Where bills of exchange were drawn by the principal acting
partner of a firm in the name of the firm, all the partners were
responsible.
Whenever there are written articles of agreement between the
partners, their power and authority,
inter se, are to be
ascertained and regulated by the terms and conditions of the
written stipulations. But independently of any such stipulations,
each partner possesses an equal and general power and authority, in
behalf of the firm, to transact any business within the scope and
objects of the partnership, and in the course of its trade and
business.
Where partnerships are formed for the mere purpose of farming,
one partner does not possess the right, without the consent of his
associates, to draw or accept bills of exchange, for the reason
that such a practice is not usual, nor is it necessary for carrying
on the farming business.
In the present case, the jury found that this was a trading
firm, and their verdict is conclusive.
The right of the acceptors, who had paid the money, to recover
from the drawers, cannot be affected by the fact that one of the
drawers had applied the money to an unlawful purpose.
Page 63 U. S. 257
The suit was brought upon three bills of exchange, which were
accepted and paid by Bullitt, Miller & Co., the drawees, for
the accommodation of the drawers, Dement, Kimbro & Sons, of
which firm Joseph Kimbro was a partner. This action was brought by
Bullitt, Miller & Co., against Joseph Kimbro alone. The place
of business of the firm of Dement, Kimbro & Sons, was in
Mississippi. Kimbro resided in Tennessee, and therefore was sued
there.
The defense set up in the court below rested on two grounds,
viz.:
1. That Dement, the principal acting partner of the firm of
Dement, Kimbro & Sons, had no power to draw the bills sued
on.
2. That the bills were drawn for the purpose of raising money to
be laid out in the purchase of slaves to be carried into
Mississippi for sale, which slaves were so carried in and sold,
contrary to laws of Mississippi.
On the trial, the judge charged the jury in the following
words:
"The court charge the jury that Dement, the principal acting
partner of the firm of Dement, Kimbro & Sons, had power to draw
the bills given in evidence, according to the proof adduced to
them, if true; that if the bills were accepted and paid at maturity
by the plaintiffs for said firm, the defendant, Joseph Kimbro, was
responsible, and it mattered nothing to the plaintiffs how the
proceeds of the bills were disposed of, as this was a fact the
plaintiffs could not know, and were not bound to prove."
This ruling was excepted to, upon which the case was brought up
to this Court.
Page 63 U. S. 262
MR. JUSTICE CLIFFORD delivered the opinion of the Court.
This case comes before the court upon a writ of error to the
Circuit Court of the United States for the Middle District of
Tennessee. It was an action of assumpsit brought by the present
defendants against the plaintiff in error, to recover the amount of
three several bills of exchange, particularly described in the
declaration. As exhibited in the transcript, the several bills of
exchange bear date at Lexington, in the State of Mississippi, on
the second day of April, 1853, and purport respectively to have
been drawn and addressed to the original plaintiffs by one Morgan
McAfee, and by Dement, Kimbro & Sons. They were each for the
sum of two thousand dollars, and were severally made payable to the
order of the first-named drawer, by whom also they were duly
endorsed. Two of them
Page 63 U. S. 263
were likewise endorsed with the firm name of the other drawers.
At the time the bills of exchange were executed, the original
defendant was a member of the firm of Dement, Kimbro & Sons;
and it was conceded, in the pleadings and at the trial, that the
bills of exchange were drawn and negotiated by the senior partner
of that firm. All the members of that partnership except the
defendant were citizens of the State of Mississippi at the time the
suit was commenced, and were residing out of the jurisdiction of
the court; and for that reason, as alleged in the declaration, the
other partners were not sued in this action. In the court below,
the plaintiffs claimed to recover against the defendant, upon the
ground that the firm, of which he was a member, were the drawers of
the bills of exchange, and that they, the plaintiffs, had paid the
amount, or the principal portion of the same, out of their own
funds, as acceptors, for the accommodation of the drawers. Without
attempting to give any very definite analysis of the several pleas
filed by the defendant, it will be sufficient for the purposes of
this investigation to state that he set up two distinct grounds of
defense in answer to the claim of the plaintiffs:
1. To the merits of the claim he pleaded the general issue, and
denied specially that he ever drew the bills of exchange described
in the declaration, or that he ever authorized anyone to draw them
in his name, or in the name of his firm.
2. For a further defense, he also alleged, in his fourth plea to
the amended declaration, that the bills of exchange were drawn and
endorsed by Dement, and accepted by the plaintiffs, for the purpose
of raising money to be laid out in the purchase of slaves, to be
imported from some other state or territory of the United States,
for sale, into the State of Mississippi, which slaves he alleged to
be afterwards purchased with the money and imported into the state,
and there sold, according to the original intent, contrary to the
form of the statute of that state in such case made and provided.
To that plea the plaintiffs replied, traversing the allegations of
fact, and tendering an issue, which was duly joined. Some of the
pleas resulted in issues of law, all of which were ruled in favor
of the
Page 63 U. S. 264
plaintiffs, and the defendants acquiesced in the rulings of the
court.
Evidence was then introduced on both sides upon the issues
involving the merits of the claim, and the court instructed the
jury that Dement, the principal acting partner of the firm, had
power to draw the bills given in evidence according to the proof
adduced to them, if true; that if the bills were accepted and paid
at maturity by the plaintiffs for the firm, the defendant was
responsible, and it mattered nothing to the plaintiffs how the
proceeds of the bills were disposed of, as that was a fact the
plaintiffs could not know, and were not bound to prove.
Under the charge of the court, the jury returned their verdict
in favor of the plaintiffs for the amount claimed, deducting
certain admitted credits, according to the account exhibited in the
transcript, and the defendant excepted to the instructions of the
court. It is obvious, on the first reading of the instruction, that
it contains two distinct propositions, and no doubt is entertained
that both were intended to be controverted by the exceptions. In
the first place it affirms that the evidence adduced, if found to
be true, was sufficient to show that the acting partner of the
firm, of which the defendant was a member, had power to draw the
bills of exchange described in the declaration. According to the
proofs introduced by the plaintiffs, the firm commenced business at
Lexington, in the State of Mississippi, in January, 1853, and the
partnership was continued, without interruption, until the third
day of October, of the same year, when it was terminated by the
death of the senior partner. They also proved, by two witnesses,
that the firm was engaged during that period in farming, carrying
on a steam saw mill, and in general trading. Both of these
witnesses testified that the senior partner, who drew the bills of
exchange in question, was the active business partner of the firm,
and one of them added, that he did the principal trading, and
borrowed money, and paid it back in the name of the firm.
Their partnership agreement was introduced by the defendant. It
bears date on the fifth day of January, 1853; and the
Page 63 U. S. 265
partnership was formed, as recited in the instrument, to
continue for the term of two years, for the purpose of farming and
of carrying on a steam saw mill. By its terms, one-third of the
capital stock was to be furnished by the senior partner, one-third
by the defendant, and the remainder by his two sons. Those five
persons constituted the firm, under the name and style before
mentioned. And it was further stipulated that negroes or hands,
stock, provisions, and all necessary utensils, should be furnished
by the respective parties, according to their interest in the
capital stock, and that they should defray the expenses of the
co-partnership and share its profits in the same proportions. They
also designated the farm to be carried on, and stipulated that the
steam saw mill should be located at such place as a majority of the
partners in interest should determine.
After the partnership agreement was executed by the parties, it
was deposited with a third person; and it appeared from his
deposition, taken by the defendant, that it remained in his
possession from that period to the time of his examination. In the
same deposition, the witness testified that the firm, so far as he
knew, had never been held out by the defendant as having any more
extensive powers than those conferred by the partnership
agreement.
Some attempt was made by the defendant to prove that it was the
usage, in partnerships of this description, when money was wanted
to carry on the business, and the several partners could not be
consulted, for the managing partner to raise it on his own credit,
and charge it to the partnership; but the proof was not sufficient
to show any such general usage.
Such was the substance of the evidence on which the charge of
the court was based, and we think it was of a character to justify
that part of the instruction under consideration. Our reasons for
that conclusion will now be briefly stated.
That one of several partners composing a trading firm has power
to draw bills of exchange, unless restricted from so doing by the
terms of the co-partnership agreement, is a proposition which, it
is presumed, no one will dispute. Whenever there are written
articles of agreement between the partners,
Page 63 U. S. 266
their power and authority,
inter se, are to be
ascertained and regulated by the terms and conditions of the
written stipulations. But, independently of any such stipulations,
each partner possesses an equal and general power and authority, in
behalf of the firm, to transact any business within the scope and
objects of the partnership, and in the course of its trade and
business.
Acts performed by one of the partners, in respect to the
partnership concerns, and in the usual course of its business,
differ in nothing, so far as their legal consequences are
concerned, from those transactions in which they all concur; and
for the reason that, by the commercial law, each partner of a
trading firm is presumed to be entrusted by his co-partners with a
general authority in all the partnership affairs. Accordingly it
was held, in
Hawkin v. Bourne, 8 Mee. & Wels. 710,
that one partner, by virtue of the relation he bears to the firm,
is constituted a general agent for another, as to all maters within
the scope of the partnership dealings, and has conferred upon him,
by virtue of that relation, all authorities necessary for carrying
on the partnership, and all such as are usually exercised in the
business in which they are engaged. Any restriction which, by
agreement among the partners, is attempted to be imposed upon the
authority which one partner possesses, as a general agent for the
other, is operative only between the partners themselves, and does
not limit the authority as to third persons, who acquire rights by
its exercise, unless they know that such restrictions have been
made.
Contracts made by one of several partners, in respect to matters
not falling within the ordinary business, objects, and scope of the
partnership, are not binding on the other partners, and create no
liability to third persons, who have knowledge that the partner
making the contract is acting in violation of his duties and
obligations to the firm of which he is a member. But whenever
credit is given to the firm, within the scope and objects of the
partnership, and in the course of its trade and business, whether
the partnership be of a general or limited nature, it will bind all
the partners, notwithstanding any secret stipulations or
reservations between themselves,
Page 63 U. S. 267
which are unknown to those who give the credit.
Harrison v.
Jackson, 7 Term. 207;
Pinkney v. Hall, 1 Salk. 126;
Lane v. Williams, 2 Vern. 277;
Swan v. Steele, 7
East. 210; Byles on Bills 31; 3 Kent Com. 40; Story on Part. sec.
105; Collyer on Part. sec. 401.
Apply these principles to the facts disclosed in evidence, and
it is clear that the power of the acting partner was ample to
authorize him to draw the bills of exchange in the name of the
firm, unless it can be shown that the firm of which he was a member
was not one falling within the general rules of law defining and
regulating the rights and obligations of partners engaged in the
transactions and business of trade.
All partnerships, says Chancellor Kent are more or less limited;
and there is none that embraces, at the same time, every branch of
business. Such limitations are generally to be found in the terms
and stipulations of the articles of co-partnership, but they may
arise from general usage, or, to a certain extent, from the
character of the business, and the nature of the objects to be
accomplished.
Partnerships are sometimes formed by those who are interested in
real estate, for the mere purpose of farming; and in respect to
that class of business arrangements, it has been held, that one of
the several partners does not possess, by virtue of that relation
merely, the right, without the consent of his associates, to draw
or accept bills of exchange, for the reason that such a practice is
not usual, nor is it necessary for carrying on the farming
business. Collyer on Part. ed. 1848, sec. 402;
Greensdale v.
Dower, 7 Barn. & Cres. 635;
Dickerson v. Valpy,
10 Barn. & Cres. 138, per Littledale, J.
In the case last named, it was held that a certain mining
company fell within the same exception, and, on the facts
disclosed, no doubt the question was well decided. But the mere
circumstance that the business consists in making profits out of
real estate, as in working a stone quarry, will not necessarily
take the case out of the operation of the general rule.
Thicknesse v. Brownilow, 2 Cromp. & Jerv. 425.
Page 63 U. S. 268
Farming partnerships, when strictly confined to that purpose,
are held to be within the exceptions to the general rule upon the
ground, as assumed by the counsel for the plaintiffs, that their
principal object is to make profits out of the soil by gathering
its fruits, and that the partners are in no proper sense engaged in
trade; but wherever the business, according to the usual mode of
conducting it, imports, in its nature, the necessity of buying and
selling, the firm is then properly regarded as a trading
partnership, and is invested with all the powers and subject to all
the obligations incident to that relation.
McGregor v.
Cleaveland, 5 Wen. 475;
Winship v. Bank of United
States, 5 Pet. 529;
Baker v. Wheeler, 8
Wen. 505;
Coles v. Coles, 15 Johns. 160;
Johnston v.
Dutton, 27 Ala. 245;
Hedley v. Bainbridge, 3 Q.B.
321.
Another answer, however, may be given to the objection to this
part of the instruction, which is entirely conclusive against it.
According to the evidence, farming was not the sole business of the
partners composing this firm. They were also engaged in running a
steam saw mill, for manufacturing purposes; and common observation
will warrant the remark, that those who engage in that business
always want capital to carry it on, and frequently find it
necessary to ask for credit. Like those engaged in other branches
of manufactures, they buy and sell, and have occasion to remit
money and collect it from distant places.
Two witnesses also testified at the trial that this firm was
engaged in general trading, and there was no evidence introduced by
the defendant to contradict their statements. Whether the witnesses
were entitled to credit, and whether, in point of fact, this firm
was a trading firm, were questions which were properly submitted to
the jury. By the verdict, both questions were found in favor of the
plaintiff, and the finding of the jury is conclusive.
2. One other point only remains to be considered, which arises
out of the second proposition contained in the charge of the court.
It was to the effect, that if the bills of exchange were accepted
and paid at maturity by the plaintiffs for the
Page 63 U. S. 269
firm, then the defendant was responsible, and it mattered
nothing to the plaintiffs how the proceeds were disposed of.
No evidence was offered by the defendant in support of the issue
raised by his fourth plea to the amended declaration, and there was
none in the case tending to show that the proceeds had been applied
to any illegal object, or in any manner misappropriated. Such being
the fact, it is obvious that this part of the instruction became
entirely immaterial, which, of itself, is a sufficient answer to
the objection.
But another answer may be given to the objection, which perhaps
will be more satisfactory, and that is, we think it was clearly
correct. It will be observed, that this part of the charge was
based upon the theory that the bills of exchange were drawn by the
firm of which the defendant was a member, and properly so, for the
reason that the question of authority to draw them had been
disposed of in the preceding part of the charge.
In considering this objection, then, it must be assumed that the
bills were drawn by the firm, and that they were duly accepted and
paid by the plaintiffs at maturity, on account of the firm; and if
so, it is not perceived how their right to recover the amount can
be affected by the fact that one of the drawers applied the money
to an unlawful purpose. Where a contract grows immediately out of
and is connected with the illegal or immoral act of the party
claiming the benefit of it, courts of justice will not lend their
aid to enforce it.
Armstrong v.
Toler, 11 Wheat. 258.
But the illegal act, if any, in this case, was performed by one
of the drawers of the bills, and not by the acceptors. Suppose one
of a firm should borrow money of a third person, in the name of the
partnership, and apply it to an unlawful purpose, it surely could
not defeat the right of the lender to recover on the contract.
Regarding this point as too clear to be the subject of dispute,
we forbear to pursue the discussion.
After a careful examination of the exceptions, we think they
cannot be sustained. The judgment of the circuit court is
therefore
Affirmed with costs.