d. Commercial paper of trading and nontrading partnerships. It is a fundamental principle of the right of one partner to bind the partnership by contracts in the form of negotiable instruments, that such instruments should be executed within the scope of the partnership business.75 Where a firm is not engaged in trade, it is a general rule that no implied authority to execute negotiable instruments is possessed by any individual member of such firm.76 This follows from the fact that a nontrading partnership, as for the purpose of practicing law, would not ordinarily be called upon to secure the payment of its debts by the execution and delivery of negotiable paper," and the binding of the firm by

one of the partners made for his own bridge, 3 Q. B. (Eng.) 316; Levy v. benefit. If, therefore, at the time he Pyne, Car. & Marsh. (Eng.) 453; received the instrument from one of Harman v. Johnson, 2 E. & B. (Eng.) the partners, he knew, or had reason 61. In the case of Hedley v. Bainto believe, that it was in payment of bridge, supra, Lord Denman, C. J., the partner's debt, or for his own pe- said: "No doubt a debt was due from culiar advantage, aside of the part- the firm; but it does not follow that nership benefit, he acquires no right by this attempted prostitution of the firm. These principles are firmly and universally established on every page of the law merchant with respect to this subject."

one partner had authority to give a promissory note for that debt. Parthers in trade have authority, as regards third persons, to bind the firm by bills of exchange; for it is in the usual course of mercantile transac75. Lindley on Partnership (6th tions so to do, and this authority is ed.), p. 142, where it is said: "With by the custom and law of merchants, respect to partnerships which are not which is part of the general law of trading partnerships, the question the land. But the same reason does whether one partner has any implied not apply to other partnerships. authority to bind his copartners by putting the name of the firm to a negotiable instrument, depends upon the nature of the business of the partnership."

76. Bates on Partnership, § 343. As to what are and what are not trading partnerships, see Bates on Partnership, §§ 327-329, and notes.

77. Firms of attorneys.- In the case of Marsh v. Gold, 2 Pick. (Mass.) 285, a promise was made by one of a firm of attorneys to indemnify a sheriff for making an arrest under an execution, and it was held that, while an attorney-at-law cannot bind his copartner by such a promise, the partnership is, nevertheless, a circumstance, from which, with other circumstances, it may be inferred that the attorney intended to act for the firm; and since it appeared that the copartner, subsequently to the commitment, adopted and ratified the promise, the sheriff might maintain an action against them jointly. See also Hedley v. Bain

There is no custom or usage that attorneys should be parties to negotiable instruments; nor is it necessary for the purposes of their business."

A member of a firm of attorneys has no implied authority to bind his copartners by a post-dated check drawn in the name of the firm. Forster v. Mackreth, 36 L. J. Exch. (Eng.) 94, 16 L. T. 23.

The business of attorneys is not such as to render it either necessary or usual to draw or to indorse bills of exchange, and therefore a member of a firm of attorneys has not, as such, authority to bind his firm, either by drawing or by indorsing them. Garland v. Jacomb, L. R., 8 Exch. (Eng.) 216, 28 L. T. 877, 6 Moak, 289. also Story on Partnership, § 102a; Smith v. Sloan, 37 Wis. 285; Rogers v. Priest, 74 Wis. 538, 43 N. W. 510. (In the latter case it was held that one partner in a firm of attorneys has no implied authority to give a firm note; but the partner giving such a note, and

See

such contracts would not, under common usage, be within the scope of the business for the transaction of which the firm was organized. In the absence of evidence showing usage the power of a single member of a firm to bind the other members, without their express consent, has been denied in the case of mine prospectors, quarry workers,79 farmers,80 planters,81 physicians and surgeons, sugar refiners,83 hotel-keepers.84 Partners in the practice of medicine may mutually bind each other for all things properly belonging or

who himself received the money for which it was given, is estopped to deny its validity.)

78

82

Hunt v. Chapin, 6 Lans. (N. Y.) 139; Greenslade v. Dower, 7 B. & C. (Eng.) 635.

Borrowing money is no part of the 81. Firms engaged as planters.- In regular business of an attorney and the case of Prince v. Crawford, 50 counselor-at-law; from the existence of Miss. 344, the court said: "In a a partnership in that profession, there- planting partnership, there does not fore, no authority results to any mem- exist the implied power in the several ber of the firm to obtain loans on the members to borrow money, make promcredit of the firm; and, though one issory notes, draw bills of exchange, may undertake to pledge the firm for and thereby bind the firm. Those who a loan obtained by him, unless author- deal with an individual jointly interity is given by the express terms of ested with another in the cultivation the partnership contract, or may be and production of agricultural prodimplied from the general habits of ucts, must, at their peril, inform themthe partners,- no other member will selves of the articles of association, be bound by such contract without and the power communicated to each his express consent. Breckinridge v. to bind all. Shrieve, 4 Dana (Ky.), 375. See also Friend v. Daryee, 17 Fla. 116; Bays v. Connor, 105 Ind. 415.

78. Brown v. Byers, 16 Mees. & W. (Eng.) 252; Dickinson v. Valpy, 10 B. & C. (Eng.) 128; Brown v. Kidger, 3 H. & N. (Eng.) 853.

79. Thicknesse v. Bromilow, 2 Cr. & J. (Eng.) 425.

The rule is

founded in manifest wisdom and propriety. One man may be entirely willing to engage with another in the cultivation of a farm, on terms defined by articles, who would not risk his associate beyond that special business. A landlord might well agree to unite with one or several in the cultivation of his land, on joint account, on specific terms, who would not confide to him, or those joined with him, the powers implied by law in a moie general partnership.'

82. Crosthwaite v. Ross, 1 Humph. (Tenn.) 23.

83. Hermanos v. Duvigneaud, 10 La. Ann. 114; Livingston v. Roosevelt, 4

80. Firms engaged in farming. In the case of Ulery v. Ginrich, 57 Ill. 531, it was held that while in the case of commercial partnerships each partner may execute promissory notes and other negotiable securities, in the name of the firm, or do any other acts which are incident or appropriate to such trade or business, Johns. (N. Y.) 251. according to the common course and 84. Cocke v. Branch Bank of Mobile, usages thereof, yet, where the part- 3 Ala. 175. The great changes and nership is organized for farming pur- developments which have been made poses, the parties do not, as incident during recent years in the conduct of thereto. possess a power to draw or ac- the business of hotel-keepers would cept bills, or to draw or indorse notes seem to have modified the rule as apfor the firm. In such cases there plied to firms engaged in such busimust be some proof that an express ness. The nature and scope of their authority is given for this purpose, business is such as to include such or that it is implied by the usages of firms in the same class and subject the business, or the ordinary exigen- them to the same liabilities as trading cies and objects thereof. See also firms.

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necessary to be used by them in their vocation, such as medicines, surgical instruments, and supplies of a similar nature, but they cannot bind each other by drawing bills, or making, indorsing, and issuing notes for other purposes, or for raising money, that not being an article for which the firm has any direct use. There are other cases to the effect that where a negotiable instrument is executed by one partner for the purchase of supplies necessary for a proper transaction of the business of the partnership, the other partners will be bound thereby; as a note given by a member of a law firm for the purchase of law books, and one given by a member of a firm of lumber sawyers for the purchase of food and groceries for the use of their employees.87 The courts are not uniformly disposed to favor exceptions similar to those cited. The general doctrine may be summed up in the language of Judge Lyon in the case of Smith v. Sloan:88 " "We gather from all of the authorities that the distinction between a trading and a nontrading partnership, in respect to the power of a partner to bind his copartner by negotiable instruments, is not limited to a mere presumption of such authority in one case, and the absence of such presumption in the other; but we think and must so hold, that one

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86. Miller v. Hines, 15 Ga. 197, 201.

87. Johnston v. Dutton, 27 Ala. 245. For similar cases of notes given for supplies, labor, and other matters held binding upon nontrading firms, see Hickman v. Kunkle, 27 Mo. 401 (overruled in 78 Mo. 128); Newell v. Smith, 23 Ga. 170; Pease v. Cole, 53 Conn. 53, 72; Voorhis v. Jones, 29 N. J. L. 270; Brayley v. Hedges, 52 Iowa, 623.

85. Firms of physicians. In the pendent of any right arising from the case of Crosthwaite v. Ross, 1 Humph. partnership." (Tenn.) 23, the court said: "Crosthwaite and Hartwell were partners in the practice of physic; this is an occupation, and they may mutually bind each other for all things properly belonging to or necessary to be used by them in this vocation. ***But the drawing of bills or the making of notes is no more within the scope of their partnership, in fact not so much so, as was the buying of brandy by the parties in the sugar refinery, or the drawing of the bills in the mining company. If the note in this case had been executed for anything for which a firm of physicians had use, as such, the firm would have been bound, though the member who drew it had designed at the time to appropriate it to his own use and did so, unless the person contracted with knew of his intention at the time. But money is not an article for which such a firm has use directly, though it may indirectly, but if it has, it must be raised by the individuals comprising the firm, and not by one member, unless he is authorized by the others so to do inde

In the case of Graves v. Kellenberger, 51 Ind. 66, it appeared that two persons were partners in the milling business, one owning the mill, and the other furnishing the money for carrying on the business, but having no interest in the mill. The former, without the knowledge, consent, or ratification of the latter, gave the firm note to a third person for a lightning rod put upon the mill. It was held that, the transaction not being within the scope of the ordinary affairs of the partnership, the note was not binding upon the nonassenting member of the firm.

88. 37 Wis. 285.

partner in a nontrading partnership cannot bind his copartner by a bill or note drawn, accepted or indorsed by him in the name of the firm, not even for a debt which the firm owes, unless he have express authority therefor from his copartner, or unless the giving of such instruments is necessary to the carrying on of the firm business, or is usual in similar partnerships; and that the burden is upon the holder of the note who sues upon it, to prove such authority, necessity, or usage."

e. Rights of bona fide holder. Though a note be made by one of a firm in the firm name, out of the usual course of business, yet if it is signed by them, or, being made payable to them or order, it be indorsed by one of them in the name of the firm, and then discounted or transferred to a bona fide holder, all the partners are responsible on the note.89 As has been said: "If the firm's business is such that the making of any notes is in its scope, a bona fide buyer can hold the firm and need not inquire whether the note was issued within the scope of the business or not, or whether it was to pay or secure a separate debt of a partner, or was for the accommodation of a third person, or for a loan to the signing member, or in any other way in fraud of the rights of copartners." 90 But in the hands of the person who receives a note from

89. Gansevoort V. Williams, 14 being on behalf of the firm, is considWend. (N. Y.) 123. Nelson, J., in ered the act of the rest; and whenever speaking in this case of the reason for a bill is drawn, accepted, or indorsed the rule holding members of a firm by one of several partners on behalf liable to bona fide holders of the firm's of the firm during its continuance, note executed or indorsed by one of which comes into the hands of a bona them, says: "It may be asked, why fide holder, the partners are liable to should the partners be bound at all him, though in truth one partner only when the paper is in fact signed with- negotiated the bill for his own benefit, out their authority? This is no doubt without the consent of the copartagainst general principles, and involves ners." See also Rich v. Davis, 4 Cal. the injustice of subjecting a person to 22; Freeman v. Ross, 15 Ga. 252; answer for an act of another to which Wright v. Brosseau, 73 Ill. 381; Waldo he never expressly or impliedly as- Bank v. Lambert, 16 Me. 416; Blodgett sented. The answer is founded upon v. Weed, 119 Mass. 215; Boyd v. Mcthe law merchant. By entering into Cann, 10 Md. 118; Central Nat. Bank the partnership, each reposes confi- v. Frye, 148 Mass. 498; Nichols v. dence in the other, and constitutes him Sober, 38 Mich. 678; Bloom v. Helm, a general agent as to all the partner- 53 Miss. 21; Atlantic State Bank v. ship concerns; and the inconvenience Savery, 82 N. Y. 291; Evans v. Wells, to commerce, if it were necessary that 22 Wend. (N. Y.) 324; Stall v. Catsthe actual consent of each partner kill Bank, 18 Wend. (N. Y.) 466; should be obtained, or that it should Morehead v. Gilmore 77 Pa. St. 118, be ascertained that the transaction 18 Am. Rep. 435; Sedgwick v. Lewis, was not for the benefit of the firm in 70 Pa. St. 217; Duncan v. Clark, 2 the ordinary transaction of their busi- Rich. (S. C.) 587; Roth v. Colvin, 32 ness, suggested the rule that the act Vt. 125. of one, when it has the appearance of

90. Bates on Partnership, § 352.

the hands of the partner making or indorsing it, with knowledge that it is given or indorsed for his private debt, or in a transaction unconnected with the partnership business, it is not binding on the firm.91 But if a note is transferred before maturity, and in the usual course of business, the firm becomes liable, on the principle that being negotiable paper, and having been made or indorsed by one who prima facie had the authority to do the act, a recovery thereon is not to be defeated, when the action is brought in the name of the holder who has received the same for value, and in good faith. Though this rule is partly founded on public policy, it is supported by justice and good sense; if one of two innocent parties must suffer, the loss should fall upon the one who by his own acts has made it possible for the guilty person to commit the fraud.93 This doctrine does not protect the holder of a note of a nontrading partnership; the partner signing the note having no

92

91. Foot v. Sabin, 19 Johns. (N. warn the holder that the indorsement Y.) 154; Dob v. Halsey, 16 Johns. or signing was by way of accommoda(N. Y.) 34, 38, in which Spencer, J., tion, guaranty, or suretyship, he has said: "This court has decided, in sev- a right to assume that it was in the eral cases, that where a note is given usual course of partnership business. in the name of a firm, by one of the Adams v. Ruggles, 17 Kan. 237; Blodpartners, for the private debt of such gett v. Weed, 119 Mass. 215; Wagner partner, and known to be so by the v. Freschl, 56 N. HI. 495. person taking the note, the other partners are not bound by such note, unless they have been previously consulted and consent to the transaction." Citing Livingston v. Hartie, 2 Cai. (N. Y.) 246; Lansing v. Gaine, 2 Johns. (N. Y.) 300; Livingston v. Roosevelt, 4 Johns. (N. Y.) 251.

92. Swan v. Steele, 7 East (Eng.),

210.

In Freeman's Nat. Bank v. Savery, 127 Mass. 75, Law, the maker of the note, made it payable to the firm of C. F. Parker & Co., of which he was a member, and the name of that firm was indorsed thereon by De Merritt, another member of the firm. The name of the firm of John Savery's Sons was without authority indorsed on the note by Law, of which firm he was also a Where a note has been indorsed or member. The note was discounted at signed with the firm name by a part- the bank by De Merritt, who was ner without authority, a bona fide known by the officers of the bank to be holder who has taken it without no- a member of the firm of C. F. Parker tice, either from the paper itself, or & Co. It was held that there was no from evidence aliunde, that the in- notice to the bank that Savery Sons dorsement or signing was for accomwere accommodation indorsers and modation or by way of guaranty or suretyship, may enforce it against the sureties. And the court remarked that firm. Whaley v. Moody, 2 Humph. title or a knowledge of circumstances a suspicion that there is a defect of (Tenn.) 495; Austin v. Vandermark, which might excite suspicion in the 4 Hill (N. Y.), 259; Waldo Bank v. Lambert, 16 Me. 416. If the holder mind of a cautious person, or even had good reason to believe that the gross negligence, not amounting to evitransaction was authorized by the dence of fraud or bad faith, will not firm, he will be protected. Long v. defeat the title of the purchaser." Carter, 3 Ired. (S. C.) 238. For un93. Edwards on Bills and Notes, less there is something on the face of p. 103, note; Bates on Partnership, the paper or in the circumstances to 8 352.

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