declared to be well settled that a general partner in a trading business may borrow money for the benefit of the firm and execute notes or drafts therefor, unless restrained by the articles of copartnership, of which the lender has notice, and that where money is borrowed by the partner of a trading firm in the name of the firm, and a note is executed therefor, such note is prima facie the obligation of the partnership, and if the other partner seeks to avoid its payment the burden of proof lies upon him to show that the note was given in a matter not relating to the partnership business, and that also with the knowledge of the holder of the note.36 And this rule applies in the case of an accommodation note which has been given by one partner in the firm name.37 So, if a promissory note executed in the name of the partnership is delivered to the payee by a member of the firm, it is enforceable in the hands of a bona fide purchaser, notwithstanding that the member of the firm who signed the firm's name to the paper had no authority to do so, but signed the firm's name in violation of the partnership contract.3 So, also, a partnership can be held liable on a promissory note of the partnership, executed by one member of the firm for his personal debt, if the note has passed into the hands of a bona fide purchaser before maturity, and without notice that it was issued for an individual debt of one of its members.39 It is a question for the jury Sad. 398; Potts v. Taylor, 140 Pa. St. 601, 21 Atl. 443; Parker v. Burgess, 5 R. I. 277; Moore v. Williams, 26 Tex. Civ. App. 142, 62 S. W. 977; Roth v. Colvin, 32 Vt. 125; Kellogg v. Fancher, 23 Wis. 21, 99 Am. Dec. 96; Rollins v. Russell, 46 Wis. 594, 1 N. W. 277; Sullivan v. Sullivan, 122 Wis. 326, 99 N. W. 1022; Baker v. Charlton, Peake 80; Swan v. Steele, 7 East 209; Jacaud v. French, 12 East 317; Ridley v. Taylor, 13 East 175. But compare Lerch Hdw. Co. v. First Nat. Bank (Pa.), 5 Atl. 778; Cooper v. McClurkan, 22 Pa. St. 80; King v. Faber, 22 Pa. St. 21; Tanner v. Hall, 1 Pa. St. 417. "The indorsement and negotiation of promissory notes and bills is within the scope of the partnership business; and as to everything within 38 the scope of that business, every partner by virtue of the partnership is clothed with the power to act for the firm-to use its name-and in that name to do every act the firm collectively might do, whether it be to make or indorse notes or bills." Windham County Bank v. Kendall, 7 R. Ï. 77, 84. 36 Deitz v. Regnier, 27 Kans. 94, 105. 37 Catskill Bank v. Stall, 15 Wend. (N. Y.) 364; Austin v. Vandermark, 4 Hill (N. Y.) 259; Chemung Canal Bank v. Bradner, 44 N. Y. 680. See also, Leach v. Bank, 2 Ind. 488; Waldo Bank v. Lumbert, 16 Maine 416. 38 Davis v. Howell Cotton Co., 101 Ga. 128, 28 S. E. 612. 39 Loeb v. Mellinger, 12 Pa. Super. Ct. 592, 17 Lanc. L. Rev. 129. So where the evidence is conflicting whether the act of a partner was within the scope of his authority or whether there was a subsequent ratification of such act by the firm.40 If one of several partners obtains a loan of money for his individual use, by giving the note or check of the firm, but within their authority, the other partners will nevertheless be bound thereby unless there be something in the transaction to induce the lender to suspect that the money is not borrowed for their benefit or the circumstances were such as to put him upon inquiry.41 And where a note was made payable to an individual partner for partnership property, it is decided that the right of a transferee, who is a bona fide holder, to recover can not be defeated by the fact that such partner transferred the note in satisfaction of his individual debt, and in fraud of the other partner's rights, except there be evidence of a participation by the transferee in the fraud or misconduct of such partner.12 where a partnership was formed for the purpose of, and was engaged in, selling and buying, an instruction in an action upon a note executed by one of the partners in the firm name that if the other partner did not authorize the note to be so executed or did not subsequently ratify it, he was not bound, is erroneous.43 And though the name of a firm be affixed by one of the members to negotiable paper for the accommodation of a third person, if the note is discounted by a bank without knowledge of such fact, the other members of the firm are liable, though the note is given out of the course of the partnership business, and without their knowledge or consent. Again, where a partnership firm is pledged by the acceptance of a bill of exchange by one partner in the name of the firm, the partnership, of whomsoever it may consist, whether they are named or not, and whether the partners are known or secret partners, will be bound, unless the title of the person who seeks to charge them can be impeached or he be shown to have knowledge of the misapplication by such partner of the bill or its proceeds.45 40 Cassidy v. Saline County Bank, 14 Okla. 532, 78 Pac. 324. 41 Wagner v. Freschl, 56 N. H. 495; Miller v. Manice, 6 Hill (N. Y.) 114. 42 Nichols v. Sober, 38 Mich. 678. 43 Carter v. Steele, 83 Mo. App. 211. 44 Waldo Bank v. Lumbert, 16 Maine 416; Catskill Bank v. Stall, 15 Wend. (N. Y.) 364. 45 Wintle v. Crowther, 1 Cromp & J. 316. § 176. Want of authority of partner-Qualifications and limitations of rule.-Where the partnership is not in the trade of merchandise, want of authority may be shown in an action on a firm note given by one of the partners in a transaction' which has no connection with the business of the joint concern.46 The general rule as to the authority of a partner to bind his co-partner by the execution or indorsement of paper in the firm name does not control in the case of a partnership of the non-trading class, which holds itself out as engaged in an employment or occupation which does not necessarily or fittingly embrace buying and selling, or a pledging of the firm's credit, unless it be shown to be the common usage, or the business is of a character to make the power essential to a proper transaction thereof, and in such cases the burden is held to be on the holder of such paper to prove its validity against the firm.47 And want of authority may be shown against the payee taking a note with full knowledge of the fact that the note was not given in connection with the partnership business. 48 So this is a good defense against one to whom a firm note is given by a partner for the individual debt of the latter.49 And where a partner borrowed money without his copartner's knowledge, which money was with the lender's knowledge borrowed and used by such partner for the purpose of speculating in "cotton futures," and the firm note was given for such money, the other partner signing it in the belief that it was given for a lawful partnership debt, it was held that the lender could not recover thereon as against such partner.50 And 46 Cocke v. Branch Bank, 3 Ala. 175; Gray v. Ward, 18 Ill. 32. 47 Marsh v. Whecler, 77 Conn. 449, 59 Atl. 410, 107 Am. St. 40; Schele v. Wagner, 163 Ind. 20, 71 N. E. 127; citing Dowling v. National Exch. Bank, 145 U. S. 512, 36 L. ed. 795, 12 Sup. Ct. 928; Schellenbeck v. Studebaker, 13 Ind. App. 437, 41 N. E. 845, 55 Am. St. 240. Commercial or trading partnerships "are those whose conduct so involves buying and selling whether incidentally or otherwise, that it naturally comprehends the employment of capital, credit and the usual instrumentalities of trade and frequent con tact with the commercial world in dealings which in their character and incidents are like those of trades generally." Marsh v. Wheeler, 77 Conn. 449, 454, 59 Atl. 410, 107 Am. St. 40. 48 Benson v. Dublin Warehouse Co., 99 Ga. 303, 25 S. E. 645; Sherwood v. Snow, 46 Iowa 481, 26 Am. Rep. 155; Rice v. Doane, 164 Mass. 136, 41 N. E. 126; Roberts v. Pepple, 55 Mich. 367, 21 N. W. 319. 49 Lanier v. McCabe, 2 Fla. 32, 48 Am. Rep. 173; Taylor v. Hillyer, 3 Blackf. (Ind.) 433, 26 Am. Dec. 430. 50 Benson v. Dublin Warehouse Co., 99 Ga. 303, 25 S. E. 645. 51 a holder with notice of the want of authority is subject to this defense. So where a note is executed to the order of a firm by one of the partners, who indorses the firm name thereon and delivers it to a bank for discount, with a direction that the proceeds be placed to his personal credit, this is declared to be a sufficient indication of the nature of the transaction to make it the duty of the bank, which discounts it, to inquire into his authority to use the firm name for the occasion unless there are circumstances from which the authority can be implied.52 And it has been declared that "it is not necessary to secure a person giving credit to a partnership, that he should know or believe that each individual of the firm would approve the transaction; but it is necessary that he. should not know that the debt attempted to be secured was not the debt of the partnership, or the property sold was not to inure to their benefit.53 But where a note is made payable to one member of a partnership, upon the purchase of partnership property, and the name of the partnership is different from that of the payee of the note, it is decided that the legal title does not pass by an indorsement by another one of the partners in the name of the payee, there being nothing whatever on the face of the note to indicate the connection of any partnership with it.54 § 177. Note between partner and firm.-Though a partner can not sue the firm of which he is a member or be sued by it, yet if a note is executed by him to the firm or by the firm to him, a subsequent indorsee, who is not a member of the firm, may recover in an action against it on the note.55 The reason underlying this is that though a party can not sue himself as promisor, yet "this is 51 Livingston v. Roosevelt, 4 Johns. (N. Y.) 251, 4 Am. Dec. 273; Gansevoort v. Williams, 14 Wend. (N. Y.) 133; Weed v. Richardson, 19 N. Car. 535; Stockdale v. Keyes, 79 Pa. St. 251; Brown v. Pettit, 178 Pa. St. 17, 35 Atl. 865, 34 L. R. A. 723, 56 Am. St. 742; Wintle v. Crowther, 1 Cromp. & J. 316. 52 Brown v. Pettit, 178 Pa. St. 17, 35 Atl. 865, 34 L. R. A. 723, 56 Am. St. 742; Tanner v. Hall, 1 Pa. 417. 53 Huntington v. Lyman, 1 Chip. D. (Vt.) 438, 448, 12 Am. Dec. 716. 54 McCauley v. Gordon, 64 Ga. 221, 37 Am. Rep. 68. 55 Kipp v. McChesney, 66 Ill. 460; Hapgood v. Watson, 65 Maine 510; Thayer v. Buffum, 52 Mass. (11 Metc.) 398; Young v. Chew, 9 Mo. App. 387; Ormsbee v. Kidder, 48 Vt. 361. Compare Davis v. Merrill, 51 Mich. 480, 16 N. W. 864 a difficulty attending the remedy only, not the right, and when the note is indorsed by those having the right to indorse it, to one against whom there is no such exception, whereby he acquires a legal interest and right to sue in his own name, the difficulty vanishes. It is like a note payable to one's own order, which, though till indorsement is not a good legal contract, becomes such by the indorsement. 56 $178. Paper given in violation of articles of partnership.— The fact that a note was given in violation of the articles of partnership is no defense as against a bona fide holder for value and before maturity.57 And a promise to honor drafts drawn by a certain person does not include drafts drawn by a company of which such person is a member.58 "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. * * Any restriction which, by agreement among the partners, is attempted to be enforced 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."59 So, where a note was given by one of the partners in a firm name to pay certain partnership expenses, and signed by him as agent, it was decided in an action thereon by a bona fide holder, who had discounted the same, that the partner had the power to make the note in suit and thereby bind his copartners, and that the restriction on his authority contained in an agreement between the partners did not affect the plaintiff, as it was not communicated to him.60 So the bona fide holder, for a valuable consideration, with 56 Pitcher v. Barrows, 17 Pick. (34 Mass.) 361, 363, 28 Am. Dec. 306. 57 Winship v. Bank, 5 Pet. (U. S.) 529, 8 L. ed. 216; Michigan Bank v. Eldred, 9 Wall. (U. S.) 544, 19 L. ed. 763; Cottam v. Smith, 27 La. Ann. 128; Hogg v. Skeen, 34 L. J. C. P. 153. See Sandilands v. Marsh, 2 B. & A. 673. "If by an agreement inter se a different rule were established by commercial partners, it would be with out effect against third parties unless 58 First Nat. Bank v. Black Hills 59 Kimbro v. Bullitt, 22 How. (U. S.) 256, 266, 16 L. ed. 313. 60 National Union Bank v. Landon, 66 Barb. (N. Y.) 189. |