U.S. Supreme Court Le Roy, Bayard & Co. v. Johnson, 27 U.S. 2 Pet. 186 186 (1829)
Le Roy, Bayard & Co. v. Johnson
27 U.S. (2 Pet.) 186
ERROR TO THE CIRCUIT COURT FOR THE COUNTY
OF ALEXANDRIA IN THE DISTRICT OF COLUMBIA
In an action originally commenced against A. and B. as partners upon an alleged engagement by the firm, and where A., who was not found or served with process, was offered as a witness in favor of B., having been released by B., the Court said
"It is to be premised that the only ground upon which the objection can be rested is the supposed interest of the witness in the event of the cause, since, the suit having regularly abated as to him by the return that he was 'no inhabitant,' he was no more a party to it than he would have 'been had his name been altogether omitted in the declaration.' As to the objection upon the score of interest, it is sufficient to remark that it was manifestly hostile to the party in whose favor he testified and who offered it in evidence, since the plaintiffs' recovery against the defendant and satisfaction from him would be a bar to their action against the witness, and the release of A. protected him against any action which A. might bring against him for contribution or otherwise."
It is well settled that if a bill of exchange be drawn by one partner in the name of the firm, or if a bill drawn on the firm by their usual name and style be accepted by one of the partners, all the partnership is bound. It results necessarily from the nature of the association and the objects for which it is constituted that each partner should possess the power to bind the whole when acting in the name by which the partnership is known, although the consent of the other partners to the particular contract should not be obtained or should be withheld.
Third persons are not bound to inquire whether the partner with whom they are contracting is acting on the partnership account or for his individual advantage. The interest of the partner in the joint stock of the concern, and his consequent authority to use the partnership name raises a presumption that the contract was made for joint account, which is sufficient to bind the firm unless to the contrary be shown, and that the person with whom the partner deals had notice or reason to believe that the former was acting on his separate account.
Where in the articles of partnership no name of the firm was mentioned as agreed upon, and the concern went into operation under the articles, the books being kept and the bills and accounts relating to their transactions being made out at their warehouse in the name of "Hoffman & Johnson," it cannot be questioned but that a name thus assumed, recognized, and publicly used became the legitimate name and style of the firm, not less so than if it had been adopted by the articles of partnership.
Where a bill of exchange was drawn by A. after the dissolution of his partnership with B., and the proceeds of the bill went to pay and did pay the partnership debts of A. & B., which A. on the dissolution of the firm had assumed to pay, the holder of the bill after its dishonor can have no claim on B. in consequence of the particular appropriation of the proceeds of the bill. It is admitted, that if one of the partners contracted with a third person, in the name
of the firm after the dissolution, but that tact not made public or known by such third person, the law considers the contract as being made with the firm and on its credit. But if the partner deals with another in his individual name and upon his sole responsibility, without even an allusion to the partnership, it was unimportant to that other to know that the partnership was dissolved, since he was dealing not with the firm and upon its credit, but with the individual with whom he was acting, upon his own credit.
An action of debt upon a bill of exchange for Ĺ 1,250 sterling, was instituted by the plaintiffs in error in the Circuit Court for the County of Alexandria in the District of Columbia against Jacob Hoffman and George Johnson alleging them to be partners in trade. By the statute of Virginia, adopted as the law of the County of Alexandria, this form of action is authorized for the recovery of the sum due upon a bill of exchange, and damages for nonpayment. The declaration charged the bill to have been drawn by Jacob Hoffman and George Johnson, trading as co-partners in Alexandria under the name of Jacob Hoffman, the same being for the account of the concern, and that the bill was purchased by the plaintiffs, who remitted it to London, where it was presented to the drawers and was returned protested.
The process was not served on Jacob Hoffman.
Upon the trial of the cause, it was proved that it was generally known in Alexandria in 1823 that the defendant and Jacob Hoffman were jointly concerned in buying and selling pork, and by the articles of co-partnership signed by both partners and entered into on 10 December, 1823, it was agreed, inter alia, that the funds necessary for the purposes of the partnerships were to be borrowed from the banks or otherwise upon the notes of George Johnson to be endorsed by Hoffman, or in such other shape as respects the paper of the parties as might be found suitable to the object intended. The active partner in the business was Jacob Hoffman, who, besides the business of the concern, carried on that of a sugar refiner, a buyer, seller, and salter of beef, and a tobacconist, and at the same time the defendant George Johnson was engaged in the transaction of business on his own account as a commission merchant and grocer.
The cashier of the Bank of Alexandria proved that an account was opened in that bank on 3 December, 1823, which he understood from both parties was to comprehend the cash deposits of the joint concern and the proceeds of notes discounted for the purpose of raising funds for the same. For some years before, Jacob Hoffman kept an account in the bank until the opening of the new account, upon which the private balance due the bank was transferred to it, and no money could be drawn out of the bank upon the account but upon the check of Hoffman drawn by him in his own name. Accounts of a similar character, in the same form and used in the same manner and for similar purposes, were proved to have been kept at the same period in the Farmers' Bank and in the Bank of Potomac. These accounts comprehended indiscriminately all the deposits of cash kept by Hoffman in the banks, as well as deposits and cash of the joint concern. The same witness also proved that before a note for $6,000, drawn by the defendant and endorsed by John H. Ladd & Co., was discounted by the bank, he sent the bill of exchange which was the foundation of this action to New York, at the request of Hoffman, to be there negotiated. The bill not being sold immediately in New York, Hoffman went there and, assisted by letters of recommendation from merchants of Baltimore, he negotiated the bill, and out of the proceeds of the same the note for $6,000 was paid at the Bank of Alexandria. The proceeds of the discount of this note were used by the firm. The partnership of the defendant and Jacob Hoffman was advertised in the public papers of Alexandria, the advertisement being subscribed with the names of both persons; during the continuance of the concern, it was generally known in Alexandria under the style of Hoffman & Johnson; accounts were rendered and money was paid in that name, and the firm was dissolved on 10 January, 1824.
By the terms of the dissolution, Mr. Hoffman was bound to pay the debts of the firm, and this bill was drawn to enable him to comply with this contract.
The defendant was called upon early in June and informed of the fate of the bills, and efforts were made without
success to procure payment out of property which had belonged to Hoffman and Johnson and which was in the hands of a trustee.
The questions submitted to the jury and upon which the court was requested to charge in favor of the plaintiffs below, who are plaintiffs in error in this Court, were:
1. That upon the evidence of partnership, and that the proceeds of the bill were applied to the payment of the note which had been discounted for the firm, unless the defendant could show a notice of the dissolution of the partnership, either public or private, before the bill was sold, and that the bill was not drawn on partnership account, the plaintiffs were entitled to recover.
2. If the jury, from the evidence, should be of opinion that the bill was drawn in reference to the business of the concern and to meet the engagements of the same, and the proceeds of the same were so applied, then the defendant is liable to the plaintiffs unless he proves a dissolution of the firm and knowledge of the same by the plaintiffs before the bill was negotiated.
3. That if the jury believed the name of Jacob Hoffman was sometimes used in relation to the business of the concern and that the bill was drawn in the name of Jacob Hoffman and so negotiated for the firm to pay its notes, the plaintiff is entitled to recover unless the defendant can prove that the bill was not drawn and negotiated on partnership account or that the partnership was dissolved and the plaintiff notified thereof, or the dissolution was advertised before the bills were drawn and negotiated.
The court having refused these instructions and a verdict and judgment having been obtained for the defendant, this writ of error was prosecuted.
MR. JUSTICE WASHINGTON delivered the opinion of the Court.
The plaintiffs instituted an action of debt under the statute of Virginia, in the Circuit Court of the District of Columbia for the County of Alexandria against Jacob Hoffman and the defendant upon a bill of exchange drawn by the said Hoffman and dated 3 January, 1824. The declaration charges that the said Jacob Hoffman and George Johnson were partners in the business of buying, curing, and selling pork and bacon, and carried on their said co-partnership business under the name and firm of Jacob Hoffman, and that the bill of exchange on which the suit is brought was drawn in the name of Jacob Hoffman for and on account of the said firm, and was sold to the plaintiffs, who caused it to be presented for acceptance, and that the same was duly protested for nonacceptance and nonpayment, of which due notice was given to the defendants, the drawers. The writ being returned "no inhabitant" as to Hoffman, the suit abated against him.
From the evidence disclosed in a bill of exceptions taken by the plaintiffs to the opinion of the court, the case appears to be as follows.
On 10 December, 1823, Jacob Hoffman and the defendant entered into articles of co-partnership under their respective signatures to commence and prosecute, on joint account, during that winter, the business of purchasing, salting up, and smoking pork. The funds necessary to the accomplishment of the objects, intended to be borrowed from the banks or otherwise upon the paper of the said George Johnson to be endorsed by Hoffman or in such other shape as respected the paper of the parties as might be found most suitable to the object intended, Johnson agreeing, in consideration of the extraordinary trouble and experience which Hoffman would devote to the purchase and
putting up of the pork, to pay two-thirds of the interest arising or growing out of the loan which should be made for the business contemplated. It was further stipulated that the business should be carried on as far as the parties should agree and could command the funds, and that the profits and loss should be equally divided between them. No name of style is agreed upon under which the business of the concern was to be transacted, but evidence was given that after the parties commenced their operation under these articles, the books of the concern were kept, and the bills and accounts were made out at their warehouse, where the pork was cured and kept, in the joint names of Hoffman & Johnson and never otherwise; and that they continued to be so kept and made out until the pork was sold. They were generally known in Alexandria as partners in buying, curing, and salting pork, under the name and style of Hoffman & Johnson in which they acted in relation to the business of the concern and advertised in the newspapers.
It further appears that, besides the business of this concern and during the same period, Hoffman carried on the business of a sugar refiner, of a buyer, salter and seller of beef, and of a tobacconist, and the defendant that of a grocer and commission merchant in the Town of Alexandria.
Notwithstanding what has been stated as to the name by which this firm was known in Alexandria and in which they did business at their warehouse, it seems that one particular branch of business was conducted solely by and in the name of Hoffman alone. In December, 1823, an account was opened in the Bank of Alexandria which the cashier understood from both Hoffman and the defendant was to comprehend both the cash deposits of the said concern in that bank and the proceeds of notes therein discounted to raise money for the use of the firm. This account was opened on the 3d of the month just mentioned, into which a trifling balance against Hoffman upon his private account, before kept at that bank, was transferred. This new account was so kept that no money could have been drawn out of the bank upon that account except upon the check
of Hoffman, in whose name alone all the checks were drawn. Hoffman had likewise longstanding accounts in his own name in two other banks in Alexandria which were continued in the same name after this concern was formed, in which accounts all cash deposits in those banks respectively, and the proceeds of notes therein discounted to raise cash for the use of the concern were entered. These latter bank accounts comprehended indiscriminately all the deposits and cash kept by Hoffman in those banks, as well as the deposits and cash of the joint concern.
The partnership between these gentlemen, which commenced on 10 December, 1823, was dissolved by mutual consent on the 21st of the succeeding month under an agreement by which Hoffman contracted to pay all the debts due by the firm, the defendant binding himself to give the use of his name either as drawer or endorser in the renewal of all notes then existing until the bacon should be sold.
On 30 January, 1824, the bill of exchange on which this suit is brought was drawn by Jacob Hoffman in his own name, and as he states in his deposition, on his individual responsibility in order to enable him to raise money to comply with his part of the above contract, and in particular to enable him to discharge a note for $6,000 which had been drawn by the defendant, endorsed by John H. Ladd & Co. and Jacob Hoffman and discounted at the Bank of Alexandria. With much difficulty, and after great personal exertions by Hoffman, and with the aid of a letter from Mr. Colt in favor of his mercantile standing, he succeeded in selling this bill to the plaintiffs, the proceeds of which he immediately applied to the discharge of the above note for $6,000. In his negotiations with the plaintiffs the name of the defendant was never mentioned.
As a part of the evidence here detailed is taken from the deposition of the before-mentioned Jacob Hoffman which was offered by the defendant's counsel, it will be proper in the first place to dispose of the objection made to the competency of this evidence. The offer to read the deposition was preceded by the exhibition of a release executed and
delivered by the defendant to the witness prior to his examination. It does not appear that any objection was or could be made to the form of the release, and the only question is whether, in point of law, the defendant could by any release render Hoffman a competent witness.
It is to be premised that the only ground upon which the objection can be rested is the supposed interest of the witness in the event of the cause, since the suit having regularly abated as against Hoffman by the return that he was no inhabitant, he was no more a party to it than he would have been had his name been altogether omitted in the declaration.
As to the objection upon the score of interest, it is sufficient to remark that it was manifestly hostile to the party in whose favor he testified and who offered it in evidence, since if the plaintiffs recovered against Johnson and obtained satisfaction from him, that would be a bar to their action against Hoffman, and the release of Johnson protected him against any action which Johnson might bring against him for contribution or otherwise.
The general rule of law in relation to witnesses who are interested in the event of the cause goes no further than to exclude them from giving evidence in favor of that party to whom their interest inclines them. If they stand, in point of interest, indifferent between the litigating parties, or if they testify against their interest, the reason of the rule which excludes their testimony no longer exists.
We come now to the instructions to the jury asked for by the plaintiffs' counsel, and which the court refused to give. The first is that if the jury believe from the evidence that the defendant and Jacob Hoffman entered into the articles of co-partnership offered in evidence and that an account was kept for the said concern in the Bank of Alexandria in the name of Hoffman, in which the notes discounted for the use of the partnership and deposits of money on partnership account were entered to the credit and checks drawn for the same in the said Hoffman's name, and that the said Hoffman drew the bills mentioned in the declaration and sent them to New York to be sold for the
purpose of raising money to pay certain notes which had been discounted in the Bank of Alexandria on partnership account, some of them drawn by said Hoffman and endorsed by the defendant or other persons, and others drawn by the defendant and endorsed by Hoffman or others, and that the same was sold to the plaintiffs and the proceeds thereof applied by said Hoffman to the payment of the said notes; then the plaintiffs are entitled to recover unless the defendant can show a dissolution of co-partnership and notice thereof, either public, or to the plaintiffs, before the bills were sold, or that the said bills were not drawn on partnership account, but on the individual responsibility of Hoffman.
The second instruction which the court was called upon to give is substantially the same as the first except that it omits a circumstance much relied upon in the argument that the bank account of the concern was kept in the name of Hoffman, upon whose checks alone the money was drawn out.
The third instruction states that if the jury should believe from the evidence that the defendant and Hoffman sometimes used, in relation to the business of the concern, the name and style of Jacob Hoffman, as representing the firm, and that the bill in question was drawn in that name by the said Hoffman, and negotiated for the purpose of raising funds to pay notes due by the said concern, then the plaintiffs were entitled to recover unless the defendant could prove that the said bill was not drawn and negotiated on partnership account, but on account of the said Hoffman alone, or that the partnership was dissolved, and the plaintiffs notified thereof, or the dissolution advertised before the bills were drawn and negotiated.
In support of this action it has been argued by the counsel for the plaintiffs that the bill in question was drawn in the name of the firm under which the partnership concerns of Jacob Hoffman and George Johnson were transacted; that it was drawn on partnership account, and that the proceeds of the bills were in fact applied by Hoffman to the discharge of a debt due by the concern. These being the facts, it is insisted that the court below ought to have complied with
the prayer of the plaintiffs' counsel, and instructed the jury that if they were so understood by them, the plaintiffs were entitled to recover. And if this statement of the facts be correct and the instructions asked for had been so framed as to present them fairly to the jury, this Court entertains no doubt but that such instructions should have been given.
It is well settled that if a bill of exchange be drawn by one partner in the name of the firm or if a bill drawn on the firm by their usual name and style be accepted by one of the partners, all the partners are bound. It results necessarily from the nature of the association and the objects for which it is constituted that each partner should possess the power to bind the whole when acting in the name by which the partnership is known, although the consent of the other partners to the particular contract should not be obtained or should even be withheld. Were it otherwise, the affairs of the concern could with difficulty be carried on, and these persons could seldom, if ever, know when they might safely deal upon the credit of the firm. It follows that such third persons are not bound to inquire, much less to assure themselves that the partner with whom they are contracting is acting on the partnership account, or for his own individual advantage. The interest of the partner in the joint stock of the concern and his consequent authority to use their name raises a presumption that the contract was made for joint account, which is sufficient to bind the firm unless the contrary be shown and that the person with whom the partner deals had notice or reason to believe that the former was acting on his separate account.
It is now to be seen how these principles of law apply to the case under consideration.
It is quite clear that the name of this firm is nowhere designated in the articles of co-partnership which have been referred to. The mode in which a particular branch of their business was to be conducted cannot reasonably be construed to give a name to the firm. It manifestly had no allusion to that subject. The stipulation that the funds necessary for the purposes of the concern should be raised upon the paper of Johnson to be endorsed by Hoffman, or
in such other shape as might be found most suitable to the object of the parties, no more designated Jacob Hoffman, that it did George Johnson as the name of the co-partnership. If it did, then the name would be lost or changed as often as the parties should agree to raise funds for the concern in some other mode than the one specified. It is unnecessary to decide whether the omission to agree upon a partnership name in the body of the instrument was or was not supplied by the signatures of the contracting parties to it, because it was in full and uncontradicted proof that after the concern went into operation under the articles, its books were kept and the bills and accounts relating to their business were made out at their warehouse in the joint names of Hoffman & Johnson, by which name the firm was generally known in Alexandria and in which they acted in relation to the business of the concern and advertised in the newspapers. Now it cannot be questioned but that a name thus assumed, recognized, and publicly used became the legitimate name and style of the firm, not less so than if it had been adopted by the articles of co-partnership.
Keeping in mind the principles of law which have been stated and the fact or the evidence of it in relation to the name of this concern, it will not be difficult to decide the question whether the instructions asked for by the plaintiffs ought or ought not to have been given. It is obvious that the court was required by the two first of them either to assume the fact that Jacob Hoffman & George Johnson carried on their business as partners under the name and firm of Jacob Hoffman or to lay it down as law to the jury that it is competent to one partner to bind the co-partnership by a bill drawn in his individual name, even after a dissolution of the partnership if that fact was not advertised or known to the person taking the bill, provided the object of the partner who draws and negotiates the bill be to discharge certain debts due by the concern, and the proceeds are afterwards so applied.
Now the fact which the court was called upon to assume was all-important to be proved to entitle the plaintiffs to recover. It is averred in the declaration, and is in point of
law the foundation of the plaintiffs' demand against the defendant Johnson. But what right had the court to assume a fact which was not warranted by any just interpretation of the articles of co-partnership, or of any other written instrument which was given in evidence, but which, if it existed at all, was to be deduced from the parol evidence, of which the jury were alone competent to judge?
The court was not called upon to predicate the conclusion of law upon the fact that the defendant and Hoffman traded under the name and firm of Jacob Hoffman; if that fact should be so found by the jury -- and unless it was so found, it is quite clear that the bill in question, although drawn for the purpose before mentioned, and although the proceeds were so applied, did not bind the defendant, and consequently, the court was right in refusing to give these instructions in the form in which they were propounded -- unless the fact was that which all the instructions assume, and which formed the basis of the plaintiffs' argument before this Court; the plaintiffs contracted in point of law, as they manifestly did in fact, with Jacob Hoffman alone, and upon his sole responsibility, and the use which Hoffman intended to make or did make, of the proceeds of the bill, was quite as unimportant to them and to their cause, as it would have been had they contracted with Hoffman & Johnson under the name of their firm.
As to the necessity of bringing home to the knowledge of the plaintiffs in one of the modes stated in the instructions asked for, the dissolution of the co-partnership, in order to prevent their recovery against Johnson, we are all of opinion that it did not exist in point of law unless in point of fact the bill was drawn in the name of the firm. We admit that if one of the partners contracted in the name of his firm with a third person after the partnership is dissolved, but that fact not made public or known by such third person, the law considers the contract as being made with the firm and upon their credit, and this for a reason too obvious to require explanation. But if the partner deal with another in his individual name and upon his sole responsibility, without even an allusion to the partnership, as the jury would
have been well warranted in concluding the facts to be in this case, it was unimportant to that other to know that the partnership was dissolved, since he was dealing not with the firm and upon its credit, but with the individual with whom he was contracting and upon his credit.
It only remains to notice the single point of difference between the last and the two preceding instructions. These, as has before been noticed, assume the fact that the partners carried on the business of the concern under the name and style of Jacob Hoffman. That places the plaintiffs' right of recovery upon the circumstance that the defendant and Hoffman sometimes used, in relation to the business of the concern, the name and style of Jacob Hoffman, as representing the firm, in connection with the other facts stated in the preceding instructions.
But would the court have been warranted in stating to the jury what this instruction manifestly purports -- that whatever may be the name agreed upon by the partners and in which they generally act in relation to the business of the concern, still if they have sometimes used in that relation the name and style of one of the partners, bills drawn in that name and negotiated for the purpose stated in the instruction would bind the other partner? We clearly think not. The circumstance relied upon in this instruction as to what the partners sometimes did was no doubt proper to be left to the jury as evidence conducing to maintain the averment in the declaration that Jacob Hoffman and the defendant carried on business as partners in trade under the name of Jacob Hoffman, if the court had been called upon to leave that as a fact to the jury. But it was nothing more than evidence of that fact, upon which it would have been highly improper in the court to predicate any principle of law whatever. This point we conceive was fully settled in the case of Townsley v. Sumrall, decided a few days ago by this Court, ante, page 27 U. S. 170 .
We are, upon the whole, of opinion that the court below was right in refusing to give any of the instructions prayed for, and that the judgment of that court ought to be
Affirmed with costs.