Sladen, Fakes & Co. v. Lance

MANNING, J., after stating the case: The principal question presented by this appeal is the correctness of his Honor’s refusal to instruct the jury, upon the evidence, to return a verdict for the plaintiffs, for the reasons that the defense pleaded was not good, and that it was unsupported by any sufficient evidence, in view of the written admissions of the defendant at the trial. We are against the plaintiffs upon both propositions. It is undoubtedly a generally accepted doctrine that “Whatever, as between the partners themselves, may be the limits set to each other’s authority, every person not acquainted with those limits is entitled to assume that each partner is empowered to do for the firm whatever is necessary for the transaction of its business, in the way in which that business is ordinarily carried on by other people.” Powell v. Flowers, at this term; Lindley on Part., 124; George on Part., 215. The doctrine stated is so generally held and so well established that no further citation of authority is needed for its support. It is equally well settled that where a party dealing with a partner has notice of the limitation upon the partner’s authority, the partnership is not bound; his remedy would be restricted to the partner with whom he dealt. Story on Part., secs. 128, 129, 130; George on Part., p. 215; Lindley on Part., pp. 168, 169; 1 Bates on Part, secs. 323, 324; Parson’s Principles of Part., 115; 22 Am. & Eng. Enc., 142; Cotton v. Evans, 21 N. C., 284; Long v. Carter, 25 N. C., 241; Baxter v. Clark, 26 N. C., 127; Gallway v. Matthews, 10 East, 264; Winship v. Bank, 5 Peters, 529; Knox v. Buffington, 50 Iowa, 320; Bramley v. Elliott, 38 N. H., 287; Livingston v. Roosevelt, 4. Johnson, 251; Pollock v. Williams, 42 Miss.; Fertilizer Co. v. Pollock, 104 Ala., 402; Wilson v. Richards, 28 Minn., 337; Radcliffe v. Varner, 55 Ga., 427; Williams v. Barnett, 10 Kan., 455; Hastings v. Hopkinson, 28 Vt., 108; Chap *495 man v. Devereux, 32 Vt., 616; Cargill v. Carley, 15 Mo., 425. As opposed to a doctrine established by the well-considered decisions of learned and eminent jurists, the counsel for the plaintiffs cite Johnston v. Bernheim, 86 N. C., 339, and the same case, 76 N. C., 139. We think that in those two cases there will be found an express recognition of this doctrine. At page 140, 76 N. C., the Court says: “It is otherwise where the partnership is not general, but is upon special terms, as that purchases and sales must be with and for cash. There the power to each is special in regard to all dealings with third persons, at least, who have notice of the terms.” But the Court adds: “But even in that case, if the terms are violated, as if a partner buy on time when he ought to buy fox cash, and the thing bought come into the partnership and the partnership take the benefit, the partnership must pay for it.” This language was quoted by the learned Chief Justice, who spoke for the Court in delivering the opinion in the 86 N. C., 339, when the case of Johnston v. Bernheim was again before this Court, and was evidently predicated upon the evidence in that particular case, which tended to show that the partner sought'to be charged had knowledge of the delivery of the goods bought on credit and recognized the debt. The language of the Court, applied to that state of facts, is sustained by reason and authority, and is in agreement with the many well-considered opinions which we have examined. It is obviously true that when notice that the limitations upon the power of a partner contained in the partnership agreement are exceeded, or the restrictions therein imposed disregarded, is brought home to the other partner or partners, and, having such knowledge, the other partner or partners permit the partnership to enjoy the fruits of the abuse of power and to receive benefits therefrom, or fail promptly to disavow the act of such partner,, the partnership and its members would and ought to be bound; but, without such limitation, we think the language of this Court in the opinions quoted from above states the proposition too broadly, and is not sustained by the text writers and the well-considered opinions of other courts whose opinions are above cited. The evidence in this case tended to prove that in the partnership agreement it was stipulated that Lance should not go in debt for goods purchased; that Mrs. Jones notified a member of plaintiff firm of the agreement, and that she wished them to quit selling to him if he did not pay promptly; that she inquired from time to time of plaintiffs salesmen if Lance was keeping his bills paid up, and was uniformly told that he was; that when she was told that Lance had run the business in debt, she *496 promptly complained to plaintiffs and tbey admitted tbat tbey ought to have informed her; tbat plaintiffs were permitting Lance to become and remain indebted to .them during tbe period sbe was inquiring if Lance was indebted; tbat sbe offered to turn over tbe stock of goods to plaintiffs and tbey refused to accept it; tbat sbe sold tbe stock, inventoried by an employee sent by tbe plaintiffs, and paid tbe plaintiffs tbe entire proceeds; tbat plaintiffs hesitated, upon her demand to give her a statement of tbe account, for tbe reason it might make Lance mad; tbat plaintiffs sold goods to tbe partnership upon tbe financial strength of Mrs. Jones. We think bis Honor committed no error in submitting tbe case to tbe jury upon this evidence, and tbat tbe jury were justifiedfin their verdict. While tbe plaintiffs were not, upon tbe evidence, guilty of tbat fraud which necessarily involves moral turpitu.de, yet their conduct was a fraud upon the right of tbe defendant, for tbe fraud in such case consists in tbe knowledge tbat tbe partner was violating, with their aid, a stipulation of tbe partnership agreement, without tbe consent of tbe other partner and against her express instructions. Livingston v. Roosevelt, supra; Bigelow on Fraud, 242; Story on Part., sec. 131; 1 Bates on Part., sec. 323; Cotton v. Evans, supra. We bave carefully examined tbe exceptions taken at tbe trial by tbe plaintiffs, appellants, to tbe rulings of bis Honor upon the evidence, and to instructions prayed and refused, and to certain parts of bis charge, and we find no reversible error. Tbe judgment is therefore Affirmed.