Mechanics' & Traders' Insurance v. Richardson

The opinion of the Court was delivered by Bermudez, C. J. The defendants, a firm once composed of John P. Biehardson and George W. Gary, are sought to be held liable, as endorsers, on two notes purporting to have been'drawn, the one by W. [1310] A. & C. W. Cary, and the other by J. J. Pierce, and which were duly protested, notice of same having been regularly given. Richardson denied any liability, specially pleading, that the endorsement was for no consideration enuring to the firm, or to him, as plaintiffs knew, or should have known; that said notes or endorsements were not made or used for said firm, or within the course of its business and by any person authorized thereto; that the notes were received by plaintiffs in a private matter with George W. Cary, totally disconnected with the firm and respondents, as plaintiffs knew or should have known; that the firm was dissolved long prior to the institution of this suit. After trial, the lower court gave judgment for one of the notes, for $1,219 08, and rejected plaintiffs’ demand for the other, for $1,733 39. Prom the judgment against him Richardson has appealed. The evidence shows that the notes were endorsed by G. W. Cary, in the name of Richardson & Cary, and were subsequently endorsed by him, in his individual name, and used for his individual purposes to plaintiffs’ knowledge, the consideration of the transaction being given to him in his individual capacity; that the notes never belonged to the firm, which had been dissolved prior to the delivery to the plaintiffs, of the note of W. A. & G. W. Cary, the dissolution being known to the plaintiffs. We think that, under the circumstances of this case, the endorsement of Richardson & Cary, being in the hand of G. W. Cary, and G. W. Cary subsequently endorsing the notes, to the knowledge of plaintiffs, in his individual name, and using them for his individual purposes, to the knowledge of the plaintiffs, these were under the obligation of proving that the transaction had been authorized by John P. Richardson, or that the consideration had enured to him, or to the firm in some manner, which they have not done. A mortgage of firm property by a partner, in his own name, conveys no title. The act of each partner is considered the act of the whole partnership, or of all the partners, only so far as that act was within the scope of the business of the firm. Parsons, Ed. 1873, vol. 1, p. 184; 2 Miss. 163; 15 Geo. 197. Judge Story says: “Every contract in the name of the firm in order to bind the partnership must not only be within the scope of the business of the partnership, but it must be made with a party who has no knowledge or notice that the partner is acting in violation of his obligations and duties to the firm, or forjpurposes disapproved of by the firm, or in favor of the firm.” Story on Part., Sec. 128; see, also, Chitty on Bills, p. 48. The American adjudications decidedly assume, says Parsons, p. 121; [1311] that the third party taking this paper with the knowledge that it was given for the private or personal debt of one partner, knows enough to put him on his guard, and that he is now bound to inquire whether the firm, authorized the use of their name, and can only hold them on the ground that they did-so authorize it in fact, and this he must show-as the foundation of his claim. In other words, the American courts hold the doctrine, that a third party taking from a partner the signature of his firm for his own debt, cannot hold that firm without proof of authority, adoption or ratification by the firm. Parsons on Part., vol 1, p. 184; 6 B. Monroe, 60; 4 Wendell, 168; 30 An. 1291. Multo fortiori is such the case, where the paper is uttered after the dissolution of the firm, as is clearly proved as to one of the notes. Daniel on Neg. Inst., vol. 1, p. 278; 3 Kent 63; Collyer on Part. 544, 127; 1 Starkie, 275; 30 Vermont, 225; 25 Ala. 475. “ The power of a partner is limited to the business of the firm. He who knows that the partner’s act is not within the business, knows that it is not authorized, and, if all he knows is, that the partner is acting for his own immediate, direct and several benefit, he has no right to presume that the firm are benefited and authorized it.” Parsons on Part., p. 228. There are some acts in relation to negotiable paper which carry with them the presumption that the partner doing them was not authorized. One of these is the endorsing paper which does not belong to it. P. 235. “If the firm resists payment, it will be sufficient to show that a co-partner signed the firm name for a private debt due the plaintiff and its defense is then complete, unless the plaintiff reply by showing the assent of the co-partners.” Daniels on Neg. Ins., vol. 1, p. 276; 12 Pet. 299; Collyer on Part., Secs. 490, 491; 28 An. 941; 10 L. 416; 5 L. 49. Under the circumstances and the law, we cannot hold the defendant, John P. Richardson, liable. It is, therefore, ordered, adjudged and decreed that the judgment of the lower court condemning defendant Richardson to pay $1219 08 with interest and costs, be reversed, and that judgment be now rendered in favor of said defendant rejecting plaintiffs’ demand, and it is further ordered and decreed that said judgment exonerating said defendant from liability for the note of $1733 39 be affirmed, the plaintiffs to pay costs in both courts. Rehearing refused. Mr. Justice Eenner recuses himself, having been of counsel.