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true nature, however, of the transaction is simply this :—Bolton paid into his banker's hands bills on his general account, to be converted into cash, in order to increase his credit with his bankers. These bills, at least the bills in question, were remitted to the house in London on the general account of the banking houses. We cannot think that this was a misapplication, or that the confidence of Mr. Bolton was abused. It may be asked, assuming that Mr. Bolton considered both houses to be in full credit, was it not the very thing he meant ?
Was not this the probable mode by which the banking house would be enabled to provide for the payment of Mr. Bolton's acceptances at the house of Forbes & Gregory? Then, what effect can the privity and participation of Forbes & Gregory in the agreement between Bolton and the banking house have on this transaction, which, as between the two houses, undoubtedly changed the property in these bills? If, up to the moment of the bankruptcy, nothing affected the right of Forbes & Gregory, to hold these bills on their separate account, the right must vest in the assignees of Forbes & Gregory, with nothing to affect it; the assignees of Forbes & Gregory are bound to admit that Forbes & Gregory knew that Mr. Bolton's object, and that the object of the partnershịp at Liverpool, was, that by means of those bills the acceptances were to be provided for. But how were these bills to operate as means? They were to be dealt with as the banking house thought fit to deal with them to be negotiated if they thought fit, to be discounted at Liverpool if they pleased, or remitted to whom they pleased, and were necessarily to be converted into money, in order to be means effectual to the purpose even of the parties who deposited them. If, then, Forbes & Gregory were parties capable of acquiring a property in these bills, as capable as any third party, and did acquire it without reproach, and in truth in pursuance of that agreement upon which they were delivered to the banking house, why are not Forbes & Gregory to be considered as third persons, with whom these bills have been negotiated ?"
In the preceding case, the creditor himself proposed to be bound by the arrangement regarding the two houses; there was likewise a due consideration for rendering the contract several. But a mere acquiescence in the terms proposed by a firm cannot be binding on a creditor; because this is a mere nudum pactum; and, à fortiori, it will not bind him where he reserves to himself the present securities which he holds against the firm. Hence, also, an agreement previous to a dissolution of partner. ship, that one partner shall undertake the payment of all debts, is not binding on third persons, though privy to it, unless they are also parties to it; and even in the latter case, it seems doubtful whether such an agreement would amount to a release or covenant not to sue (a).
The question, whether or not a creditor has assented to be bound by the private arrangements of the firm, most commonly arises in cases where, upon the retirement of one or more partners, the others undertake to receive the credits and pay the debts of the firm. These cases will be noticed in a subsequent chapter (6).
We have already had occasion to observe, that where, previous to entering into a contract with one of several partners, the creditor has had notice of the want of power in such individual partner to bind the firm, the creditor will be bound by this arrangement, and cannot sue the partnership on such contract (c).
IV. It has been observed, that by the custom of a particular trade, the firm may be exempt from liability on account of contracts entered into by its individual members. Instances, however, of this kind are of rare occurrence; for although it has been held that partnerships of a peculiar nature are not liable on account of bills drawn by their respective members (d), yet perhaps there is no ordinary trade, except that of coach-proprietors, in which the firm shall not be liable in respect of goods supplied or repairs done by the order of one partner, for the use of the concern. It happens, however, that in the particular trade we have mentioned, certain contracts made by one partner for the benefit of the proprietors at large, have nevertheless been held to be binding upon him only with whom they were made. Thus, if several persons horse, with horses, their several property, the several stages of a coach, in the general profits of which they are partners, they are not all jointly liable for goods furnished to one partner, for the use of the horses drawing the coach
(a) Lodge v. Dicas, 5 Barn. & Ald. 611.
(6) Post, chap. 3, sect. 3.
(c) Ante, p. 261.
along his part of the road. In Barton v. Hanson (a), an action was brought to recover the price of some hay and corn furnished by the plaintiff to the defendants, who were co-proprietors with others of a stage-coach, running from Hastings to London, but who horsed the coach only in the Lamberhurst quarter; and the jury found a verdict for the plaintiff. The Court of Common Pleas, however, ordered the verdict to be set aside, and granted a new trial; and upon its being suggested, that the entire partnership had the benefit of the goods supplied, and, upon every adjustment of the partnership account, paid for them as part of their general outgoings, the Court observed, that the utmost that could be said in favour of the plaintiff was, that he let the horses to the whole concern for this stage; but if his argument was founded on the ultimate mode of making up the accounts between the partners, he could at that time proceed no further; for that fact did not appear.
But, if a coachmaker let coaches for the use of the proprietors of a stage-coach, this is a contract with the whole firm, although the actual agreement be made with one only, whose particular business it is to hire the coaches. In the case of Arthur ý. Dale(b), it appeared that Dale, Thomas, and Burford were proprietors of a stage-coach, running from London to Stroudwater. Dale was the London proprietor; and it was his business to hire the coaches for the journey, for which there was a separate account between him and the other proprietors. The distance from London to Stroudwater is one hundred and seven miles. Thomas horsed the coach for the space of fifteen miles only, and he was coachman between London and Abingdon. Dale contracted with the plaintiff Arthur, who was a coachmaker, for the hire of the coaches; and in the course of these transactions, Arthur took his separate bills for the amount. Dale afterwards becoming bankrupt, the plaintiff proved and received a dividend under the commission, in respect of the bills. It was proved,
(a) 2 Taunt. 49 ; 2 Camp. 97.
(6) M. T. 1828. It appears to be the custom amongst stage-coach proprietors, for the town proprietors to make a monthy account of the hire of carriages, or mileage, which account is discharged periodically by the other proprietors. It was urged
at the trial of this action, that the custom was well known to all coachmakers; and that, therefore, the plaintiff on not being paid regularly by the defendant Dale, ought to have given notice of this circumstance to the other defendant.
that before the bankruptcy the plaintiff had, in various conversations with Thomas, asserted that he had not been paid the amount of his bills for mileage. Some time after the bankruptcy of Dale, the plaintiff brought his action against all the partners, to recover the residue of the money due to him. Dale having pleaded his bankruptcy, and Burford having let judgment go by default, the Court of Common Pleas held that Thomas was liable for the whole amount unpaid ; Best, C. J., observing, that, as there was no proof that the plaintiff had taken the bills in question as a satisfaction of all claims against the defendants, nor any evidence of collusion between the plaintiff and Dale, the contract being one of partnership, the defendant Thomas was clearly liable for the monies sought to be recovered.
It has been decided, however, that if several persons are partners in a coach concern, but one, by agreement, provides the coaches at a certain rate per mile, he alone is responsible for repairs done to the coach by a person cognizant of this arrangement, although the names of all the partners appear on the vehicle (a).
Of Exemptions where the Contract is several in Fact.
It is evident, from the very nature of a separate creditor's contract, that, primâ facie, he can have no claim against the firm. But such creditor frequently obtains from his debtor the bills, notes, or effects of the partnership, as a security for his separate debt. A question then arises - Did he obtain these securities fraudulently or bona fide? If he obtained them fraudulently, he is remitted to his several contract, and cannot recover against the firm. If, on the other hand, he obtained them bona fide, a new contract arises, under which he can sue the firm. It therefore becomes necessary to determine what,
(a) Hiard v. Bigg, Man. N. P. Ind. 220; Gow, Partn, 150.
in these cases, constitutes fraud, and what a bona fide transaction.
I. 1. First, then, what constitutes fraud in a separate creditor holding partnership securities, so as to remit him to his several contract, and bar him of any remedy against the firm ?
Where there is clear evidence of collusion between the partner and his separate creditor, independently of the transfer to the latter of partnership securities, it is hardly necessary to say, that the firm are not liable to the separate creditor in respect of his contract. In the case of Arden v. Sharpe (a), the plaintiff brought his action against Sharpe & Gilson, partners, on a bill of exchange, under the following circumstances :-It appeared, that on the day on which the bill bore date, Gilson, one of the defendants, brought the bill in question to the plaintiff, and requested him to discount it; the plaintiff said he could not do it himself; upon which Gilson answered, he could get it done for him, but wished the business to be kept a secret from his partner, Mr. Sharpe; to which the plaintiff assented, and took his bill. The witness then proved, that the indorsement,
Sharpe & Gilson," was in the handwriting of Gilson. On this evidence the plaintiff rested his case; but Lord Kenyon nonsuited the plaintiff, on the ground that the transaction indicated that the money was for that partner's own use, and not raised on the partnership account; and his Lordship observed, that the party who brought the action was himself the person who took the bill, with the indorsement by one partner only, and was informed that the transaction was to be concealed from the other.
And where a partnership bill or note is originally negotiated in fraud of the firm, it will not be binding on the firm, even in the hands of a subsequent indorsee, unless he prove himself an indorsee for value; it being a rule, that where a note or acceptance has been obtained by felony, fraud, or duress, the indorsee must prove the consideration for which he took it. In Heath v. Sansom (6), it appeared, that Sansom and Evans
(a) 2 Esp. 524. It seems, how- 5, sect. 1. ever, that the defrauded partner (6) 2 B. & Ad. 291. In this case cannot be relieved at law, if in the three of the Judges, dissentiente situation of plaintiff. See post, chap. Parke, J., held, that in all cases