debt or loan for which the individual note or bill of a partner was given was contracted on behalf and for the benefit of the firm, and such note or bill was accepted on the credit of the firm, the note or bill will be deemed as collateral to the original obligation, and the other partners may be held thereon.21 There has been con V. Maffet v. Leuckel, 93 Pa. St. 468. See also Farmers' Bank of Missouri Mo. 428; Allen v. Coit, 6 Hill (N. Y.), v. Bayliss, 41 Mo. 274, 287; s. c., 35 318; Duval v. Wood, 3 Lans. (N. Y.) 489; Uhler v. Browning, 28 N. J. L. 79; Weaver v. Tapscott, 9 Leigh (Va.), 424; Cunningham v. Smithson, Leigh (Va.), 32; Smith v. Collins, 115 Mass. 388. the lender a creditor of the firm. It To bind a partner by a note drawn is only in cases where the name used, by his copartner in his own individual and to which credit is given, is that name, it must appear that such indiadopted by the firm, and used to des- vidual name was the style of the firm. ignate the partnership, that it is held If the individual name of one partliable. National Bank of Salem v. ner is accepted as a merger of a partThomas, 47 N. Y. 15. See also 2 nership liability the other partner Macklin Kent's Comm. 41, 42; Collyer on Part- is thereby exonerated. nership, p. 365, § 401; Jacques v. Mar- Crutcher, 6 Bush (Ky.), 401. quand, 6 Cow. (N. Y.) 197; Le Roy v. 21. Loan to one partner for use of Johnson, 2 Pet. (U. S.) 186, 199, 200. firm.-Where, at the time of obtaining The court in the case of National a loan, the reason for the loan, and Bank of Salem v. Thomas, supra, in the uses to which it was to be applied, speaking of the leading English case were distinctly stated to be for a of Emily v. Lye, 15 East, 7, says: partnership, and it was so understood "The case from East is to the effect by both borrower and lender, and the that where one of two partners drew money was, in fact, so used, the inferbills of exchange in his own name, ence is a fair one that the advance which he procured to be discounted was on the credit of the partnership. with a banker through the medium of the same agent, who procured the discount of other bills drawn in the partnership name with the same bankers, the latter has no remedy against the partnership, either upon the bills so drawn by the single partner, or for money had and received through the medium of such bills, though the proceeds were carried to the partnership In the case of Hoeflinger v. Wells, account, the money being advanced 47 Wis. 628, 631, 3 N. W. 589, solely on the security of the parties the court said: "If upon the whose names on the bills, by trial were the plaintiff can show that way of discount, and not by way of the money was borrowed for the a loan to the partnership, and though firm, that he was at the time advised the bankers conceived at the time that that it was for the firm, and that all the bills were drawn on the part- he loaned it to the firm and upon its nership account. The authority of this credit,- and, as we construe the allecase has never been questioned, and gations of the complaint, they are sufit cannot be distinguished from the ficient to admit such evidence, then case in hand. The question in all the mere taking of the individual note cases is whether the name used, and of the one partner for the money so to which credit is given, is that of loaned will not defeat the action. the firm, or a name which the firm The taking of such note may be evihas adopted and used as a name to dence tending to show that the money designate the partnership; and it is was not loaned to the firm, and that the only in cases where such name has sole credit was given to the individual been used, that the members of the partner; but it is not conclusive of firm have been held." Citing Faith v. that fact; and if the jury or the court Richmond, 11 A. & E. (Eng.) 339; Le should find as a fact that the money Roy v. Johnson, 2 Pet. (U. S.) 186; was borrowed by and loaned to the Beavan v. Lewis, 1 Sim. (Eng.) 376; firm, and upon its credit, then the takWright v. Hooker, 6 Seld. (N. Y.) 51. ing of the individual note of one 12 siderable discussion as to whether the giving of a note or other security by one partner to a creditor of a firm is an extinguishment of the firm debt. It is no doubt true that where a creditor agrees expressly to take a note or security of a single partner for a partnership debt that such debt is discharged.22 The mere taking of such note or security from a single partner will not, of itself, discharge the firm's indebtedness; there must be either an agreement to such effect, or facts sufficient to warrant the inference that the parties intended that the partnership debt should be discharged.2 23 j. Liability of dormant partner. As a general rule a secret or dormant partner, whose name does not appear, is bound by notes made or bills drawn, accepted, or indorsed by his copartners in the name of the firm; both when they are negotiated for the benefit and when given under such circumstances as to bind the firm.** There are in many States statutes providing for the formation of discharge the other partners." To the same effect is Tyner v. Stoops, 11 Ind. 22. member of the firm would not be a payment of such firm debt, unless it was affirmatively shown that such note was taken in payment of the same.' 23. Bonnell V. Chamberlain, 26 22. Discharge of firm debt by Conn. 487; Keerl v. Bridges, 18 Miss. note of individual partner.- Story, 612. In Muldoon v. Whitlock, 1 Cow. in his work on Partnership (§ 155), (N. Y.) 290, it was said that: "No has laid down the following rule: principle of law is better settled than "If a partnership were originally that taking a note either from one of liable to a creditor for a debt, and several joint debtors, or from a 'third he should afterward accept a se- person for a pre-existing debt, is no curity of one partner, at all events, payment, unless it be expressly agreed if it should be a security of a to be taken as payment, and at the higher or negotiable nature, for the whole debt, as a satisfaction thereof, wholly or in part, it will operate as an extinguishment of the debt of the partnership." See also Arnold v. Camp, 12 Johns. (N. Y.) 409; Bonnell v. Chamberlain, 26 Conn. 487; Rayburn v. Day, 27 Ill. 46; Leach v. Church, 15 Ohio St. 169; Stephen v. Thompson, 28 Vt. 77; Powers v. Still, 29 Pa. St. 65: Nichols v. Cheairs, 4 Sneed (Tenn.), 229. In the case of Powell v. Charless, 34 Mo. 485, it is said: "Decisions in other States, and in England, appear to have been somewhat conflicting; but the best authority now seems to be that a creditor of a partnership may, by an agreement with a new consideration (and a new note is a sufficient consideration), accept the responsibility of one or more partners in lieu of the firm's liability and thus risk of the creditor. Nor does the taking a note and giving a receipt for so much cash, in full of the original debt, amount to evidence of such express agreement to take the note in payment." And it is also said in the case of Powell v. Charless, 34 Mo. 485: "Where, upon the execution of a new note, the old one is given up, this fact is entitled to great weight with the jury, but does not raise a legal presumption of an agreement to extinguish it, and discharge the liability of the other partner. Nor, in the absence of an express agreement, is it competent for the court to instruct the jury, that any fact, or facts alone, and unconnected with a consideration of the intention or animus of the parties, will constitute an agreement." 24. Byles on Bills (16th ed.), p. 58; Edwards on Bills and Notes, p. 107. limited partnerships, and limiting the liability of the dormant or special partners to the amount of capital invested by them in the business of the partnership.25 These statutes generally provide that such special partner shall take no part in the actual transaction of the business of the concern, and it is probable that the firm would not, therefore, be liable upon notes given or bills drawn, accepted, or indorsed by him.26 Independent of the statute, an actual, though secret or special partner, is liable on the notes or bills issued by the firm in the same manner and to the same extent as a general partner; but under the statute such liability will only extend to the amount which such secret or special partner has invested in the firm's business. k. Effect of dissolution. After the dissolution of a partnership, neither partner has any authority to bind his former partners by giving a promissory note in the name of the firm;28 the act of 25. See New York Partnership Law Louisiana.- Dodd v. Bishop, 30 La. (L. 1897, chap. 420). Ann. 1178; Meyer v. Atkins, 29 La. 66 563. 26. The New York Partnership Law Ann. 586. (8 37) provides that: 'Except as Maine.- Perrin v. Keene, 19 Me. provided in this section, a special 355; Darling v. March, 22 Me. 184; partner may not sign for the partner- Lumberman's Bank v. Pratt, 51 Me. ship, nor bind the same, nor transact any business on account of the partnership, nor be employed for that purpose, as agent, attorney, or otherwise." 27. Edwards on Bills and Notes, p. 109. 28. National Bank v. Norton, 1 Hill (N. Y.), 572; Mitchell v. Ostrom, 2 Hill (N. Y.), 520. And see also the following cases bearing upon this question: Alabama.- Myatts v. Bell, 41 Ala. 222; Cunningham v. Bragg, 37 Ala. 436. 51 California.- Curry v. White, Illinois. Easter v. Farmers' Nat. Bank, 57 Ill. 215; Smith v. Vanderburgh, 46 Ill. 34. Indiana.- Chase v. Kendall, 6 Ind. 304; Conklin v. Ogborn, 7 Ind. 553; Floyd v. Miller, 61 Ind. 224. Iowa.- Van Valkenburgh v. Bradley, 14 Iowa, 108; Star Wagon Co. v. Swezy, 52 Iowa, 391. Kentucky.- Turnbow v. Broach, 12 Bush, 455; Montague v. Reakert, 6 Bush, 393. Maryland. Hurst v. Hill, 8 Md. 399. Massachusetts.- Parker v. Macomber, 18 Pick. 505; Parham Sewing Machine Co. v. Brock, 113 Mass. 194. Michigan.- Matteson v. Nathanson, 38 Mich. 377; Jenness v. Carleton, 40 Mich. 343; Smith v. Sheldon, 35 Mich. 42. Minnesota.- Bryant v. Lord, 19 Minn. 396. Mississippi.- Brown v. Broach, 52 Miss. 536; Maxey v. Strong, 53 Miss. 280. New York.- Lusk v. Smith, 8 Barb. (N. Y.) 570; Morris v. Perry, 11 Hun, 33; Smith v. Weston, 159 N. Y. 194, 54 N. E. 38; Bank of Monongahela Valley v. Weston, 159 N. Y. 201, 54 N. E. 40; Second Nat. Bank of Elmira v. Weston, 161 N. Y. 520, 55 N. E. 1080. Pennsylvania.- McCowin v. Cubbison, 72 Pa. St. 358; Lloyd v. Thomas, 79 Pa. St. 68; Heberton v. Jepherson, 10 Pa. St. 124; Robinson v. Taylor, 4 Pa. St. 242. Tennessee. Fowler v. Richardson, 3 Sneed, 508; Hatton v. Stewart, 2 Lea, 233. dissolution is a revocation of all authority to act for, and contract in the name of, the company. But notwithstanding a valid dissolution of a partnership by an agreement between the parties, still, as between the firm and the world, the authority of the expartners to bind each other by bills, notes, or other contracts, within the scope of the former partnership, continues until a sufficient notice of the dissolution be duly given.29 Such a notice may be either express or implied. A partnership continues, notwithstanding formal dissolution, as to third persons acting in good faith, who have had neither actual nor constructive notice that the firm has been dissolved.30 The rule is that as to all persons who have had actual dealings with the firm, actual notice of the dissolution must be given ;31 as to all who have had no dealings with the firm, but knew of its existence, though not of its dissolution, it is necessary that notice should be published by advertisement in a newspaper.32 And it has been held that mere notice to two prominent commercial agencies is insufficient to bind a creditor who was not a subscriber thereto, because such agencies circulate the information contained in their books and report among their customers only, who are required to treat it in a confidential manner. The dissolution once effected, Texas.- Seward v. L'Estrange, 36 Tex. 295; White v. Tudor, 24 Tex. 639; Haddock v. Crocheron, 32 Tex. 276. West Virginia.- Miller v. Miller, 8 W. Va. 542. Wisconsin.- Lange v. Kennedy, 20 Wis. 279. 31. Vernon v. Manhattan Co., 17 Wend. (N. Y.) 524; National Bank v. Norton, 1 Hill (N. Y.), 572; Buffalo City Bank v. Howard, 35 N. Y. 500. 33 way give actual notice of the dissolution to those with whom the house has had dealings. The retiring partner knows or has means of knowing who these persons are; and inasmuch as he has, by transacting business with them, obtained a credit for the firm on the joint responsibility of all its 29. Byles on Bills (16th ed.), p. 61. members, justice requires that the 30. Bank of Monongahela Valley v. severance of the united credit should Weston, 159 N. Y. 202, 211, 54 N. E. be made as notorious as was the union 40. itself. This is accomplished by the rule that persons having had particular dealings with the firm should have particular notice of the dissolution or alteration; but that a general notice, by advertisement or otherwise, 32. City Bank of Brooklyn v. Mc- should be sufficient for those who Chesny, 20 N. Y. 240; Austin v. Hol- know the firm only by general repuland, 69 N. Y. 571; National Shoe & tation. This is no more than saying, Leather Co. v. Herz, 89 N. Y. 629; that a credit already raised on the Elmira Iron & Steel Rolling Mill Co. faith of the partnership is presumed v. Harris, 124 N. Y. 280, 26 N. E. 541. to be continued on the same footing, 33. Bank of Monongahela Valley v. until a special notice of a change is Weston, 159 N. Y. 202, 54 N. E. 40. given. Consequently, a note given in Proper notice of dissolution.-Ed- the partnership name, the next day wards on Bills and Notes (p. 116), after a dissolution, binds the former says: The safest course undoubtedly partners, and it is no ground of obis to send a circular, or in some other jection to their liability, that there 34 and a proper notice having been given, while it may be presumed, unless there be an agreement to the contrary, that each partner still has authority to dispose of the partnership property, and to collect, adjust, and pay debts, and give proper acquittances therefor, there is no presumption that a partner may make new promises or engagements in the name of the firm, even though they only change without increasing the prior obligation of the partners. And the fact that upon dissolution one of the partners is deputized to close up the affairs of the partnership, and to sign the firm's name in liquidation does not authorize him to create new obligations or to bind the firm by a bill or note.3 Such liquidating partner cannot give a negotiable instrument in payment of an existing debt or for money borrowed to pay debts.36 Nor can he sign commercial paper for the purpose of renewing outstanding paper bearing the firm's name.37 A different rule exists in Pennsylvania where it is held that the liquidating partner, but no other, may borrow on the credit of the firm for the purpose of paying its debts, and give a note for the purpose, the loan not being regarded 35 has not been time to give or publish ness of the partnership. 34. Bell v. Morrison, 1 Pet. (U. S.) 351, 367, 374. 35. Powers of liquidating partner. - Palmer V. Dodge, 4 Ohio St. 21, 62 Am. Dec. 271. It was held in this case that no power to bind a copartner to new engagements, contracts, or promises can be inferred from an authority given by one partner to the other, to settle, liquidate, and close up the affairs of the partnership. A liquidating partner has no power to extend the time for the payment of obligations of the firm, to increase their amounts, or to obligate the firm to persons to whom it was not bound at the dissolution of the partnership. A surety on a promissory note given by one of the members of a dissolved partnership, in the name of the firm, and to renew a debt of such partnership, must look to such member alone for indemnity, as he cannot hold the other for it. In the case of Parker v. McComber, 18 Pick. (Mass.) 509, this same question came before the Supreme Court of Massachusetts; there a firm, consisting of three partners, was dissolved; two of them were authorized to collect the debts and settle the busi They indorsed a note due to the firm at the time it was dissolved. The question was whether the other partner was liable as indorser of the note. For the plaintiff it was insisted that the authority given to the two other partners raised the inference that it was intended to give them power to negotiate the note then in question. The court said in reply: "We cannot perceive the correctness of this inference. Were it sound, each partner must be presumed to know of all the negotiable bills and drafts due to the firm and unindorsed at the time of the dissolution. He must be presumed to have intended to give authority to negotiate them in the name of the firm." See also Perrin v. Keene, 19 Me. 357; Darling v. Marsh, 22 Me. 184. 36. Bank of Montreal v. Page, 98 Ill. 109; Smith v. Shelden, 35 Mich. 42, 24 Am. Rep. 529; Fellows v. Wyman, 33 N. H. 351; Mauney v. Coit, 80 N. C. 300, 30 Am. Rep. 80; Conrad v. Buck, 21 W. Va. 396. 37. Myatts v. Bell, 41 Ala. 222; First Nat. Bank v. Ells, 68 Ga. 192; Van Valkenburg v. Bradley, 14 Iowa, 108; Haddock v. Crocheron, 32 Tex. 276, 5 Am. Rep. 244; Parker v. Cousins, 2 Gratt. (Va.) 372, 44 Am. Dec. 388. |