general doctrine is confirmed and illustrated by the principles regulating limited partnerships. In such partnerships, it is held, that if the liability of the partners is not legally limited, as provided by the act, they are liable as general partners, as they participate in the profits of the concern. The cases proceed upon the ground, that there has been no legal limitation of their agency or liability. But, in this case, the partnership was formed on common law principles, and there was a legal limitation as to the liability of Hopkinson, and of the agency and power of the other partners to bind him on their contracts of purchase. The extent of that power, and whether a liability rests upon Hopkinson or not, is to be decided by the laws of this state, where the partnership was formed, and where was their place of business. It was so held in the case of Cutler v. Thomas, 25 Vt. 73. The law of the state of New York was, therefore, properly held inadmissible, as it could have no effect in determining the liability of Hopkinson, or the right of the partners to bind him by their contracts of purchase. We think, therefore, that Hopkinson is not liable for this account of the plaintiffs, and that the charge of the court on this subject was correct.

We think, however, that the deposition of Rockwell, which was taken by Hopkinson on the 17th of February, 1853, was improperly admitted in evidence to the jury. It was by that deposition that the contents of the written articles of copartnership were proven ; and from which it appeared that Hopkinson was not to be liable for any debts which might be contracted in purchasing goods» The creditors were probably at liberty'to prove, that the defendants were partners, independently of that written agreement, (25 Yt» 73,) but clearly they had that right in this case, as they had given the defendants notice to produce the original articles of co-partnership. But the defendants had no such right. That original agreement was in their possession, and under their control; or, at least, such is the legal presumption. It was their duty, therefore, to produce the original agreement, to prove the provisions of that contract, on which rested their defense, as that instrument afforded the highest evidence of the terms of their copartnership. The case of Brogart v. Brown, 5 Pick, 18, is similar to this case on this point, and, we think, is decisive on this question. We see no ground upon which we can sustain this judgment, by treating this deposition as a cross-examination of the witness, or as a continuance of the depositions of the witness, which were taken by the plaintiffs. For this matter, the judgment of the county court must be reversed, and the case remianded.