Jeremiah Travis.

Commentaries on the law of sales and collateral subjects (Volume 1) online

. (page 88 of 114)
Online LibraryJeremiah TravisCommentaries on the law of sales and collateral subjects (Volume 1) → online text (page 88 of 114)
Font size
QR-code for this ebook

fallacies in the New Brunswick case of
Jones V. Foster, 12 N. B. R. 607, to show
to what ridiculous results the ignoring of
those principles leads on the part of judges
and courts that do not act on them or
misunderstand them.

Nicholson v. Ricketts, 2 El. & El. 497,
is a case which is in marked opposition to
the holding in Jones v. Foster, 12 N. B.
E. 607 ; the facts in several important
particulars being essentially the .same. In
Nicholson v. Kicketts, V. & Co., mer-
chants trading in Buenos Ayres, agreed
with defendants, merchants trading in
London, to carry on joint exchange opera-
tions ; by which V. & Co. were, at Bue-
nos Ayres, to draw bills periodically on
defendants, to sell them there, and to in-
vest the proceeds, keeping defendants out
of cash advances by periodically remitting
to them bills to the same amount on other
firms, to be bought by V. & Co. These
transactions were on the footing of a com-
munity of profit and loss, which, under
the circumstances of the case, constituted
the parties partners with respect to these
transactions. Plaintiffs, a firm at Buenos
Ayres, bought from V. & Co. certain of
the bills drawn by the latter, in their own
name, on defendants, in the course of
these operations. Plaintiffs were induced
to buy the bills by the statement of a
broker, employed by V. & Co. to procure
purchasers, that "the bills were all in
order, he having seen defendants' letter of
credit to V. & Co., in virtue of which the
bills were drawn." Defendants refused to
accept these bills on presentation. V. &
Co. becoming bankrupts, an action was
brought against the defendants as drawers
of the bills. The court held, on a special
case stated, that although the defendants
and V. & Co. were partners, the defend-
ants were not liable on the bills, V. & Co.
having no power to make defendants liable
by their contract, notwithstanding the
agreement that existed between them.
The defendants only became liable on such
bills when they accepted them. A forti-
ori, they would not have been liable if V. &
Co. had made their own promissory notes,

for goods bought by them before and after
the partnership was constituted, without
either express or implied authority, as in
the New Brunswick case.

Hx 2Ktrle The Darlington & Stockton
Banking Co., 11 Jur. n. s. 122, was, in
effect, decided on the principles laid down
by us in the text. It was there held that
although a partner may have full author-
ity to deal with the partnership assets,
and to draw, accept, and indorse bills of
exchange, it is the duty of persons having
dealings with them, when they have rea-
son to believe that a particular act is
being done in the partnership name for
the private benefit of the partner, to ascer-
tain the extent of his authority ; other-
wise the persons so dealing with him must
depend on the right and title of the part-
ner, or on circumstances sufficient to repel
the presumption of fraud. The question
is simply one of authority, as in the case of
an ordinary agency ; the same evidence
being applicable to establish the authority
of the principal in either case. Lord
Westburj' well says : "I take it that the
law on the subject is perfectly clear and
well established. Generally speaking, a
partner has full authority to deal with
the partnership property for partnership
purposes. If the business of the partner-
ship be such as ordinarily requires bills of
exchange, then, unless restrained by agree-
ment, any one partner may draw, accept,
and indorse bills of exchange in the name
of the partnership for partnership pur-
poses. All persons may give credit to his
acts, and his authority, unless they have
notice, or reason to believe, that the thing
done in the partnership name is done for
the private purposes, or on the separate
account of the partner. In that case, oai-
thority, by vii-tue of the partnership con-
tract, ceases ; and the person dealing with
the individual partner is hound to inquire
and ascertain the extent of his authority ;
otherwise he must depend on the right
and title of the partner, or on circum.:
stances sufficient to repel the presumption
of fraud. These principles have been estab-
lished by a long series of decisions, — if,
indeed, decisions were at all required to
show the proper application of the rule of
law, which is so plain and obvious as that
which results from the ordinary law of
agency, as applied to i)artnerships." Ibid.
123. Here, clearly, was simply an ajjpli-
cation of the rules of law as to an agency
being held applicable to partiiershij)s.

The principle is clear tliat a party is
not liable as a ])artner, except he give to
his partner express or implied authority



[book II.

were named among the trustees. C. never acted. W. acted for
six weeks and then resigned. The other trustees subsequently
purchased goods from the plaintiff, for which they gave the ac-
ceptance of the S. Company. In an action against C. and W., it

to pledge his credit in the transaction
out of which the claim arises. It is, as
stated before, a mere question of author-
ity ; of agency ; the law as to agency be-
ing clearly applicable to show the au-
thority. See Thorn v. Smith, 21 Wend.
365 ; GraeH' v. Hitchman, 5 Watts, 454 ;
Ostrom V. .Jacobs, 9 Mete. 454. Smith v.
Craven, 1 Cr. & J. 500, is applicable to
further show the absurdity of the holding
in Jones v. Foster, 12 X. B. R. 607 ; the
two cases being singularly alike. In Smith
V. Craven, 1 Cr. & .1. 500, which was de-
cided long before Cox v. Hickman, 8 H.
L. C. 268, the ipiestion of liability is put
iipon the ])rinciple3 of agency. It was
held in Smith v. Craven, where A., B.,
and C, not being general partners, entered
into a joint speculation, and each was to
contribute a tliird, that A., who had paid
his share, was not liable to the bankers of
B. for moneys advanced by such bankers
on the individual credit of B., without
the knowledge of A., though such moneys
were apidied in payment of bills drawn
upon B. in the course of the joint specula-
tion. Heap V. Dobson, 15 C. B. n. s.
460, is to the same effect. There a ship
belonging to A., with which he, B. & C,
had had profit and loss transactions, was
chartereil to B., and it was arranged be-
tween A., B., and C. that the ship should
go to the southern coast of this country
for a cargo which A. represented he had
there, and take it to England, on joint
account of the three, and that goods to
the amount of £3000 should be shipped
by each of the three for an outward cargo,
and sold on joint account, the profits to
be divided in proportion to the value of
the goods shii)i)ed by each. A. shipped,
among other tilings, goods to the value of
£1377, which he obtiiiiied from the plain-
tiffs on credit. A. having became bank-
rupt, the plaiutitfs discovered that the
goods were shipped as a joint adventure,
and sued B. for the price. It was claimed
that the outward cargo having been the
joint adventure of the three, notwith-
standing the private arrangement between
themselves, they were, quoad third per-
sons, clothed with all the authority and
responsibility of partners, and that each
of the three was liable for the whole
amount of the goods shipped on the joint
account. B vies, J., said : " If the agree-
ment had been that each of the three
should contribute to the joint adventure
£3000 in money, instead of that amount

in goods, you would have hardly con-
tended that B. would have been respon-
sible to the person from whom A. borrowed
his £3000 to come into the concern."
The court hehl that B. and C. were not
liable ; putting it again on the question of
authority or agency ; that there was noth-
ing in the aiTanwement to authorize one
of the three to bind the others as their
agent in respect of the third share of the
cargo which he undertook to sui)ply for
the joint adventure. The decision is quite
as applicable to the facts in Jones v. Fos-
ter, 12 N. B. R. 607, that there M. and D.
had no more authority to purcliase goods
in his own firm's name to bind F. & S.,
than the latter had to make M. & D.
liable for moneys which F. k S. might
have obtained, through their bankers, for
the payments made by F. & S.

In Pennsylvania, where, as in Mas-
sachusetts, and in others of the States,
we find so much sound law, we find the
same principle laid down in the case of
Donually v. Ryan, 41 Pa. St. 306, by
Woodward, J., who says: "The point
stands as clear on reason as on authority ;
for when no credit is given to a firm,
which, in law, is a distinct jierson from
the members who compose it, why should
redress be sought against the firm ? As
well might a creditor who had loaned his
money on the credit of an individual, at-
tempt to pursue it into the business or
property of third persons, and hold them
responsible to himself." See, also. Brook
v. Evans, 5 Watts, 200 ; Graeff v. Hitch-
man, 5 Watts, 454 ; Clay v. Cottrell, 6
Harris, 413; Gibson v. Stone, 43 Barb.
285, 291 ; Smith, Adst. Perry, 29 N. J.
74 ; Stevens v. Faucett, 24 111. 483 ; Faw-
cett V. Osborn, 32 111. 411 : Macy v.
Combs, 15 Ind. 469 ; Reynolds v. Hicks,
19 Ind. 113 ; Loomis v. Marshall, 12
Conn. 69. In Voorhees v. Jones, 29 N.J.
270, 277, in a suit by a creditor of a firm,
against the firm, it was held that it was
incompetent to show by parol evidence
that the contract of partnership was other-
wise than it was constituted by the
written articles. In Macy v. Combs, 15
Ind. 469, 472, it was held that the com-
mon reputation and understanding as to
who were members of a firm was not legal
eviilence. The evidence received bv Allen,
J., in Jones t'. Foster, if N. B.R. 60",
and sustained by the whole court, is op-
posed to the proper holding in Voorhees
V. Jones, supra; but such holding in Jones

PART VII.] partners' SALES. 493

was held that they could not be sued as^ partners on the bills,
and that they were not liable for goods sold and delivered, there
being no distinction between the bills and the consideration for
which they were given.

The case of Redpath v. Wigg,i was somewhat different from
Cox V. Hickman. The facts in Redpath v. Wigg were that a
trader, carrying on business as M. & Co., ordered goods of the
plaintiff, and before their delivery, executed an inspectorship deed
of which the defendants were inspectors. The plaintiff afterwards
wrote a note, addressed to the debtor, informing him that the
goods were ready for delivery, and the defendants replied, request-
ing him to send the goods, and signing " for M. & Co." The
court held that the inspectorship deed, and the acts of the defend-
ants under it, did not constitute them principal traders, so as to
make the debtor only a servant or agent of theirs, and that they
were not liable under the contract.

A third case with elements very similar to those in Cox v. Hick-
man and Redpath v. Wigg (^supra') is Easterbrook v. Barker.^
Here, under a deed of composition under the English Bankruptcy
Act, 1861, the debtor assigned his works and effects to trustees,
the business to be carried on by him under their control. After
this the debtor continued to manage the business under the direc-
tion of the trustees, paying all moneys received by him to the
banking account of the trustees ; who met at the works weekly,
inspected the books, and furnished the debtor with money to meet
all disbursements which would be required during the ensuing week
for wages, materials, etc., but they gave him no power to pledge
their personal credit. In an action against the trustees for goods
supplied to the assigned works during the period of their trustee-
ship, the County Court held that they were liable ; but, on appeal,
the Court of Common Pleas reversed this decision, and, following
the decisions in Cox v. Hickman,^ and Bullen v. Sharp,* they held
that there was no partnership ; and, following Redpath v. Wigg,^
held further that no such relation as that of master and servant,
or that of principal and agent was constituted by the deed between
the trustees and the debtor ; that there was no liability in respect
of ostensible authority, for the credit was given to the debtor, and
that the deed itself gave the debtor no authority to pledge the trus-
tees' credit.

Each ostensible partner in a firm is its agent and representative
with reference to all business within the scope of the partnership.

V. Foster is only one of the many legal ^ 3 h. L. C. 268.

errors with which that case abounds. * L. R. 1 C. P. 86.

1 L. R. 1 Ex. 335. 5 L R. 1 Ex. 335.

2 L. R. 6 C. P. 1.


And if, in the conduct of partnership business, and with reference
thereto, one partner makes false or fraudulent misrepresentations
of fact to the injury of innocent persons who deal with him as
representing the firm, and without notice of any limitations upon
his general authority, his partners cannot escape pecuniary re-
sponsibility therefor upon the ground that such misrepresenta-
tions were made without their knowledge. This is especially so
when the partners, who were not themselves guilty of wrong, re-
ceived and appropriated the fruits of the fraudulent conduct of
their associate in business.^

A sole surviving partner of an insolvent firm, who is himself
insolvent, can make a valid assignment of partnership assets for
the benefit of the joint creditors, with preference to some of them,
and such assignment is not void because of the fraudulent omis-
sion from tlie schedule by the surviving partner of certain prop-
erty which constituted a part of the partnership assets, and was
appropriated by liim to his own use. Such fraud does not affect
tlie rights of the assignee and of the beneficiaries of the trust who
were ignorant of the fraud of the grantor. If the assignment was
valid when executed, no subsequent conduct on the part of the
grantor or the trustee, however fraudulent, can avoid the deed,
and deprive the creditors, accepting it in good faith and not par-
ticipating in the fraud, of their rights under it.^

D. and I. were partners, engaged in carrying on a small business
in buying and manufacturing wheat and grain, in a small town in
an interior county in Indiana ; shipping the flour and such sur-
plus of the grain as was not required for manufacturing, in a mill
of an average capacity of thirty barrels of flour per day, to Indian-
apolis and Baltimore, for sale and immediate delivery. Their
whole working capital varied from 82000 to 84000. D. carried
on the business, while I. resided in Pennsylvania, and rarely vis-
ited tlieir place of business in Indiana. In 1877, and five years
subsequent to the formation of the partnership, D., without the
knowledge of I., gave orders to the plaintiffs, commission-mer-
chants and grain-brokers in Baltimore, for sale of 165,000 bushels
of wheat for future delivery. These orders were executed by the
plaintiffs ; the price amounting to 8251,794.84. No grain was
shipped by D. to meet these sales, and the plaintiffs paid as differ-
ences, 817,215.94. In an action against I,, as surviving partner

1 Strangr. Bradner, 114 U. S. 555; Stock- Hampstead v. Johnston, 18 Ark. 123, 140;
well V. United States, 13 Wall. 531, 547 ; Cornish v. Dews, 18 Ark. 172, 181 ; Man-
Chester V. Dickerson, 54 N. Y. 1 ; Locke v. del v. Peay, 20 Ark. 325, 329 ; Hunt v.
Stearns, 1 Met. 560 ; Lothrop v. Adams, Weiner, 39 Ark. 70, J5 ; Marbury r.
133 Mass. 471 ; Blight v. Tobin, 7 T. B. Brooks, 7 Wheat. 556, 577 ; Brooks v.
Mon. 612 ; Durante. Rogers, 87 111. 508. Marburv, 11 Wheat. 78, 89 ; Tompkins
2 Emerson i;. Seuter, 118 U. S. 3; v. Wheeler, 16 Pet. 106, 118.


partners' sales.


of D. &!., for this sum, it was claimed for the defendant that the
transaction was not authorized by the partnership agreement,
nor within the regular course of the partnership business, nor
within its apparent scope. The court charged in favor of the
plaintiffs, for whom the verdict and judgment were entered. The
Supreme Court, on error, held that such liability did not arise
from the partnership agreement between D. and I. ; nor from any
implication arising out of the previous transactions between them
and the plaintiffs ; and that the court below was in error in hold-
ing, and, in effect, directing the jury, that the business of dealing
in grain involved, as a matter of law, as an essential characteris-
tic of the business, not only dealing in grain on hand for present
delivery, for cash or on credit, but, also, dealing in futures by
means of contracts of sale or purchase for purposes of specu-
lating upon the course of the market. The judgment was reversed
and a new trial was ordered.^

1 Irwan v. Williar, 110 U. S. 499.
Two questions of importance are involved
in this ease, one, as regards the genera!
doctrine of agency as applicable to a
partnership ; the other, as to dealing in
"futures." The court below assumed, be-
cause I. & D. were dealers in grain, that,
therefore, all dealings in grain by one
member of the firm, in the name of the firm,
would bind the firm. The United States
Supreme Court, in dealing with this fallacy,
said : "In this, we think, there was error.
The liability of one partner, for acts and
contracts done and made by his co-partners,
without his actual knowledge or assent, is
a question of agency. If the authority is
denied by the actual agreement between
the partners, with notice to the party who
claims under it, there is no partnership
obligation. If the contract of partnership
is silent, or the party with whom the deal-
ing has taken place has no notice of its
limitations, the authority for each trans-
action may be imj)lied from the nature of
the business, according to the usual and
ordinary course in which it is carried on,
by those engaged in it in the locality
which is its seat, or as reasonably neces-
sary and fit for its successful prosecution.
If it cannot be found in that, it may still
be inferred from the actual though excep-
tional course and conduct of the business
of the partnership itself, as personally car-
ried on with the knowledge, actual or
presumed, of the partner sought to be
charged. In the present case the partner-
ship agreement cannot affect the question,
because it is not claimed, on the one hand,
that it conferred actual authority to make
the transactions in dispute, nor, on the
other, that the defendants in error had any

notice of its limitations. And so, too, any
implication that might have arisen from a
previous course of business of this char-
acter, carried on by Davis with the knowl-
edge of Irwin, must be rejected, for it is
not claimed that any foundation in proof
existed for it. The only remaining ground
for the implied authority by which it can
be claimed that Irwin was bound by the
contracts of his partner, is that arising
from the intrinsic nature of the business
in which the partnership was actually
engaged, or from the usual and ordinary
course of conducting it at the locality
where it was carried on. What the nature
of that business in each case is, what is
necessary and proper to its successful
prosecution, what is involved in the usual
and ordinary course of its management by
those engaged in it, at the jdace and time
where it is carried on, are all questions of
fact to be decided by the jury, from a con-
sideration of all the circumstances which,
singly or in combination, affect its char-
acter or determine its peculiarities ; and
from them all, giving to each its due
weight, it is its province to ascertain and
saj' whether the transaction in question is
one which those dealing with the firm had
reason to believe was authorized by all
its members. The difficulty and duty of
drawing the inference suitable to each
case from all its circumstances cannot be
avoided or supplied by affixing or ascrib-
ing to the business some general name,
and deducing from that, as a matter of
law, the rights of the public and the
duties of the partners. Dealing in grain
is not a technical phrase from which a
court can properly infer as matter of law
authority to bind the firm in every case



[book II.

The plaintiff, having been a clerk in the defendant's firm, en-
tered into a verbal agreement with him for a share of profit and
loss in the proportion of one-fifth to the plaintiff, and four-fifths
to the defendant, it being stipulated that the building in which the
business was carried on should remain the property of the de-
fendant. The plaintiff alleged that the agreement was for a part-
nership, and claimed a dissolution and an account of assets. The
defendant denied the partnership, and alleged that the plaintiff
was only manager. Held, that under the facts proved, the agree-
ment for sharing profit and loss in certain proportions conferred
all the rights of partnership inter se^ subject to the stipulation as
to the buildings remaining the property of one partner ; that the
defendant could not maintain that the legal effect of partnership
should not follow such a contract, and that the plaintiff had a
right to a dissolution and sale of the assets of the partnership, in-
cluding the good-will. But as to the good-will, it was only that
which could be sold by its being quite understood that the mills

irrespective of its circumstances ; and if,
by usage, it has acquired a fixed and defi-
nite meaning, as a word of art in trade,
that is a matter of fact to be established
by proof and found by a jury. It may
mean one thing at I?razil in Indiana,
another at Baltimore. It may not be the
same when standing alone with what it is
in connection with a flouring-mill in a
small interior town. It may mean deal-
ing in grain on hand for present delivery
for cash or on credit, or it may mean, also,
dealing in futures by means of contracts
of sale or purchase for purposes of specu-
lating upon the course of the market. We
are quite clear that the latter feature of
the business, as it may sometimes be pros-
ecuted, is not, as matter of law, an essen-
tial characteristic of every business to
which the name of dealing in grain may
be properly assigned. And yet this is dis-
tinctly what in the present case was given
to the jury as the law, and in that respect
the Circuit Court erred." This is so clear
and accurate an exposition of the law in
the matter, and so thoroughly harmonizes
with the late well-decided English cases,
and with the views we have expressed in
this Part, that we have quoted thus fully
from the juilgment.

The other point involved in the case is
as to whether the contract was void as
a wagering or gambling contract. The
court laid it down as the generally ac-
cepted doctrine in this country, that a
contract for the sale of goods, to be deliv-
ered at a future day is valid, even though
• the seller has not the goods, nor any other
means of getting thera than to go into the
market and buy them ; but such a con-

tract is only valid when the parties really
intend and agree that the goods are to be
delivered by the seller and the price to be
paid by the buyer ; and, if, under guise of
such a contract, the real intent be merely
to speculate in the rise or fall of prices,
and the goods are not to be delivered, but
one party is to pay to the other the differ-
ence between the contract price and the
market price of the goods at the date
fixed for executing the contract, then the
whole transaction constitutes nothing more
than a wager, and is null and void ; all
wagering contracts being generally held in
this country to be illegal and void as
against public polic}'. Dickson's Exec-
utor V. Thomas, 97 Pa. 278 ; Gregory v.
Wendell, 40 Mich. 4.32 ; Lyon v. Culbert-
son, 83 111. 33 ; Melchert v. American
Union Tel. Co., 3 McCrary, 521 ; 11 Fed.
Rep. 193, and note ; Barnard v. Bock-
haus, 52 Wis. 593 ; Kingsburv v. Kirwan,
77 N. Y. 612 ; Storv v. Salomon, 71 N.
Y. 420; Love v. Harvey, 114 Mass. 80.
In England, it is held that the contracts,
althougli wagers, were not void at common
law. But this has been altered by statute,
8 & 9 Vic. c. 109, sec. 18, declaring that
they "shall be null and void," and mak-
ing such wagering contracts or agreements
non-enforceable in courts of law and equity.
It has been held in England, that, the stat-
ute has not made such contract illegal, but
only non-enforceable. Thacker v. Hardy,
4 Q. B. Div. 6S5. We shall consider the
question fully in a later volume of this

Online LibraryJeremiah TravisCommentaries on the law of sales and collateral subjects (Volume 1) → online text (page 88 of 114)