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
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 chanroblesvirtualawlibrary
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 £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. chanroblesvirtualawlibrary
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 ons; during the continuance of the concern, it was generally known in Alexandria under the style of Hoffman & Johnson; accounts were rendered and ons; 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 chanroblesvirtualawlibrary
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. chanroblesvirtualawlibrary