27 U.S. 186
2 Pet. 186
7 L.Ed. 391
LE ROY, BAYARD & CO. PLAINTIFFS IN ERROR
GEORGE JOHNSON, DEFENDANT IN ERROR.
January Term, 1829
AN action of debt upon a bill of exchange for 1250 sterling, was instituted by the plaintiffs in error, in the circuit court for the county of Alexandria, in the district of Columbia, against Jacob Hoffman and George Johnson, alleging them to be partners in trade. By the statute of Virginia, adopted as the law of the county of Alexandria, this form of action is authorised for the recovery of the sum due upon a bill of exchange, and damages for non-payment. The declaration charged the bill to have been drawn by Jacob Hoffman and George Johnson, trading as co-partners in Alexandria, under the name of Jacob Hoffman, the same being for the account of the concern; and that the bill was purchased by the plaintiffs, who remitted it to London; where it was presented to the drawers, and was returned protested.
The process was not served on Jacob Hoffman.
Upon the trial of the cause, it was proved that it was generally known in Alexandria, in 1823, that the defendant and Jacob Hoffman were jointly concerned in buying and selling pork; and by the articles of co-partnership signed by both partners, and entered into on the 10th of December 1823, it was agreed, inter alia, that the funds necessary for the purposes of the partnerships were to be borrowed from the banks or otherwise, upon the notes of George Johnson, to be indorsed by Hoffman, or in such other shape, as respects the paper of the parties, as might be found suitable to the object intended. The active partner in the business was Jacob Hoffman, who, besides the business of the concern, carried on that of a sugar refiner, a buyer, seller, and salter of beef, and a tobacconist; and at the same time the defendant, George Johnson, was engaged in the transaction of business on his own account, as a commission merchant and grocer.
The cashier of the bank of Alexandria proved, that an account was opened in that bank on the 3d of December 1823, which he understood, from both parties, was to comprehend the cash deposits of the joint concern, and the proceeds of notes discounted for the purpose of raising funds for the same. For some years before, Jacob Hoffman kept an account in the bank, until the opening of the new account; upon which the private balance due the bank was transferred to it, and no money could be drawn out of the bank upon the account, but upon the check of Hoffman drawn by him in his own name. Accounts of a similar character, in the same form, and used in the same manner and for similar purposes were proved to have been kept at the same period in the Farmers' Bank, and in the Bank of Potomac. These accounts comprehended, indiscriminately, all the deposits of cash kept by Hoffman in the banks; as well as deposits and cash of the joint concern. The same witness also proved, that before a note for $6000, drawn by the defendant, and indorsed by John H. Ladd & Co., was discounted by the bank, he sent the bill of exchange which was the foundation of this action to New York, at the request of Hoffman, to be there negotiated. The bill not being sold immediately in New York, Hoffman went there; and assisted by letters of recommendation from merchants of Baltimore, he negotiated the bill, and out of the proceeds of the same the note for $6000 was paid at the bank of Alexandria. The proceeds of the discount of this note were used by the firm. The partnership of the defendant and Jacob Hoffman was advertised in the public papers of Alexandria, the advertisement being subscribed with the names of both persons; during the continuance of the concern, it was generally known in Alexandria, under the style of Hoffman & Johnson; accounts were rendered, and money was paid in that name, and the firm was dissolved on the 10th of January 1824.
By the terms of the dissolution, Mr Hoffman was bound to pay the debts of the firm, and this bill was drawn to enable him to comply with this contract.
The defendant was called upon early in June, and informed of the fate of the bills; and efforts were made without success to procure payment out of property which had belonged to Hoffman and Johnson, and which was in the hands of a trustee.
The questions submitted to the jury, and upon which the court were requested to charge in favour of the plaintiffs below, who are plaintiffs in error in this court, were:
1. That upon the evidence of partnership, and that the proceeds of the bill were applied to the payment of the note which had been discounted for the firm; unless the defendant could show a notice of the dissolution of the partnership, either public or private, before the bill was sold, and that the bill was not drawn on partnership account; the plaintiffs were entitled to recover.
2. If the jury, from the evidence, should be of opinion that the bill was drawn in reference to the business of the concern, and to meet the engagements of the same, and the proceeds of the same were so applied; then the defendant is liable to the plaintiffs, unless he proves a dissolution of the firm and knowledge of the same by the plaintiffs before the bill was negotiated.
3. That if the jury believed the name of Jacob Hoffman was sometimes used in relation to the business of the concern, and that the bill was drawn in the name of Jacob Hoffman, and so negotiated for the firm to pay its notes; the plaintiff is entitled to recover, unless the defendant can prove that the bill was not drawn and negotiated on partnership account, or that the partnership was dissolved and the plaintiff notified thereof, or the dissolution was advertised before the bills were drawn and negotiated.
The court having refused these instructions, and a verdict and judgment having been obtained for the defendant, this writ of error was prosecuted.
The case was argued by Mr Swann and Mr Key for the plaintiffs in error, and by Mr Jones for the defendant.
For the plaintiffs, it was contended, that the bill upon which this suit was brought was drawn by Jacob Hoffman on account of himself and the defendant, to provide for the payment of a note discounted for the concern, in the name used by them in their arrangements of finance; and the proceeds of the sale of the bill having gone to pay the note, the defendant was liable to the plaintiffs for the amount of the bill and damages. It was in fact the bill of the firm.
The evidence on the part of the plaintiffs was sufficient to go to the jury, upon the principles claimed by the plaintiffs. The name of Jacob Hoffman was used as that of the firm, and if several persons act under one name, all are bound. Montagu on Partnership, 32, note.
While it is admitted that the partnership was not bound for all the acts done in the name of Jacob Hoffman, here was a transaction in reference to its concerns, and it is therefore obligatory on all. Gow on Partnership, 55, 70, 189.
The language of the bill is in the plural, and thus it is manifest that it was not an individual transaction of Jacob Hoffman. It is thus drawn, 'Ninety days after sight of our first of exchange, (second, third and fourth of same tenor unpaid) pay to the order, &c.'
That the partnership was dissolved before the bill was drawn is immaterial. The dissolution was secret, as it was not known to the plaintiffs; and they must be supposed to have taken the bill upon the notoriety of the partnership. The difficulties which prevented the early sale of the bill in New York, may have been removed by information obtained by the plaintiff in Alexandria, and particularly of the form in which the engagements for the money concerns of the firm were drawn.
The propositions stated by the counsel of the plaintiffs should have been submitted to the jury.
The first requested the court to say, whether the facts proved showed a partnership.
The second, that unless notice of the dissolution was brought home to the plaintiffs, the defendants were liable.
The third, that there was evidence that the parties sometimes used the name of Jacob Hoffman; and the bills were drawn to raise funds for the partnership, and therefore the plaintiffs were entitled to charge the defendant, unless the defendant could prove they were not used for the firm.
The counsel also cited Gow on Part. 155. 2 Bos. & Pul. 679.
Mr Jones, for the defendant. The evidence showed a special partnership, to buy and sell pork, and all the transactions of the firm were in the name of Jacob Hoffman and George Johnson. If the name of Jacob Hoffman was used at the banks, it was not so used as the name of the firm, but as the name of one individual of the same; each giving his own name to raise funds for conducting the business.
Nor was the bill taken as that of the firm; the plaintiffs refused it in the first instance, and took it afterwards, when assured of the respectability of the drawer, individually. The law is fully settled, that when it is claimed to make a person liable as a partner, in a firm carried on in the name of one person, it must be shown to be a partnership concern. The defendant is protected by this principle; for although the proceeds of the bill were applied to pay the note discounted for the benefit of the firm, the payment of that note had been assumed by Jacob Hoffman, and he had a right to raise funds on his own responsibility to discharge it.
To bind a partnership, the name of the firm is essential. If it is not used, it must be presumed to be an individual transaction; and if the proceeds of the same are brought into the concern, it is presumed it is done as an individual duty to the firm.
The books show universally, the difference between a manual act of purchasing goods, which may be done by one partner to bind all; and the binding of all by writing, in which all must act, or he who acts must have authority to bind all. How far the courts have gone in considering that a separate debt, which is contracted by one of a firm, is shown by the following cases. 4 Term Rep. 270. 12 East, 122. Gow on Part. 32. 1 Atk. 223. 1 Marshall's Rep. 249.
It is incumbent on the plaintiffs to prove they dealt with the firm, or with a view to the liability of all the parties to it. Here George Johnson was unknown to the plaintiffs; Jacob Hoffman alone appeared in the transaction, and he drew the bill in his own name, on his own responsibility, to obtain the means to carry into effect the terms of the dissolution of the partnership. The court in refusing the instructions, therefore, acted in conformity with the law, and the facts of the case.
Mr Justice WASHINGTON delivered the opinion of the Court.
The plaintiffs instituted an action of debt under the statute of Virginia, in the circuit court of the district of Columbia, for the county of Alexandria, against Jacob Hoffman and the defendant upon a bill of exchange drawn by the said Hoffman, and dated the 3d of January 1824. The declaration charges, that the said Jacob Hoffman and George Johnson were partners in the business of buying, curing, and selling pork and bacon, and carried on their said co-partnership business under the name and firm of Jacob Hoffman, and that the bill of exchange on which the suit is brought, was drawn in the name of Jacob Hoffman, for and on account of the said firm, and was sold to the plaintiffs, who caused it to be presented for acceptance; and that the same was duly protested for non-acceptance and non-payment, of which due notice was given to the defendants, the drawers. The writ being returned 'no inhabitant,' as to Hoffman, the suit abated against him.
From the evidence disclosed in a bill of exceptions, taken by the plaintiffs to the opinion of the court, the case appears to be as follows.
On the 10th of December 1823, Jacob Hoffman and the defendant entered into articles of co-partnership under their respective signatures, to commence and prosecute, on joint account, during that winter, the business of purchasing, salting up, and smoking pork. The funds necessary to the accomplishment of the objects, intended to be borrowed from the banks, or otherwise, upon the paper of the said George Johnson to be indorsed by Hoffman, or in such other shape, as respected the paper of the parties, as might be found most suitable to the object intended; Johnson agreeing, in consideration of the extraordinary trouble and experience which Hoffman would devote to the purchase and putting up of the pork, to pay two-thirds of the interest arising, or growing out of the loan which should be made for the business contemplated. It was further stipulated, that the business should be carried on as far as the parties should agree, and could command the funds; and that the profits and loss should be equally divided between them. No name of style is agreed upon under which the business of the concern was to be transacted; but evidence was given, that after the parties commenced their operation under these articles, the books of the concern were kept, and the bills and accounts were made out at their warehouse, where the pork was cured and kept, in the joint names of Hoffman & Johnson, and never otherwise; and that they continued to be so kept and made out until the pork was sold. They were generally known in Alexandria as partners in buying, curing, and salting pork, under the name and style of Hoffman & Johnson, in which they acted in relation to the business of the concern, and advertised in the newspapers.
It further appears, that, besides the business of this concern, and during the same period, Hoffman carried on the business of a sugar refiner, of a buyer, salter and seller of beef, and of a tobacconist; and the defendant that of a grocer, and commission merchant, in the town of Alexandria.
Notwithstanding what has been stated as to the name by which this firm was known in Alexandria, and in which they did business at their warehouse, it seems that one particular branch of business was conducted solely by, and in the name of Hoffman alone. In December 1823, an account was opened in the bank of Alexandria, which the cashier understood from both Hoffman and the defendant, was to comprehend both the cash deposits of the said concern in that bank, and the proceeds of notes therein discounted to raise money for the use of the firm. This account was opened on the 3d of the month just mentioned, into which a trifling balance against Hoffman upon his private account, before kept at that bank, was transferred. This new account was so kept that no money could have been drawn out of the bank, upon that account, except upon the check of Hoffman, in whose name alone all the checks were drawn. Hoffman had likewise long standing accounts in his own name in two other banks in Alexandria, which were continued in the same name after this concern was formed; in which accounts all cash deposits in those banks respectively, and the proceeds of notes therein discounted, to raise cash for the use of the concern, were entered. These latter bank accounts comprehended, indiscriminately, all the deposits and cash kept by Hoffman in those banks, as well as the deposits and cash of the joint concern.
The partnership between these gentlemen, which commenced on the 10th of December 1823, was dissolved by mutual consent, on the 21st of the succeeding month; under an agreement, by which Hoffman contracted to pay all the debts due by the firm, the defendant binding himself to give the use of his name, either as drawer or indorser, in the renewal of all notes then existing until the bacon should be sold.
On the 30th of January 1824, the bill of exchange on which this suit is brought, was drawn by Jacob Hoffman in his own name, and, as he states in his deposition, on his individual responsibility, in order to enable him to raise money to comply with his part of the above contract, and in particular to enable him to discharge a note for $6000 which had been drawn by the defendant, indorsed by John H. Ladd & Co. and Jacob Hoffman, and discounted at the bank of Alexandria. With much difficulty, and after great personal exertions by Hoffman, and with the aid of a letter from Mr Colt in favour of his mercantile standing, he succeeded in selling this bill to the plaintiffs, the proceeds of which he immediately applied to the discharge of the above note for $6000. In his negotiations with the plaintiffs the name of the defendant was never mentioned.
As a part of the evidence here detailed is taken from the deposition of the before mentioned Jacob Hoffman, which was offered by the defendant's counsel, it will be proper, in the first place, to dispose of the objection made to the competency of this evidence. The offer to read the deposition, was preceded by the exhibition of a release executed and delivered by the defendant to the witness prior to his examination. It does not appear that any objection was, or could be made to the form of the release; and the only question is, whether, in point of law, the defendant could by any release render Hoffman a competent witness.
It is to be premised, that the only ground upon which the objection can be rested, is the supposed interest of the witness in the event of the cause, since the suit having regularly abated as against Hoffman, by the return that he was no inhabitant, he was no more a party to it than he would have been, had his name been altogether omitted in the declaration.
As to the objection upon the score of interest, it is sufficient to remark, that it was manifestly hostile to the party in whose favour he testified, and who offered it in evidence; since, if the plaintiffs recovered against Johnson, and obtained satisfaction from him, that would be a bar to their action against Hoffman, and the release of Johnson protected him against any action which Johnson might bring against him for contribution or otherwise.
The general rule of law, in relation to witnesses who are interested in the event of the cause, goes no farther than to exclude them from giving evidence in favour of that party to whom their interest inclines them. If they stand, in point of interest, indifferent between the litigating parties, or if they testify against their interest, the reason of the rule which excludes their testimony, no longer exists.
We come now to the instructions to the jury, asked for by the plaintiffs' counsel, and which the court refused to give. The first is, that if the jury believe from the evidence, that the defendant and Jacob Hoffman entered into the articles of co-partnership offered in evidence, and that an account was kept for the said concern in the bank of Alexandria, in the name of Hoffman, in which the notes discounted for the use of the partnership, and deposits of money on partnership account, were entered to the credit, and checks drawn for the same in the said Hoffman's name, and that the said Hoffman drew the bills mentioned in the declaration, and sent them to New York to be sold, for the purpose of raising money to pay certain notes which had been discounted in the bank of Alexandria on partnership account, some of them drawn by said Hoffman, and indorsed by the defendant or other persons, and others drawn by the defendant, and indorsed by Hoffman or others, and that the same was sold to the plaintiffs, and the proceeds thereof applied by said Hoffman to the payment of the said notes; then the plaintiffs are entitled to recover, unless the defendant can show a dissolution of co-partnership, and notice thereof, either public, or to the plaintiffs, before the bills were sold, or that the said bills were not drawn on partnership account, but on the individual responsibility of Hoffman.
The second instruction which the court was called upon to give, is substantially the same as the first, except that it omits a circumstance much relied upon in the argument, that the bank account of the concern was kept in the name of Hoffman, upon whose checks alone the money was drawn out.
The third instruction states, that if the jury should believe from the evidence, that the defendant and Hoffman sometimes used, in relation to the business of the concern, the name and style of Jacob Hoffman, as representing the firm, and that the bill in question was drawn in that name by the said Hoffman, and negotiated for the purpose of raising funds to pay notes due by the said concern; then the plaintiffs were entitled to recover, unless the defendant could prove that the said bill was not drawn and negotiated on partnership account, but on account of the said Hoffman alone, or that the partnership was dissolved, and the plaintiffs notified thereof, or the dissolution advertised before the bills were drawn and negotiated.
In support of this action, it has been argued by the counsel for the plaintiffs, that the bill in question was drawn in the name of the firm under which the partnership concerns of Jacob Hoffman and George Johnson were transacted; that it was drawn on partnership account, and that the proceeds of the bills were in fact applied by Hoffman to the discharge of a debt due by the concern. These being the facts, it is insisted that the court below ought to have complied with the prayer of the plaintiffs' counsel, and instructed the jury, that if they were so understood by them, the plaintiffs were entitled to recover. And if this statement of the facts be correct, and the instructions asked for had been so framed as to present them fairly to the jury, this court entertains no doubt but that such instructions should have been given.
It is well settled, that if a bill of exchange be drawn by one partner in the name of the firm, or if a bill drawn on the firm by their usual name and style, be accepted by one of the partners, all the partners are bound. It results necessarily from the nature of the association, and the objects for which it is constituted, that each partner should possess the power to bind the whole, when acting in the name by which the partnership is known, although the consent of the other partners to the particular contract should not be obtained, or should even be withheld. Were it otherwise, the affairs of the concern could with difficulty be carried on; and these persons could seldom, if ever, know, when they might safely deal upon the credit of the firm. It follows, that such third persons are not bound to inquire, much less to assure themselves that the partner with whom they are contracting is acting on the partnership account, or for his own individual advantage. The interest of the partner in the joint stock of the concern and his consequent authority to use their name, raises a presumption that the contract was made for joint account, which is sufficient to bind the firm, unless the contrary be shown and that the person with whom the partner deals, had notice or reason to believe, that the former was acting on his separate account.
It is now to be seen how these principles of law apply to the case under consideration.
It is quite clear, that the name of this firm is no where designated in the articles of copartnership which have been referred to. The mode in which a particular branch of their business was to be conducted, cannot reasonably be construed to give a name to the firm. It manifestly had no allusion to that subject. The stipulation that the funds necessary for the purposes of the concern should be raised upon the paper of Johnson, to be indorsed by Hoffman, or in such other shape as might be found most suitable to the object of the parties, no more designated Jacob Hoffman, that it did George Johnson, as the name of the copartnership. If it did, then the name would be lost or changed, as often as the parties should agree to raise funds for the concern in some other mode than the one specified. It is unnecessary to decide whether the omission to agree upon a partnership name in the body of the instrument was, or was not supplied by the signatures of the contracting parties to it, because it was in full and uncontradicted proof, that after the concern went into operation under the articles, their books were kept, and the bills and accounts relating to their business were made out at their warehouse, in the joint names of Hoffman & Johnson, by which name the firm was generally known in Alexandria, and in which they acted in relation to the business of the concern, and advertised in the newspapers. Now it cannot be questioned, but that a name thus assumed, recognized and publicly used, became the legitimate name and style of the firm, not less so, than if it had been adopted by the articles of copartnership.
Keeping in mind the principles of law which have been stated, and the fact or the evidence of it, in relation to the name of this concern, it will not be difficult to decide the question, whether the instructions asked for by the plaintiffs ought, or ought not to have been given. It is obvious that the court was required by the two first of them, either to assume the fact that Jacob Hoffman & George Johnson carried on their business as partners under the name and firm of Jacob Hoffman: or to lay it down as law to the jury, that it is competent to one partner to bind the copartnership by a bill drawn in his individual name, even after a dissolution of the partnership, if that fact was not advertised or known to the person taking the bill; provided the object of the partner who draws and negotiates the bill, be to discharge certain debts due by the concern, and the proceeds are afterwards so applied.
Now the fact which the court was called upon to assume, was all important to be proved to entitle the plaintiffs to recover. It is averred in the declaration, and is in point of law the foundation of the plaintiffs' demand against the defendant Johnson. But what right had the court to assume a fact which was not warranted by any just interpretation of the articles of copartnership, or of any other written instrument which was given in evidence, but which, if it existed at all, was to be deduced from the parol evidence, of which the jury were alone competent to judge?
The court was not called upon to predicate the conclusion of law upon the fact that the defendant and Hoffman traded under the name and firm of Jacob Hoffman; if that fact should be so found by the jury,—and unless it was so found, it is quite clear that the bill in question, although drawn for the purpose before mentioned, and although the proceeds were so applied, did not bind the defendant, and consequently, the court was right in refusing to give these instructions in the form in which they were propounded, unless the fact was that which all the instructions assume, and which formed the basis of the plaintiffs' argument before this court; the plaintiffs contracted in point of law, as they manifestly did in fact, with Jacob Hoffman alone, and upon his sole responsibility, and the use which Hoffman intended to make or did make, of the proceeds of the bill, was quite as unimportant to them and to their cause, as it would have been, had they contracted with Hoffman & Johnson under the name of their firm.
As to the necessity of bringing home to the knowledge of the plaintiffs, in one of the modes stated in the instructions asked for, the dissolution of the co-partnership, in order to prevent their recovery against Johnson; we are all of opinion, that it did not exist in point of law, unless, in point of fact, the bill was drawn in the name of the firm. We admit that if one of the partners contracted in the name of his firm with a third person, after the partnership is dissolved, but that fact not made public or known by such third person, the law considers the contract as being made with the firm and upon their credit, and this for a reason too obvious to require explanation. But if the partner deal with another in his individual name, and upon his sole responsibility, without even an allusion to the partnership, as the jury would have been well warranted in concluding the facts to be in this case, it was unimportant to that other to know that the partnership was dissolved; since he was dealing, not with the firm, and upon their credit, but with the individual with whom he was contracting, and upon his credit.
It only remains to notice the single point of difference between the last, and the two preceding instructions. These, as has before been noticed, assume the fact that the partners carried on the business of the concern under the name and style of Jacob Hoffman. That places the plaintiffs' right of recovery upon the circumstance, that the defendant and Hoffman sometimes used, in relation to the business of the concern, the name and style of Jacob Hoffman, as representing the firm, in connection with the other facts stated in the preceding instructions.
But would the court have been warranted in stating to the jury, what this instruction manifestly purports; that whatever may be the name agreed upon by the partners, and in which they generally act, in relation to the business of the concern, still, if they have sometimes used, in that relation, the name and style of one of the partners, bills drawn in that name, and negotiated for the purpose stated in the instruction, would bind the other partner? We clearly think not. The circumstance relied upon in this instruction, as to what the partners sometimes did, was no doubt proper to be left to the jury, as evidence conducing to maintain the averment in the declaration, that Jacob Hoffman and the defendant carried on business as partners in trade under the name of Jacob Hoffman; if the court had been called upon to leave that as a fact to the jury. But it was nothing more than evidence of that fact, upon which it would have been highly improper in the court to predicate any principle of law whatever. This point we conceive was fully settled in the case of Townsley vs. Sumrall. decided a few days ago by this court, ante page 170.
We are, upon the whole, of opinion that the court below was right in refusing to give any of the instructions prayed for; and that the judgment of that court ought to be affirmed with costs.