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 afterward becoming bankrupt, the plaintiff proved and received a dividend under the commission in respect of the bills. It was proved 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 moneys 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.'

periodically by the other proprietors. It was urged at the trial of this action, that the custom was well known to all coach-makers; 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.

'Hiard v. Bigg, Man. N. P. Ind. 220; Gow Partn. 150. On this subject, see Dwight v. Brewster, 1 Pick. (Mass.) 50; Cobb v. Abbott, 14 id. 289; Dow v. Sayward 12 N. H. 276; Bostwick v. Champion, 11 Wend. (N. Y.)571; Wetmore v. Baker, 9 Johns. (N. Y.) 307.

SEC. 502.

SEC. 503.

Bill invalid in hand of payee may be valid in hands of bona fide holder.

Other securities, rule as to

SEC. 505.

SEC. 506.

Where money is advanced on obligation of the firm..

What is evidence of collusion.

SEC. 507. Rule in Barber v. Backhouse.

SEC. 500. It is evident, from the very nature of a separate creditor's contract, that, prima 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, in these cases, constitutes fraud, and what a bona fide transaction.

What constitutes fraud in.

SEC. 501. 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,' the plaintiff brought his action against Sharpe and 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, it appeared that Sansom and Evans were partners in alum works, under the firm of Sansom & Co., and that Sansom was also a partner in the Droitwich Patent Salt Company. Sansom being indebted to the company in £300, and being called upon to pay, gave the company a note of Sausom & Co., at two months, for £310. This note was afterward indorsed by the company to the plaintiff, who brought his action. upon it against Sansom and Evans. At the trial of the action, it did not appear why the plaintiff sued the makers whom he did not know,

12 Esp. 524. It seems, however, that the defrauded partner cannot be relieved at law, if in the situation of plaintiff. 22 B. & Ad. 291. In this case three of the judges, dissentiente Parke, J., held that in all cases where, from defect of consideration, the original payee cannot

recover on the note or bill, the indorsee, to maintain an action against the maker or acceptor, must prove consideration given by himself or a prior indorsee ; and that, although he may have had no notice that such proof will be called

for.

rather than the indorsers whom he did know, and who were a solvent and well-known partnership; nor did he show that the note had been indorsed to him for any valuable consideration. Under these circum

stances, the Court of King's Bench held clearly, not only that the Droitwich Company could not have maintained an action on the note against Evans (because it must be taken to have been given to them by Sansom in fraud of Evans), but also that the indorsee was not entitled to recover in this action, he having omitted to show, as he was bound to do under the circumstances, that the note had been indorsed to him for valuable consideration.

Bill invalid as to payee valid in hands of innocent holder.

SEC. 502. However, a bill or note negotiated by one partner, which is not binding on the firm in the first instance, by reason of a collusive contract between that partner and the separate creditor who takes the security, may, nevertheless, afterward become binding, in the hands of an indorsee, for valuable consideration.'

A Scotch case may here be noticed, in which the partnership was absolved from liability in consequence of the collusion of a separate creditor with one of the partners. Miller lent to Sturrock & Small 5007. on their joint acceptance. Sturrock having become bankrupt, Miller received a dividend out of his estate, which reduced the debt to 861. 78. 7d. For this sum Small granted to Miller an acceptance, subscribed by the firm of James Ivory & Co., of which firm Small was a partner. The firm of Ivory & Co. having become bankrupt, with the exception of Douglas, one of the partners, Douglas, was sued by Miller. But the Court of Session held that the suit was not maintainable, and adhered to the opinion of the Lord Ordinary, who tried the cause, and who held that, under the circumstances, the acceptance of that company was not given bona fide.'

In the preceding cases of Arden v. Sharpe, and Blair Miller v. Douglas, there were other circumstances to charge the creditor with fraud, independently of the bare taking of partnership securities. But a series of decisions has shown that, if the separate creditor of a partner take a partnership security toward the discharge of his separate debt, that fact alone, unless explained by particular circumstan

benefit, or in fraud of the rights of the partnership, if the third party had knowledge of these facts. He would

under such circumstances stand in no better position than the payee. Taylor v. Hillyer, 3 Black f. (Ind.) 443; Hickman v. Rineking, 6 id. 388; Robinson v. Aldridge, 34 Miss. 352; Hickman v. Kunkle, 27 Mo. 401; Burleigh v. Parton, 21 Tex. 585; Maudlin v. Branch Bk., 2 Ala. 502; Stainer v. Tyson, 2 Hill (N. Y.), 279; Miller v. Manice, 6 id. 115; Baird v. Cochran, 4 S. & R. (Penn.) 397. But this doctrine has no application to the bona fide holder of the negotiable paper of a firm, aad especially would the law imply authority in a partner to execute such paper in the name of the firm where such authority is necessary for the successful prosecution of the business, or according to the usage of such partnerships; or according to the course of trade of similar partnerships. Walworth v. Henderson, 9 La. An. 339; Gray v. Ward, 18 Ill. 32; Newell v. Smith, 23 Ga. 170; Dow v. Phillips, 24 Ill. 249; Waldo Bank v. Lumbert, 16 Me. 416; Coursing v. Baker, 7 Har. & J. (Md.) 28; Bascom v. Young, 7 Mo. 1; Potter v. Dillon, id. 228; Partin v. Leiterick, 6 Jones' (N. C.) Eq. 341; Monroe v. Cooper, 5 Pick. (Mass.)

412; Livingston v. Rosevelt, 4 Johns. (N.Y.)25; Mechanics' Bank v. Foster, 19 Abb. (N.Y.) Pr. 47; Bacon v. Hutchins, 5 Bush (Ky.), 595. And a partner has no authority to indorse a note in the name of a firm for the accommodation of a third person without the consent of his copartners, and the latter would not be bound by such an indorsement to one who takes the note with knowledge of the facts. And it has recently been held that the burden of proof in such a case would rest upon the holder to show the authority to indorse the note in this manner. Hendrie v. Berkowitz, 37 Cal. 113. But one who takes in satisfaction of a note against a member of a firm, the note of a third party, running to such member, but in fact the property of the firm, is a bona fide holder for value. Kellogg v. Fancher, 23 Wis. 21. And although, as a general rule, a member of a dissolved partnership cannot make a note for the firm, or execute a contract in the name of the firm, still if a note is made under such circumstances, and the act is subsequently ratified by the other, it will then be binding upon the firm. Carter v. Pomeroy, 30 Ind. 438.

Blair Miller v. Douglas, Fac. Coll. No. 41, p. 154.