Hoskinson v. Eliot , 62 Pa. 393 ( 1870 )

The opinion of the court was delivered,

by Williams, J.

The main question presented by the assignments of error in this case — though not the first in numerical order — is, whether Charles A. Winn, under the articles of partnership, constituting the Excelsior Steam Press Brick Company, had authority, either as agent or partner, to borrow money on the credit and for the use of the firm in carrying on its business; and whether the partnership is liable for the amount lent or advanced for its use, by the plaintiffs below, at his request.

It is contended by the plaintiffs in error that Winn had no authority to borrow money on the credit of the firm because, by the articles of association, it was a limited partnership for carrying. on the art and trade of manufacturing and vending bricks, with the capital agreed to be contributed by the parties, under the agency and supervision of Winn, whose power and authority did not exceed that given by the articles of copartnership. As these do not, in terms, give him power to borrow money, it is insisted that the partnership is not liable for the money which he borrowed of the plaintiffs. It is true that the partnership was not a general partnership for carrying on all the trade and business of the parties composing the firm, but was a special or limited partnership for carrying on the particular business of manufacturing and selling bricks. But though a partnership may be special or limited to a particular branch of business, it does not follow that a partner has less power to bind such a firm, in the scope of its business, than he would, if it were a general partnership. Nor does it necessarily follow, because a partner is constituted the agent of the firm, and the general supervision of its business is committed to him by the articles of copartnership, that he has no other or greater power than that which is expressly or impliedly given to him as such agent. If the articles of association do not limit or restrict his authority, he has the same general power to bind the firm that he would have, if he had not been constituted sole agent for the supervision and management of its business. As in this case the articles of copartnership do not impose any limitation or restraint upon the authority of Winn, he must be regarded as having all the general power of a partner to bind the firm in the scope of its business. And if the articles had imposed restrictions on his power, such restraints would not affect parties to whom they were unknown, and who, in their dealings with the firm, trusted to the general and well established principles of the commercial law. What then is the general power and authority of a partner ? He may, as is well settled, enter into any contracts or engagements on behalf of the firm in its ordinary trade and business. He may buy, sell or pledge goods; draw, negotiate, endorse or accept bills, notes, checks or other negotiable securities ; or do any other acts which are incident or appropriate to such trade or business, according to the common course or usages thereof: Story’s Part, p. 102. As said by Mr. Chief Justice Marshall in Winship v. Bank U. S., 5 Peters 561: “A partner — certainly the acting partner —has power to transact the whole business of the firm, whatever that may be, and consequently to bind his partners in such transactions, as entirely as himself. This is a general power, essential to the well conducting of business; which is implied in the existence of a partnership. When then a partnership is formed for a particular purpose, it is understood to be in itself a grant of power to the acting members of the company to transact its business in the usual way. * * * * This is a general authority held out to the world, to which the world has a right to trust. The articles of copartnership are perhaps never published. They are rarely, if ever, seen, except by the partners themselves. The stipulations they may contain, are to regulate the conduct and rights of the parties, as between themselves. The trading world with whom the company is in perpetual intercourse, cannot individually examine these articles, but must trust' to the general powers contained in all partnerships. The acting partners are identified with the company and have power to transact its business in the usual way.” In all contracts concerning negotiable paper, the act of one partner binds all; and there is no distinction in principle upon this point between general and special partnerships. One partner may borrow money for the partnership, and give notes and other negotiable securities therefor in the name of the firm; and the partnership is liable for money borrowed by one of its members on the credit of the firm within the general scope of its authority and according to the usual course of its business.

But, while it is conceded that this is the law as applicable to commercial partnerships, it is insisted that it does not apply to partnerships formed for mechanical or manufacturing purposes. But no such distinction is suggested or recognised in any of the adjudicated cases or text-books, and there is no foundation for it in the necessities or usages of these partnerships. The necessity for borrowing money to carry on the business of a manufacturing partnership may be as great as it is in order to carry on the business of one that is strictly commercial; and common observation and experience show that it is equally the custom and usage of manufacturing, as of commercial partnerships, to borrow money to enable them to conduct their business. In this case the jury have found that it was within the general scope of the business of the firm to borrow money to carry on its affairs; and, if so, Winn, as the acting partner, unquestionably had power to borrow money on the credit and for the use of the firm. But, aside from his general power as a partner, Winn had all the authority of a general agent, under the articles of copartnership, in the supervision and management of its business. And if his copartners knew that he was in the habit of borrowing money from the plaintiffs and others for the use of the firm without objection on their part, they are liable for the money so borrowed. We are not furnished with the evidence, but it appears, from the charge of the court, that the plaintiffs gave evidence tending to show that the other members of the firm were cognisant of the manner in which Winn was conducting the business, and knew that he was borrowing money for the use of the firm, without objection or protest on their part; and, if so, the jury would have been justified in finding that they had either authorized or ratified his acts. As there is no exception or assignment of error to this part of the charge, we must presume that the evidence was sufficient to justify the court in submitting the question to the jury. In either aspect of the case, whether Winn be regarded as a partner, if the jury found that he acted within the scope and usage of the business of the firm; or if he be regarded as its agent under the articles of association, if they found that he acted with the knowledge and consent of its members, the partnership is liable for the money which-he borrowed of the plaintiffs.

The next question to be considered is, whether Winn had authority to give the sealed note of the 24th October 1867 for the amount of the firm’s indebtedness to the plaintiffs at that date; and whether it operated as a merger or satisfaction of the debt. It is clear that, under the power conferred by the articles of copartnership, he had no authority to give the note as the agent of the firm; and it is equally clear that, under his general power as a partner, he was not authorized to give it. One partner has no authority to bind his copartners by deed, and a specialty given by one, in the name of the firm, binds only himself. This principle is so well settled that it is unnecessary to cite any authority for it. Did the note then operate as a merger or satisfaction of the partnership indebtedness ? Merger takes place only when the debt is one, and the parties to the securities are identical. As the other members of the firm were not parties to the note, it was not a merger of the indebtedness for which it was given. But if not a merger, was it a satisfaction of the debt ? It cannot be doubted that the acceptance of a bond or specialty from one partner is an extinguishment or satisfaction of the partnership indebtedness on simple contract: Anderson v. Levan, 1 W. & S. 339. If then the note was accepted as the individual obligation of Winn, it extinguished the partnership indebtedness. But if it was not taken as the individual obligation of Winn, but as the obligation of the partnership, why should it he regarded as an extinguishment of the debt ? To hold it to be a satisfaction of the partnership indebtedness, because Winn was bound by it, when it was not accepted as his individual obligation, would shock all our sense of justice, and the law is not so unreasonable or absurd. Whether the note was taken by the plaintiffs as the individual obligation of Winn, or as the obligation of the firm, was a question of fact which the court submitted to the jury, with the instruction, in substance, that if it was taken as the individual obligation of Winn, it extinguished the partnership debt for which it was given, and the plaintiffs were not entitled to recover. But if it was taken as the note of the firm, with the intention of holding the firm for the debt, the plaintiffs might recover if there was no other reason against their recovery. The note on its face does not purport to be the individual obligation of Winn, but of the firm of which he was the acting partner and agent; and, under the evidence, there can be no doubt that the plaintiffs took it as the obligation of the firm, and not as the individual obligation of Winn. . If both Winn and the plaintiffs were under a mutual mistake as to his authority to give the note, why should it be regarded as an extinguishment or satisfaction of the firm’s indebtedness, when it was not binding on the other members of the partnership ?

There was, then, no error in the refusal of the court to charge, as requested in the defendants’ 6th point, that if the sealed note was given on settlement of the account against the company, said account is merged in said sealed note, and the plaintiffs cannot recover for said account. Nor was the admission of the sealed note in evidence error. If it had been offered and received as the foundation of the plaintiffs’ claim or cause of action, its admission would have been error without proof of Winn’s authority to give it. But it was offered and received as evidence of the amount due the plaintiffs by the defendants, on settlement, at the date; to be followed by evidence that plaintiffs had a balance of account to that amount then due them by the defendants; and for this purpose it was clearly evidence. Both the plaintiffs’ and the defendants’ books, by which it was followed, showed that there was a balance due the plaintiffs by the defendants at that date corresponding in amount with that of the note. But the court fell into an error in refusing to charge, as requested in defendants’ 7th point, that the said note is not binding on the defendants because Winn had no authority to give it. The defendants were clearly entitled to an affirmative answer to this point, but the qualified negative given to it by the court did them no possible harm. If the court had affirmed the point, the plaintiffs would have been entitled to recover, under the common counts in their declaration, the balance due them by the defendants as shown both by their own and the defendants’ books. There was no dispute as to the amount which the plaintiffs had advanced for the use of the firm at the request of Winn. The only controversy was in regard to his authority to borrow the money on the credit of the firm, and whether the liability of the company therefor was not discharged by the sealed note which he gave to the plaintiffs on settlement. As under the evidence there can be no doubt as to Winn’s’ authority to borrow the money, and as the firm’s indebtedness therefor was not discharged by the note which he gave, a reversal of the judgment, for the refusal of the court to charge that the note was not binding on the defendants, would be of no avail to them on another trial, and we have repeatedly said that we will not reverse for an error which did the parties complaining of it no harm. The right of the plaintiffs to recover did not depend upon Winn’s authority to bind the defendants by giving the sealed note in the name of the firm, but upon his authority to borrow the money on its credit. The amount which he borrowed, as already intimated, was shown independently of the note by the books of both parties.

Nor was there error in admitting the check of November 20th 1867 in evidence. It was shown to have been drawn on the plaintiffs by Winn as agent, and delivered to Ball & Colt on account of the firm’s indebtedness to them, and that part of the proceeds were applied in discharge of said indebtedness, and that the residue was paid out on Winn’s checks for the use of the firm. Whether he drew the check as the agent of the firm, was a question of fact for the jury, and, under the evidence, it was properly admitted.

But it was error to join the administrators of the deceased partner as co-defendants with the surviving partners in the action. But no objection was made to the misjoinder in the court below. If objection had been made, the plaintiffs, under the Act of 4th May 1852, Pamph. L. 574, would have been permitted to amend the record by striking out the names of the administrators of the deceased partner.. As the objection is made here for the first time, we will permit the amendment with the same effect as if it had been made in the court below.

We have now considered all the questions presented by the assignments in this ease, and as we discover no material error in the record, the judgment, as modified by the amendment suggested, must be affirmed.

It is therefore ordered that the record in this case be amended by striking out the names of the administrators of the deceased partner, George J. Morton, wherever the same occur; and the record being now so amended, the judgment is affirmed.