| N.J. | Jun 15, 1858
This action was brought upon a promissory note, drawn in the partnership name of Tomlin-son & Kennady to Samuel C. Bell, and by him endorsed. Judgment by default was entered against the endorser, and against Tomlinson, one of the makers. Kennady the other maker, alone defends the action.
The evidence shows that, at the time of the transaction, Tomlinson and Kennady were partners in trade. The note was drawn by Tomlinson, one of the partners, in the partnership name, and, at his request, was endorsed by Bell, as a matter of accommodation. The note, thus endorsed, was offered at the Medford Bank for discount for the accommodation of the firm, but was not discounted. It was subsequently delivered to Mecutehen, the plaintiff, by Tomlinson, one of the partners, in payment of his individual debt due to Mecutehen, without the knowledge or consent of Kennady, the other partner-.
The case presented is that of a partnership note made to a third party, and by him endorsed, and delivered by one of the partners to a ereditoi', in payment of his individual debt. The authority of the individual partner to bind the firm by the drawing or endorsing of negotiable paper extends only to the trade or business of the firm. Where such paper is in the hands of an innocent endorsee or bona fide holder, the law presumes that it was given for the benefit of the partnership, and the firm are held liable. Story on Partnership 102. And though such paper be negotiated by one partner in fraud of his co-partner, it is nevertheless binding on the firm in the hands of án endorsee without notice of the fx-aud. Coll-yer on Part., § 447.
It is equally well settled, thá-t where one partner employs the funds of the fix;m in payment of his individual debt, the creditor, knowing that fact, will be deemed to act in bad faith and in fraud of the partnership. And where the funds or the paper of the firm is taken in pay
There is no proof that the note in question had ever been negotiated. It is in evidence that it was made and endorsed as mere accommodation paper, and was in the hands of the individual partner by whom it was drawn, and by whom arid for whose individual benefit it was fraudulently transferred. Is the plaintiff who received the paper, not from the endorser, but directly from the partner, chargeable with knowledge of fraud ?
As against the creditor, the presumption of law would be, that the note, in the hands of the partner, at least before maturity, was mere accommodation paper, endorsed for the benefit of the firm, and not the property of the individual partner. If the note was transferred to the plaintiff after maturity, he holds it subject to every defence which would he available against the partner from whom he received it.
Where partnership property is transferred by a partner in payment of his individual debt without the consent of his co-partner, it vests no property in the creditor, whether he knew it to be the property of the partnership or not. Rogers v. Batchelor, 12 Peters 221.
The case of Ridley v. Taylor, 13 East 175, is not recognized as law in this country, so far as it imposes the burthen of proof in relation to the fraud upon the partnership. That case, moreover, is made to rest, in some measure, upon the ground that there was no proof that the appropriation of the partnership property was unknown to or unauthorized by the other partner, though such evidence was within the power of the defendant.
The recent case of Williams v. Walbridge, 3 Wend. 415, was in principle like the present, and rules the point now in question. The note was drawn by one of the partners of the firm to a third party, by them endorsed, and was delivered by the partner who drew the note to the plaintiffs in payment of an individual debt. The court held that no title to the paper passed by its delivery to the plaintiffs, and that the defence was available in an action
The Circuit Court should be advised accordingly.
Cited in Craig v. Hulschizer, 5 Vr. 364.