SECTION I.

Of Liabilities under Loans, Purchases, Sales, and Pledges effected in the Name of the Firm.

PERHAPS the most remarkable instances of partnership liability are those, where loans, purchases, sales, or pledges are effected by one partner on the partnership account. Such transactions, if bond fide on the part of the creditor, are uniformly binding on the firm.

Thus, money lent to one partner for his own expenses while engaged in the partnership business, is a partnership debt (a). There are also other cases, in which it should seem that money lent to one partner in the partnership name, and applied to partnership purposes, will, even at law, be considered a debt due from the partnership, although the money may not be the subject of written securities. Thus, where an action was brought against partners on certain bills of exchange, which had been indorsed by one partner, and it was doubtful whether the bills could be recovered upon as genuine bills, Bayley, B., asked whether, if the case failed on the bills, the plaintiff could not recover the consideration; and whether, if a partner borrows money in the partnership name, and applies it to partnership purposes, the party lending the money is to act at his peril; and the learned Judge seemed to consider it as clear that, in such case, the lender is not bound to shew that the money has been applied to partnership purposes (b).

II. Again, in a very early case, it was admitted that the firm were liable for goods purchased by one partner (c).

(a) Rothwell v. Humphreys, 1 Esp. 406.

(b) Thicknesse v. Bromilow, 2 C. & J. 431. The difference, however, seems to be considerable between the case which was before the learned Judge, in which a negotiable security, though of questionable validity, had been given, and that where no security beyond a

mere acknowledgment is taken by the lender. In the latter case, it would depend on the special circumstances whether the firm would be bound by the act of their copartSee post, book 3, chap. 2, sect. 2. But see Etheridge v. Binney, 9 Pickering, 272.

ner.

(c) Hyatt v. Hare, Comb. 383.

Upon the same principles, if one partner, having purchased goods for the partnership, become a bankrupt, and his vendor (without notice of the partnership) stop the goods in transitu, such stoppage will be good against the whole firm, although they may have paid the price of the goods to the bankrupt partner. In the case of Salomons v. Nissen (a), one Hague bought 705 pigs of lead of the defendants at Liverpool, and ordered them to be shipped to Garvey & Co. at Rouen. The lead was accordingly shipped, and the bill of lading was indorsed by the defendants in blank and sent to Hague. A few days afterwards, the plaintiff gave Hague his acceptances on account of the lead to a large amount; which acceptances were paid to the indorsees when due. Soon after the acceptances were given, the following agreement was made between Hague and the plaintiff: "That the said J. Salomons shall pay for and send in his name to Messrs. Garvey & Co., merchants at Rouen, a cargo consisting of 705 pigs of lead, to be shipped at &c., to be sold by Messrs. G. & Co., at the best price, &c., and the net proceeds to be remitted to the said J. Salomons. And it is hereby agreed, that the profit and loss arising from the said cargo of lead shall be equally divided between the said E. Hague and J. Salomons." The vessel sailed with the lead for Rouen, but was forced back by stress of weather, and Hague having become a bankrupt, and the defendants not having received the price of the goods, stopped them while on board the ship in England, and took them away. The lead not being paid for by Hague or any other person, and the defendants having refused to deliver it up, the plaintiff brought trover against them, but failed in his suit. Ashurst, J.-" It appears, upon the contract, that the plaintiff made himself a complete partner with Hague, quoad this transaction, and that he also made himself the paymaster; therefore he put himself in the place of the original consignee, and must take the bill of lading subject to the same rights. That being the case, it follows, as a necessary consequence, that the defendant had a right to stop the goods in transitu.”

III. In a very early case, "it was agreed by the Court that the sale of one partner is the sale of them both (b);” and in

(a) 2 T. R. 674.

(b) Lambert's case, Godbolt, 244.

more recent times the power of one partner to bind the firm by simple contract, has been continually recognised in cases of sale of the partnership effects. Lord Mansfield, in a celebrated case (a), decided, that even after an act of bankruptcy committed by one partner, an assignment bond fide of partnership effects by the solvent partner to a creditor of the firm, in payment of his debt, was binding on the firm.

IV. 1. Again, if one partner pledge the partnership effects to a bona fide pledgee, this contract will bind the firm, if made in the ordinary course of business; and it should seem from an early case that such a contract is consistent with the business of a general trading partnership (b). The more modern decisions on the subject have related to particular adventures, and the contract has been held binding on the firm, where the pledgee has had no notice of the joint interest. Thus, in Raba v. Ryland (c), the plaintiffs, Raba and Robles, were merchants at Bourdeaux, and the defendants corn and seed factors in London. The plaintiffs purchased for the joint account of themselves and Caumont, in equal thirds, thirty-three bags of clover seed, and consigned them to Caumont who lived in London. Caumont pledged the seed to the defendants, who had no notice of the joint interest. Caumont became a bankrupt, and the defendants were his creditors to more than the amount of the clover seed. It was held, that the plaintiffs could not maintain trover for the seed; Dallas, J., observing, that Caumont being jointly interested in the seed with the plaintiffs as a partner, was in that character possessed of the entirety; that as a partner he had a clear right to sell; and that so far from its being pretended that the defendants had notice of the partnership, the contrary was admitted.

Another case of the same complexion was decided in the same manner. Tupper & Co. consigned to Smith & Co. a quantity of wool on the joint account of the two houses. T. & Co. were to be interested in one moiety, and S. & Co. in the other moiety. S. & Co. pledged the wool to H. & Co., who

(a) Fox v. Hanbury, Cowp. 445. See post, Book 4, ch. 1. Lord Mansfield, however, chiefly addressed himself to the form of the action.

(b) Metcalfe v. Royal Exch. Ass. Comp., Barnardist. 343.

(c) Gow, N. P. C. 132. See Ex parte Gellar, 1 Rose, 297.

were ignorant that the consignment had been made on the joint account, and to whom, when the bills of lading were indorsed to them, it was represented that the wool was to be sold on the sole account of S. & Co. S. & Co. became bankrupts, and H. & Co. were greatly their creditors. Sir William Grant held, that S. & Co., as partners, had a right to pledge the wool as against Tupper their partner, there being no evidence of collusion and fraud between S. & Co. and H. & Co., and that as against Tupper & Co., H. & Co. had a right to have their claim satisfied out of the proceeds of the cargo (a).

So, where Reid & Co. and Davidson & Co. agreed to be jointly interested in an adventure in cottons, for which R. & Co. paid, and D. & Co. having possession of the cotton pledged it to H., who was ignorant of the interest of R. & Co. therein, and afterwards D. & Co. became bankrupts, and H. being their creditor by more than the value of the cotton, refused to deliver it up; the Court of King's Bench held clearly, on the authority of the two preceding cases, that R. & Co. could not maintain trover against H. for the cotton (b).

But in Ex parte Copeland (c), doubt was entertained by two of the Judges of the Court of Review, as to the power of one partner to pledge the goods of a joint adventure, where the pledgee has notice of the joint interest in the goods. In that case, A., B., and C., being partners in a joint adventure for the shipping and sale of goods, C. found the goods, and A. and B. gave their acceptances to bills drawn upon them by C., which were to be answered by the proceeds of the sales. After the goods had been shipped, C. procured discount of the bills, and pledged the goods as a security to the discounter. Upon the bankruptcy of all three, the discounter applied to prove the amount of the bills. It appeared that A. and B. had ratified the transaction of C., and that there were no joint creditors of the three, and on this ground, the petitioner was permitted to prove; but Erskine, C. J., said, that if the case had rested merely on the letters of C., by which he pledged the goods, he should have thought the case distinguishable from Reid v. Hollinshead, because there the partner who created the lien

(a) Tupper v. Haythorn, Gow,

135.

(b) Reid v. Hollinshead, 4 Barn.

& Cres. 867; 7 Dowl. & Ryl. 444. (c) 2 Mont. & A. 177; 3 Dea. & Chit. 199.

had the possession of the goods, and had an apparent right to deal with them as his own, and the receiver had no notice of the interest of other parties, and therefore it was decided, the partner might pledge the goods, and bind not only his own share, but the whole interest. But here, where those circumstances did not occur, if it depended merely on the letter of C., his Honor would have been inclined to doubt the power of one partner in such a transaction to bind the joint property, it being out of the ordinary course of trade. And Rose, J., appears to have thought, that except under the special circumstances of the case, it would have been difficult for C. to have bound the whole interest of the partners, though he might have incumbered his own interest.

IV. 2. From the preceding cases it appears that partners in a particular adventure, as well as they who are engaged in general trade, have power (at least with certain limitations) to bind their copartners by pledge or sale of the partnership effects. But care must be taken to distinguish a partnership in a particular adventure from a mere joint purchase or sub-purchase made without any view to a joint sale. On the ground of this distinction, the case of Barton v. Williams (a) was decided. There Moon & Co. and Barton & Co. agreed to purchase cottons on their joint account. In pursuance of this agreement, Moon gave orders to his brokers to purchase cottons on his own account, not acquainting them with the joint transaction. The purchases were made, and the goods left in the hands of the brokers, and Barton & Co. paid Moon & Co. for their share. Before the purchases were completed, the interest of Barton & Co. was known to the brokers. In November, 1818, Moon wishing to borrow £20,000, he and the brokers, unknown to Barton, pledged the whole of the cotton warrants to the defendants for that sum, which was advanced by the defendants by means of the discount of bills. In February, 1819, by consent of all parties, the cottons were divided between Barton & Co. and Moon & Co., according to their respective shares. In March following, Moon paid off half the £20,000 by the produce of the cottons, and gave renewed bills for the other half. On that occasion the brokers received the warrants from the

(a) 5 Barn. & Ald. 395. See ante, pp. 11, 257.