Rogers vs. Batchelor.

he was not bound; and that it was the duty of the creditor to ascertain whether there was such assent or not.

The same question has been discussed in the American courts on various occasions. In Dob vs. Halsey, 16 John. Rep. 34, it was held by the Court, that one partner could not apply partnership property to the payment of his own separate debt without the assent of the other partners. On that occasion, Mr. Chief Justice Spencer stated the difference between the decision in New York, and those in England, to be merely this: "that in New York the Court required the separate creditor, who had obtained the partnership paper for the private debt of one of the partners, to show the assent of the whole firm to be bound; and that in England the burden of proof was on the other partners to show their want of knowledge or dissent." The learned judge added: "I can perceive no substantial difference whether the note of a firm be taken for a private debt of one of the partners by a separate creditor of a partner, pledging the security of the firm, and taking the property of the firm, upon a purchase of one of the partners, to pay his private debt. In both cases, the act is equally injurious to the other partners. It is taking their common property to pay a private debt of one of the partners." The same doctrine has been, on various occasions, fully recognised in the Supreme Court of the same State. And we need do no more than refer to one of the latest, the case of Evernghim vs. Ensworth, 7 Wend. Rep. 326. Indeed, it had been fully considered long before, in Livingston vs. Roosevelt, 4 John. Rep. 251.

It is true, that the precise point now before us does not appear to have received any direct adjudication; for in all the cases above-mentioned there was a known application of the funds or securities of the partnership to the payment of the separate debt. But we think, that the true principle to be extracted from the authorities is, that one partner cannot apply the partnership funds or securities to the discharge of his own private debt without their consent; and that without their consent their title to the property is not divested in favor of such separate creditor, whether he knew it to be partnership property or not. In short, his right depends, not upon his knowledge that it was partnership property, but upon the fact whether the other partners had assented to such disposition of it or not.

If we are right in the preceding views, they completely dis

Rogers vs. Batchelor.

pose of the second instruction. The point there put involves the additional ingredient, that the separate debt and draft of Richards for the three thousand dollars was with the knowledge of the plaintiffs (Rogers & Sons) paid out of the partnership funds; and if so, then, unless that payment was assented to by the other partner, it was clearly invalid, and not binding upon him. It is true that the draft of three thousand dollars was drawn on Richards alone; and therefore it cannot be presumed that the plaintiffs had knowledge that it was accepted by the partnership or paid out of the partnership funds. But the question was left, and properly left, to the jury to say, whether the plaintiffs had such knowledge; and if they had, unless the other partner consented, the payment would be a fraud upon the partnership. With the question, whether the jury have. drawn a right conclusion, it is not for us to intermeddle. It was a matter fairly before them upon the evidence; and the decision upon matters of fact was their peculiar province.

The third instruction admits of no real controversy. The letter purports to be written by Richards alone, and not in the name of the firm, or by the orders of the firm. It embraces topics belonging to his own private affairs, as well as those of the firm. Under such circumstances, not being written in the name of the firm, it cannot be presumed that the other partner had knowledge of its contents and sanctioned them, unless some proof to that effect was offered to the jury. If the other party did not know of the letter, or sanction its contents, it is plain that he ought not to be bound by them; and such was the instruction given to the jury.

Upon the whole, our opinion is, that the judgment of the Court below ought to be affirmed, with six per cent. interest, and costs.

This decision does not at all affect that class of cases in which the bonâ fide holder of the negotiable paper of a partnership, who has acquired it for a valuable consideration in the due course of trade, is allowed to recover the amount from the firm, although the instrument itself was fraudulently put into circulation by a single partner. This rule is founded upon the peculiar principles and policy of the law merchant, which, for the general benefit of commerce, overlooks the occasional inconvenience and injustice which it may inflict. The transactions of commerce would come to a dead pause without the circulation of negotiable paper, and it therefore falls within the ordinary business of a mercantile partnership to draw, accept, and endorse bills of ex

Rogers vs. Batchelor.

change. In the absence of all known restrictions upon his authority, one partner is the general agent of the rest, in all the concerns of the partnership. Hence, unless there is some circumstance to impeach the bona fides with which the holder of the negotiable paper of a firm has received it, it is binding upon all the partners, whatever may have been its origin. Whether the circumstance, that the paper of a partnership has been received by a creditor of one partner in payment of his separate debt, is so suspicious as to throw upon him the burden of proving the assent of the other partners, is a question upon which the English and American courts have adopted a different rule, as is stated in the opinion of Judge Story, and recognised in other American cases. See Gansevoort vs. Williams, 14 Wend. 143; Stall vs Catskill Bank, 18 Wend. 466; Bank of Tennessee vs. Saffarans, 3 Hump. 597; Cotton vs Evans, 1 Dev. & Batt. Equi. 284; Weed vs. Richardson, 2 Dev. & Batt. 538.

The general principles involved in this case, were thus stated by Judge Story, in Kelley vs. Greenleaf, 3 Story's C. C. R. 98. "If one partner fraudulently or improperly, without the consent of his co-partners, applies the partnership funds to his own private purpose, or for his own private profit or emolument, or invests the same in property in his own name, and for his own use, the other partners have a right, if they can distinctly trace the investment, and elect so to do, to follow the partnership funds into the new investment, and treat it as trust property held by that partner for the benefit of the firm, and as liable to be accounted for by any person into whose possession the same may come, who is not a bonâ fide purchaser for a valuable consideration, without notice. The representatives or private creditors of the defrauding partner can stand in no better situation than he does."

In the case of M'Donald vs. Beach, 2 Black, Rep. 255, the property of the partnership has been transferred by one partner in payment of his separate debt. It was held by the Supreme Court of Indiana that the creditors of the partnership could not impeach the transaction, and claim the proceeds of the property in the hands of the separate creditor, for the satisfaction of their debts, without first showing that the appropriation had been fraudulently made without the knowledge or assent of the other partner. "Where no covin appears," says Judge Holman, "one partner will not be considered as acting without the consent of the other." "The equitable principle that the separate debt of one partner should not be paid out of the partnership estate, until all the debts of the firm are discharged, operates not only upon the property in the possession of the partnership, but embraces all that has been fraudulently disposed of; but will not extend to such as has been previously transferred in good faith."

CORPORATIONS.

THE BANK OF COLUMBIA US. PATTERSON'S ADMINISTRATOR. *

Liability of Corporations upon the parol contracts of authorized agents.

THIS was an action of indebitatus assumpsit, brought by the defendant in error against the president, directors, and company of the Bank of Columbia, in their corporate capacity. Patterson had built a banking house for the plaintiffs in error, under an agreement with a committee duly authorized by the directors of the bank. The committee had affixed their private seals to the agreement, but it was for the exclusive use and benefit of the bank. The question arose whether the corporation was capable of contracting, except under its corporate seal; and if it were capable, no special agreement being found in the case, whether the facts showed an express or implied contract on the part of the corporation. Judge Story, delivering the opinion of the Court, says upon these points as follows:

Anciently it seems to have been held, that corporations could not do anything without deed. 13 H. 8, 12; 4 H. 7, 5; 7 H. 7, 9. Afterwards the rule seems to have been relaxed, and corporations were, for conveniency's sake, permitted to act in ordinary matters without deed; as to retain a servant, cook, or butler. Plow. 91. b. 2 Saund. 305. And gradually this relaxation widened to embrace other objects. Bro. Corp. 51. 2 Salk. 191. 3 Lev. 107. Moore, 512. At length it seems to have been established, that though they could not contract directly, except under their corporate seal, yet they might, by mere vote or other corporate act, not under their corporate seal, appoint an agent, whose acts and contracts within the scope of his authority, would be binding on the corporation. Rex vs. Bigg, 3 P. Wms. 419. And courts of equity in this respect seeming to follow the law,

7 Cranch's Rep. 299, 2 Cond. Rep. 501.

The Bank of Columbia vs. Patterson's Administrators.

have decreed a specific performance of an agreement made by a major part of the corporation, and entered in the corporation books, although not under the corporate seal. 1 Fonblanque's Equity, 305. The sole ground, upon which such an agreement can be enforced, must be the capacity of the corporation to make an unsealed contract.

As it is conceded, in the present case, that the committee were fully authorized to make the agreements, there could then be no doubt that a contract made by them in the name of the corporation, and not in their own names, would have been binding on the corporation. As, however, the committee did not so contract, if the principles of law on this subject stopped here, there would be no remedy for the plaintiff, except against the committee.

The technical doctrine, that a corporation could not contract except under its seal, or, in other words, cannot make a promise, if it ever had been fully settled, must have been productive of great mischiefs. Indeed, as soon as the doctrine was established that its regularly appointed agent could contract in their name without seal, it was impossible to support it; for otherwise the party who trusted such contract would be without remedy against the corporation. Accordingly it would seem to be a sound rule of law, that wherever a corporation is acting within the scope of the legitimate purposes of its institution, all parol contracts made by its authorized agents are express promises of the corporation; and all duties imposed on them by law, and benefits conferred at their request, raise implied promises, for the enforcement of which an action may well lie. And it seems to the Court that adjudged cases fully support this position. Bank of England vs. Moffatt, 3 Bro. Ch. Rep. 262. Rex vs. the Bank of England, Doug. 524, and note ibidem. Gray vs. Portland Bank, 3. Mass. Rep. 364. Worcester Turnpike Corporation vs. Willard, 5 Mass. Rep. 80. Gilmore vs. Pope, 5 Mass. Rep. 491. Andover and Medford Turnpike Corporation vs. Gould, 6 Mass. Rep. 40.

In the case before the Court, these principles assume a peculiar importance. The act incorporating the Bank of Columbia, Act of Maryland, 1793, ch. 30, contains no express provision authorizing the corporation to make contracts. And it follows, that upon principles of the common law it might contract under its corporate seal. No power is directly given to issue notes not