McDonald v. Eggleston

The opinion of the court was delivered by Isham, J. This action is in covenant. The questions in the case arise under the plea of non est faction, which puts in issue the execution of the instrument on which- the action is brought. The agreement Was signed and sealed, in the name of Eggleston, Barker & Co., by B. Barker, one of the firm. It is insisted that he had no authority as a partner to execute the instrument in that manner; that it is not binding on those partners, who were absent at the time, and who had not previous^ assented to its execution; and that no testimony was introduced, tending to show a subsequent ratification of its execution, by the absent members of the firm, sufficient to render it their deed. We learn from the case that the defendants were the persons composing the firm of Eggleston, Barker & Co., and that in the fell of 1845, they contracted with Mr. Belknap to construct the Vermont Central Railroad, from the mouth of Dog River to Lake Champlain. The first and second sections of the road were afterwards sub-let by the defendants to the plaintiffs, for construction. It is obvious, therefore, that the subject matter of this agreement, on the part of' the defendants, was within the scope of their partnership business, and that this agreement was made, to carry into effect the object for which their relation as partners was formed, and to insuze, to that extent, the performance of that contract, which they were under obligations with Mr. Belknap to execute. It is unquestionably necessary for the plaintiffs to show those facts, which will render this'instrument the deed of all the defendants; otherwise this joint action of covenant cannot be sustained. At common law, one partner could not charge the firm, by deed, with a debt or other obligation, even in commercial dealings, without a prior authority, under seal, for that pui’pose. Neither could such an instrument be subsequently ratified, so as to make it the deed of the company, except by an instrument, under seal. [160] Harrison v. Jackson, 7 Term 207. Holt N. P. C. 141. Smith’s Mer. Law 68. 1 Amer. Lead. Cas. 446 note. The reason for this rule is founded on principles of English law, which do not exist in this state; that such a power would enable one partner to give a favorite creditor a lien on the real estate of the partners, and, consequently, a preference over the simple contract creditors of the firm. Though this reason for that rule does not exist in this state, the general principle has been, and is recognized and sustained. The strictness of this rule, however, has been greatly relaxed, to suit the exigencies of partnerships, and commercial associations, and by later authorities in England, and in this country, instruments under seal may be executed for many purposes by one partner, which will be binding on the firm. Thus one partner may release, under seal, an obligation or debt due the firm; 1 Wend. 326. 7 N.Hamp. 550. Or execute a power of attorney,under seal, to another, for that purpose. Wells v. Evans 20 Wend. 251. S. C. 22 Wend. 325. It has been held “that when a seal “ is not essential to the nature of the contract, and will not change “ or vary the liability, the addition of a seal will not vitiate it; “ and when an act is done, which' one partner may do without “ deed, it is not less effectual, that it is done by deed.” On this subject Justice Story has remarked, Story on Part. § 122, “ that “ in cases where the contract would have .been binding, if made “ without a deed, there does not seem to be any solid reason why “ the act, when done, should be vitiated by being under the signa- “ ture and seal of the firm.” That this agreement would have been obligatory if it had been executed as a simple contract, and not under seal, there can be no doubt, for it was made to advance their partnership interests, and in the benefits derived from it they have participated. We think, however, that principle does not apply to a case of this character. The doctrine seems to be established that an instrument executed in that manner, in the absence of other partners, will be binding on the firm, only in transactions that transfer an interest. Thus in Milton v. Masher, 7 Met. 244, it was held that a mortgage of personal property need not be under seal, and that a mortgage of that character is not vitiated, by one partner affixing a seal to the instrument. The same principle is sustained in 1 Met. 515. 2 Stewart 280. 1 Amer. Lead. Cas. 447, and [161] cases cited. The rule, however, is of long standing, and fully sustained by the authorities, that a mere partnership relation will not authorize one partner to execute an instrument, under seal, whereby a new and original obligation is created which will be binding on the company, as a specialty debt, or which can be enforced by the action of covenant. If the case, therefore, is made to rest on the circumstances which took place at the time the instrument was signed by B. Barker, we do not see how it can be sustained as the deed of all the defendants.' We have no doubt, however, that an instrument of this character, executed in this manner, may be rendered obligatory by a previous parol authority, or by a subsequent parol ratification; and in either event, the instrument will become the deed of the company; and that much slighter acts will produce that effect, where the subject matter of the agreement is within their partnership dealings, than it will, where it has no connection with the business of the firm, and from which they are to derive no benefit. '• In the case of Ball v. Dunsterville, 4 Term 313, it was held that if the partners were all present, when one of their number signed the instrument in the partnership name, and affixed thereto a seal, it became the deed of all. The authority for the execution of that deed was not under seal, but rested in parol; that is, parol testimony was admitted to prove the presence of the partners at the time of its execution, and that circumstance was treated, not only ás an adoption of the signature, but of the seal, so as to render it the deed of the firm, upon which covenant was sustained. If paroltestimony is admissible to prove an authority from that source, it is equally so to prove other circumstances, showing their assent to such an execution of the instrument. The actual presence of all the partners may perhaps afford more satisfactory evidence of their assent, than other circumstances which may exist; but that affects, simply, the credibility of the testimony, not its competency. If parol testimony is admissible in one case, it is in the other. If a power of attorney under seal, can be dispensed with in one instance, it may in the other, also. This view of the subject is taken by Wilde, J., in Cady v. Shepherd, 11 Pick. 405 in which he remarks “that in the “ ease of Ball v. Dunsterville, importance was attached to the cir- “ cumstance, that both partners were present when the deed was “ executed; and it may be important, as being the most satisfac162 “ tory proof of the assent of the non-subscribing partner; but in “ no oilier respect does it appear to be material.” If a previous authority, resting in parol, will render the instrument binding on the firm, as a deed, it follows that, a subsequent ratification of the instrument maybe proved by circumstances resting in parol; for no greater authority is requisite to ratify an instrument, than is required to execute it. The power that can create, can legally ratify.; This conclusion has been drawn and sustained wherever the case of Ball v. Dunsterville has been recognized and adopted, particularly by the courts in this country. Chancellor Kent, 3 Kent’s Com. 51, has reviewed the cases on this subject both in England and this country, and he observes, “ that an absent partner may be bound by a deed executed on be- “ half of the firm by his copartner, provided there be either apre- “ vious parol authority, or a subsequent parol adoption' of the act; “ and that such ratification amounts in judgment of law, to an ex- ‘‘ «'cution of the deed by all the partners, though executed by one only.” The ratification does not make a verbal or simple confuid merely, for it is an adoption by the party of the signature •.id seal affixed to the name of the firm. In Colly er’s Treatise •u Partnerships § 467, it is said “ that the American cases have ■ gone farther than those in England in relaxing the former strictness of the law, and that it is well settled in the United States, “ that an absent partner may be bound by a deed executed on be- “ half of a firm by his copartner, provided there be either a parol “ authority, or a subsequent parol adoption of the act.” The rule is also sustained in 1 Amer. Lead. Cas. 446, in which it is remarked “ that it is settled, after a thorough investigation of the “ cases, that a partner may bind his copartner by an agreement “ under seal, in the name of the firm, provided the copartner as- “ sents to the contract, previously to its execution, or afterwards “ ratifies and adopts it; and this assent or adoption may be by “ parol, and need not be express and, special, but may be implied “from the conduct of the other partner, or the course of dealing “by the firm.” Swan v. Stedman, Met. 548. Bond v. Aitken, 6 Watts &. Serg. 165. Pike v. Bacon 21 Maine 280. Darst v. Roth, 4 Wash. 471. 1 Brack. 462, by Marshall, Ch. J. We are satisfied, that parol evidence is admissible, to prove that this instrument is the deed of the defendants, and became such by the [163] signature of one partner, in the name of the firm, by showing a previous authority for that purpose, resting in parol, or that they were present at the time, or subsequently ratified the same, either expressly or impliedly, and that this implication may be drawn from the conduct of the partners, or the course of dealing by the firm. The court directed a verdict for the defendants, thereby treating the evidence introduced as having' no tendency to show a subsequent ratification of the instrument, andas being incompetent to be taken into consideration by the jury. In relation to H. Y. B. Barker, and Mr. Haight, both of whom, it appears from the case, were about the house at the time the instrument was executed, and who came there for that purpose, there can be no doubt, that those circumstances should go to the jury as evidence of their assent to its execution; as to them, the case in its facts seems to fall within that of Ball v. Dunsterville. In relation to Mr. Eggleston, the remaining partner, more difficulty exists. ' It does not appear that he had ever been in that vicinity previous to July, 1846, about two months after this instrument was executed. In consequence of some difficulties in the affairs of the company, he was sent for, and came to the office of the company at Montpelier on that account. On 'that occasion, he was led to the examination of the affairs of the company, its liabilities and resources ; to the examination of the money which was received from Mr. Belknap, under their contract, and to its expenditure by them in the construction of the road. As these plaintiffs were then employed in constructing their part of the road, and naturally would be entitled to the amount due them on the monthly estimates, it is not unreasonable to conclude that Mr. Eggleston, in seeing to the expenditures of the company, became informed of the contract made with the plaintiffs for the construction of those sections of the road. The duplicate of this instrument was among the papers in the office. After that examination they went to Burlington, on the line of the road, and on the sections where the plaintiffs were at work. A statement of the affairs of the company was sent to him by mail, soon after his return to Albany, and the legal presumption is, that it was received. It is true, that all this may exist, and he not know that this contract was executed by deed; yet, they axe very consistent with his examination of that agreement, and his knowl [164] edge of its provisions. The question now is, not whether the testimony is sufficient, but whether those circumstances have a tendency to show such knowledge, and that no objections were made to its execution in that form. Of this the jury are to judge, and draw their own conclusions. If those circumstances have such a tendency, they should not have been taken from the consideration of the jury. We think the plaintiffs were entitled to have that testimony submitted to the jury, as having a legal tendency, in proof of the issue formed in the case. The judgment of the County Court must be reversed, and the case remanded.