Selden, Withers & Co. v. Bank of Commerce

By the Oowrt — Emmett, C. J. Nothing is better settled than that an agent has an implied authority to bind his principal in all matters which are fairly within the general scope of his agency, even although in the particular case the authority to act may have been expressly denied by the terms of his appointment, if this want of authority is not known to the other party. But if it be known that he has not the power to act in the particular case, the principal is not bound, for he may limit the of his at and that limitation is — 178 — elusive upon all who deal with him with a knowledge of its existence. And these simple rules apply in full force to all transactions by one or more partners in the name of the firm; for a partner has an implied agency, arising from tire supposed assent of all the members, to act for his firm in all matters connected with the business transacted by it, and his copartners are bound by his acts; but an express notice to third persons, from the other partners, that the acts of a particular partner, or particular acts of any of the partners, are not authorized by the terms of the copartnership, would at once put an end to this implied agency or authority, so far as all parties having the notice are concerned. This implied authority is necessary to the protection of the public, which is supposed to deal with a partner in the full belief that he has authority to act for the firm in. all things fairly pertaining to the partnership business; but the authority goes no further, and if a person, dealing with such partner, does not thus innocently rely on this implied assent, he is not entitled to, nor does he receive the benefit of the rule. If the partnership is known to him to be limited, and he deals with a partner in any matter not within the range of the partnership business — if he receive from him money or property belonging to the firm in discharge of his individual debt — if he receive the partnership note in discharge of his private debt, or as security for the debt of a third person, knowing it to be for such private debt or security, the firm is not bound by the transaction unless he can show a previous authority or subsequent assent or recognition on the part of the remaining partners; for such acts are beyond the scope of the partner’s implied agency. And in all such cases the burthen of proof is on the other party, not on the firm. Livingston vs. Roosevelt, 4 John., 251; Rogers vs. Batchelor, 12 Peters, 221. A partner cannot by any kind of arrangement bind the firm to pay his private debt, Nobles vs. McClintock, 2 Watts & Sargeant, 152; and it seems to me that there is still greater reason why he should not have authority to bind the firm for the payment of the debt of a third person, in which it has no interest. If a firm has a note, debt, or judgment against a third party, — 179 — and a partner within the scope of the partnership business, and for the benefit of the firm, assign the same, and at the same time guarantee it in the name of the firm, a strong case woidd seem to be presented for holding the firm liable on the guaranty ; but we find that such is not the law, without distinct evidence that such guaranty was authorized, assented to or recognized by the other partners, or was according to the business or custom of the firm. 2 Penrose & Watts, 177; 12 Sargeant & Rawle, 13. If there be reason for doubting a firm’s liability, in a case of the kind just mentioned, it seems to me to apply, with ten fold force, to a guaranty, by a single partner, of the note or debt of a third person, in which the firm has no interest. I have found but a single case in which such a guaranty was held to be binding upon the firm. In ex parte Gardom, 15 Ves., 286, the point was made, and abandoned as untenable, but I think it may fairly be inferred from the statement of facts in that case, that the other partner had a knowledge of, and assented to the guaranty at the time it was made ; so that the case can hardly be deemed an authority on the question. It will not certainly be contended that such an authority in a single partner is fairly to be implied from the nature of the mere agreement of copartnership. In the case at bar, the note of third parties, payable to the Plaintiffs, was guaranteed by a single partner, in the name of the firm, but it was claimed that the firm was in fact interested in the note, or in the consideration for which it was given. Admitting this to be true, the firm is not liable, according to the authorities before cited, without distinct evidence that there was an authority, assent or recognition by the other partners. 1 Am. Leading Cases, 453, citimg oases above referred to and others. But if, as contended by the Defendants, the firm had no interest whatever, there is still greater reason for holding the Plaintiffs to the proof of authority or assent, if, indeed, an express promise be not absolutely necessary to hold the Defendants responsible. The Judge, in his charge to the jury, took the ground that if the Plaintiffs had reasonable cause for believing that Latham had authoiity from his firm to give the guaranty, or that the — 180 — firm was privy to, or was interested in the transaction, tliey ought to recover, and this too, as we infer, whether their belief as to these points was founded in fact or not. The direct tendency of another portion of his charge, whether so intended or not, was to load the jury to believe that the Plaintiffs must recover unless they were either guilty of fraudulently taking the guaranty, knowing that Latham had no authority to give it, or guilty of combining with Latham afterwards, to defraud his copartners. And he proceeds further to say in substance, that, if the parties were equally ignorant, the Defendants, of the guaranty by Latham, and the Plaintiffs, of his want of authority, and one or the other has to lose by the fraud of Latham, the Defendants must be the sufferers, because they had by associating Latham in business with them, led community to believe-him worthy of confidence. "We do not so understand the law and we hold each of these propositions to be wrong. In our opinion it could make no difference what may have been the belief of the Plaintiffs as to Latham’s authority, or as to the interest which the firm may have had in the transaction. Nor is it necessary in order to defeat the Plaintiffs, that they should have been aware that Latham had no authority, nor that they should afterwards have fraudulently combined with him to defraud the firm. Their right to recover depends entirely upon’ the fact of Latham’s authority express or implied, or on the subsequent recognition or adoption of his acts by his copartners; and if the Defendants failed to establish this authority or assent, they were not entitled to a judgment, whatsoever may. have been their belief at the time the transaction took place. The existence of circumstances from which the Plaintiffs might reasonably have inferred that the guaranty was given with the authority of ‘the other parties, or that the firm had an interest in the transaction, might possibly have changed the onus próbandi of Latham’s fraud, to the partners, but could have had no other effect. According to the English decisions, it lies upon the partners in such cases to prove the fraud, but it is believed that the American cases are all the other way. — 181 — And as to the degree of credit, which a firm gives a person by merely associating him as a copartner, we hold that it does not extend to any act of his, not connected with the business, in which the copartnership is known or reputed to be engaged. The public may rightfully consider that each partner has authority to bind the firmin all matters pertaining to the partnership business, but cannot reasonably believe he is authorized to go further. This view of the case renders it unnecessary to consider at length the refusal of the judge to charge as requested by the Defendants. "We will remark only that a party has a right to insist that his legal proposition be submitted to the jury in the very terms by him selected ; and the judge may refuse absolutely so to instruct the jury, or may qualify the proposition. But if there be a qualified charge it should be explicit and ought perhaps in the qualified form immediately to follow the refusal j otherwise the jury might regard it as an absolute refusal to charge as requested, and the injurious effect thus produced, will in general be the same, whether the proposition has in substance been affirmed in other terms in a former part of the charge or not. If the charge asked for be correct, it should be given, although covered by the instructions already submitted, or if there be a distinction, it should be drawn for them, because as before stated the refusal, unless carefully guarded and explained is apt to confuse the jury and lessen the effect of the proposition already stated to them. It will hardly be expected that we should notice each of the thirty-five or forty exceptions taken at the trial, after having considered and decided the points which we deem essential to the determination of the real questions in issue between the parties. There are however some twenty or more of these exceptions which relate to the admission of testimony, of which we may say generally, that the statements of witnesses as to their mere impressions of facts or circumstances, or as to the opinions which they may have entertained concerning the same, or concerning the liability of parties, ought not to be admitted — and that where, in a commission to take testimony, an interrogatory is to be put, if a previous question is answered — 182 — in a particular way, and that question is not answered in the manner indicated by the terms of the interrogatory, the interrogatory should not he put, and if put, the answer thereto should not be admitted. If a party in such case desires an answer at any rate, he should frame his question accordingly. If he frame it hypothetically, the presumption is that he does not desire an answer unless the fact exists, upon which the question is founded ; otherwise the other party may he prejudiced, for he may have waived an examination of the subject called for by the interrogatory, knowing that the fact upon which it was in terms predicated, did not exist. A new trial is awarded with costs.