Winship et al. vs. Bank of the United States. conduct the business of any company without credit., Large purchases are occasionally made on credit; and it is a question of convenience to be adjusted by the parties, whether the credit shall be given by the vendor or obtained at the bank. If the vendor receives a note he may discount it at the bank. If, for example, the notes given by Winship to Jacques for rosin to carry on his manufacture, which have been mentioned by the witness, had been discounted in bank, it would not have been distinguishable from money borrowed in any other form. The judge said, that if it was within the scope and authority of partners. generally in limited partnerships, to make and endorse notes, and to obtain advances and credits for the business and benefit of the firm, and if such was in fact the ordinary course and usage of trade, the authority must be presumed to exist. Whether this was the fact or not was left to the jury. Does anything in the articles of agreement restrain this general authority? The articles state the object of the company to be the manufacture of soap and candles; the capital stock to be ten thousand dollars, which sum is to be paid in by Amos and John Binney; John Winship to conduct and superintend the manufactory; the name of the firm to be John Winship; the profit and loss to be divided. They are silent on the subject of borrowing money. If the fact that the Binneys advanced ten thousand dollars for the stock in trade implied a restriction on the power of the manager to carry on the business on credit, it would be implied in almost every case. But the bond given by Winship to Amos Binney, which is admitted by the judge to constitute a part of the partnership agreement, is supposed to contain this restriction. The condition of the bond recites that "whereas Amos Binney had engaged to endorse the notes given by the said John Winship for the purchase of stock and raw materials for manufacturing, when necessary to purchase on credit, in consideration of which the said John Winship hath engaged not to endorse the notes, paper, or become in any manner responsible or security for any person or persons, other than the said Amos Binney." "Now, if the said John Winship shall faithfully observe the conditions, and wholly abstain from becoming the surety or endorser of any person, to any amount, other than the said Amos Binney, then," &c. Winship et al. vs. Bank of the United States. The agreement recited, but not inserted in this condition, that Amos Binney would endorse the notes of Winship when it should be necessary to purchase on credit; while it implies that the power was incident to the act of partnership; was not in itself a positive restriction on that power. The affirmative engagement on the part of Amos Binney, that he will endorse, is not a prohibition on Winship to obtain any other endorser. The exigencies of trade might require the negotiation of a note in the absence of Mr. Binney, and this may have been a motive for leaving this subject to the discretion of the acting partner. If he has abused this confidence, the loss must fall where it always falls when a partner, acting within his authority, injures his co-partners. If, then, the agreement between Amos Binney and John Winship contains nothing more than is recited in the condition, it contains no inhibition on Winship to negotiate notes in the ordinary course of business. The restriction on Winship is not in this recital, but in his engagement expressed in the condition of the bond. He engages not to endorse the notes, paper, or become in any manner responsible or security for any person or persons, other than the said Binney. The obvious import of this engagement is that Winship will not make himself responsible for another. Had he made an accommodation note for Jacques, it would have been as much a violation of this agreement as if he had endorsed it. The undertaking is not to endorse notes for another. But this note is endorsed for himself. It is negotiated in bank in the name of the firm, and the money is carried to the credit of the firm. Had not Winship misapplied this money, no question would have arisen concerning the liability of his partners on this note. The stipulation in the bond, not to endorse or become security for another, would not have barred the action. But, be this as it may, the stipulation between the parties is a secret restriction on a power given by commercial law and usage generally known and understood; which is obligatory on the parties, but ought not to affect those from whom it is concealed. The counsel for the defendants in the Circuit Court then prayed an instruction to the jury, that if they were satisfied that the partnership was known to the plaintiffs to be limited to the soap and candle business, they must find for the defendants; unless they were also satisfied that these notes were given in the Winship et al. vs. Bank of the United States. ordinary course of the partnership business, or that the moneys obtained upon them went directly to the use of the firm, with the consent of Amos Binney and John Binney; and that if they are satisfied that any part of these moneys did go to the use of the firm with such consent, that then they must find a verdict for such part only, and not for the residue. This instruction was not given as asked; but was given with "limitations, explanations, and qualifications." The judge instructed the jury, in substance, that the defendants were not bound to pay the notes sued on, unless the endorsements thereon were in the ordinary course of the business of the firm, for the use and on account of the firm; but if they were satisfied that the notes were so offered and discounted, and that the said Winship was intrusted by the partnership, as the active partner to conduct the ordinary business of the firm, and the discount of such endorsed notes was within such business, then the plaintiffs were entitled to recover; although Winship should have subsequently misapplied the funds, received from the discount of said notes, if the plaintiffs were not parties or privies thereto, or of any such intention. The plaintiffs in error contend, that the instruction ought to have been given as prayed, without any qualification whatever. The instruction required is, that although the jury should be satisfied that the money went to the use of the firm they should find for the defendants, unless they should be also satisfied that the consent of Amos and John Binney was given to its being so applied. That is, that a note discounted by the acting and ostensible partner of a firm, for the use of a firm, the money arising from which was applied to that use, could not be recovered from the firm by the holder, unless the application was made with the consent of all the partners. The counsel for the plaintiffs in error is too intelligent to maintain this as a general proposition. He must confine it to this particular case. He is understood as contending, that under the secret restrictions contained in the bond given by Winship to Amos Binney, Winship was restrained from discounting these notes even for the use of the firm, and that no application of the money to the purposes of the co-partnership could cure this original want of authority, and create a liability which the note itself did not create, unless such application was made with the consent of all the partners. So understood, it is a repetition of Winship et al. vs. Bank of the United States. the matter for which the third exception was taken, and is disposed of with that exception. The instruction, therefore, ought not to have been given as prayed. Still, if the Court has erred in the instruction actually given, that error ought to be corrected. That instruction is, that if the notes were offered in the usual course of business for the firm, by the partner intrusted to conduct its business, and were so discounted, and if such discount was within such business, then the subsequent misapplication of the money, the holders not being parties or privies thereto or of such intention, would not deprive them of their right of action against the co-partnership. We think this opinion entirely correct. It only affirms the common principle that the misapplication of funds raised by authority, cannot affect the person from whom those funds are obtained. We think there is no error in the opinions given by the judge to the jury. The Court are divided on the competency of Samuel Jacques as a witness. The judgment is affirmed, with costs and damages at the rate of six per centum per annum, by a divided Court. Mr. Justice Baldwin dissenting. The plaintiffs sue in this case as the endorsees of six promissory notes, drawn by James Jacques, and endorsed by John Winship, which came to their hands as the discounters thereof, being offered by John Winship, and the proceeds thereof placed to his credit in the bank. They were not notes endorsed to the plaintiffs in payment, or as collateral security for the payment of an antecedent debt, or the performance of any pre-existing contract. The bank are prohibited in their charter from dealing in goods, unless for the sale of such as are pledged for the payment of debts. 4 L. U. S. 43. Ninth fundamental article of the charter of the bank. This was not then the case of goods sold by plaintiffs to defendants as partners, on the faith of the partnership, in the course of their business. Neither is it a case of money previously lent, and a note or bill endorsed over in payment or security. The case finds, and the Circuit Court considered it a case of discount, which is a purchase of the note on stipulated and well known terms. The purchase or discount of a note is a contract wholly unconnected with the objects, uses, or application of the money paid. A party who sells a bill or note incurs no liability to the Winship et al. vs. Bank of the United States. discounter by the mere contract of discount, where he does not endorse it; nor does the discounter who pays for the discounted bill or note in other bills and notes, without endorsement, guarantee their payment. The contract is one of sale, and in the absence of fraud or misrepresentation the rights of the parties are tested exclusively by the only contract which the nature of the case imports, of sale and purchase as of any other article in market. Where a purchase is made or money borrowed on partnership account, an immediate debt is created: a note or bill given or endorsed is for payment of the existing debt; and if not paid, the debt remains, unless the bill or note has been accepted as payment. So if the bill or note is given as collateral security. And the law is the same whether one or all the partners do the act; there is an antecedent debt binding on all, or an indemnity to be provided; the obligation is not impaired by giving or transferring an ineffectual security. But the present case is wholly different. The defendants owed no antecedent debt to the bank, for which these notes were transferred to them. They were neither offered nor accepted as payment or indemnity, but sold by Winship and purchased by the bank at their value. That value is, in my opinion, to be ascertained with reference to the names on the bill who are the parties to the contract, and in my view of the law the only parties. The bank bought from John Winship the promise of James Jacques, guaranteed by W inship on known conditions. This distinction between passing or pledging a note in payment, and discounting it, has been wholly overlooked in the opinion of the Circuit Court, and the case seems to have been considered throughout as governed by the same rules which apply to purchases, loans, and other partnership engageThe case before them was a pure case of discount, which is governed by its own principles, which, in my opinion, would have produced a different result in the cause had they been laid down to the jury. ments. These principles are fully illustrated and established in their various bearings on cases which have been adjudicated, and laid down in terms too clear not to be understood. 15 East's Rep. 10, 11. Doug. 654, note. 3 Ves. Jun. 368. 10 Ves. Jun. 204. 3 Durnf. and East, 757. 1 Lord Ray, 442. 2 Com. Rep. 57, S. C. 1 Cranch, 192. 6 Cranch, 264. 1 Wash. C. C. R. 156, 321, 328, 399. 3 Wash. C. C. R. 266. 9 Johns. Rep. 310. |