
    The Bank of Tennessee vs. Saffarrans.
    1. It is not within the purpose and business of a mercantile firm to endorse paper for its neighbors. Such business is not within the contemplation of the partnership; and, therefore, no such authority is implied or attached to any one of the members. Such endorsements not being within the scope of the partnership business, are in fraud of the firm and void, unless in the hands of an innocent holder.
    2. If one member of a firm endorse a note for the accommodation of a third person, and this fact was known to the holder, he is chargeable with notice of want of authority and guilty of concurring in an attempted fraud upon the other partners, unless the holder proves their assent, either express or implied, either before or after the signature.
    3. Where one member of a firm was in the general habit of endorsing at bank.in the name of the firm, and with the knowledge of the firm for the accommodation of third persons, such general course of dealing would be sufficient evidence of authority from all the members of the firm, and all would be bound.
    On the 7th day of May, 1840, Benj. Exum made his promissory note to S. Merrell, for the sum of $3234, payable six months after date at the Bank of the State of Tennessee. This note was endorsed by MerreH to Boyers & Saffarrans, by them to McKoin, by McKoin to Jenkins. Thus endorsed it was bought by the Bank of Tennessee. When it fell due it was not paid, and being protested, due notice thereof was given to the endorsers.
    The bank instituted an action of assumpsit against the maker and endorsers in the circuit court of Sumner county. Judgment was rendered against Exum, Merrell, Boyers, McKoin and Jenkins. Saffarrans pleaded non est factum, and issue was taken thereupon, and the case submitted to a jury; Dillahunty, judge, presiding.
    It appeared that Boyers & Saffarrans were partners in buying and selling land, and in buying and selling goods, in the town of Gallatin, that this note was executed by Boyers in the firm name, when Boyers and Saffarrans were in partnership; that it was endorsed for the accommodation of Exum, who was engaged in speculating in Pork; that the firm of Boy-ers & Saffarrans had no interest in the proceeds of the note; that it was executed whilst Saffarrans was absent from the State, and was endorsed without his knowledge or assent; that the president and directors of the bank knew that the endorsement was made by Boyers, and that it was made for the accommodation of Exum.
    It also appeared that Boyers had endorsed notes in the firm name in various instances for the accommodation of others. It did not appear that Saffarrans was aware that Boyers had ever used his name as above, or that he approbated the course of Boyers in this transaction. It did not appear, that by the terms of the partnership, any authority was given to either member of the firm to draw or endorse bills or notes, other than the law permitted.
    The court charged the jury, that the act of one partner, within the scope of the partnership concern, bound all the partners; but that where the credit of the firm is attempted to be used by one of the firm for the benefit of third persons, there must be proof of authority to do such act or acts other than that derived from the partnership, in order to bind the other partners; that where an endorsement is made by one member of the firm without any consideration and for the mere accommodation of some party to a note, and the plaintiffs knew that it was endorsed for the accommodation of such person by one of the partners in the name of the firm, then the partner who did not sign, is not bound by it, unless he was consulted in reference thereto and assented to it, and the burthen of such proof lies on the creditor or holder.
    The jury rendered a verdict for the defendant, and judgment having been rendered thereupon,'the plaintiff appealed in error.
    
      John J. White, for the plaintiff in error.
    The first ground which I assume is, that Boyers had the right as a member of the commercial firm of Boyers & Saffar-rans, as well as being a partner of Saffarrans in their large land operations which required extensive credits, to use the partnership name in endorsing this bill and note. Gow. on Part. 57, 60-1: 7 Term 210: 2 Esp. N. P. Cases, 731: 7 East 210: 13 Ibid 175: Story on Part. 189: 1 Hump. 29-30.
    2d. If Boyers had not the power to make the endorsement, a bona fide holder such as the Bank is, would be protected. Gow. 69, 70-1-2: 3 Kent’s Comm. 20. An accommodation endorser is liable to a bona fi.de holder for value even if he received no consideration for his endorsement, and prior endorsements were forged. Harris vs. Bradley, 7 Yerg. 310-12. And in this case it is important to remark that Bradley knew Harris was an accommodation endorser, yet the court do not on that account regard him as acting mala fide. An accommodation endorser is upon the same footing with any other kind of endorsement; if his endorsement is prior, he is liable to all subsequent endorsers and holders. 9 Yerg. 1-4. Even where an endorsement is in blank, and a fraudulent.use made of the pri- or endorsement, a subsequent holder for value, is protected. Nichol, Hill SfCo vs. Bate, 10 Yerg. 429-433. The court says, “Nichol, Hill & Co., were no participators in the fraud, and had no reason to suspect the honesty of the transaction.” With-what force does that remark apply to this case from the testimony, so far as the Bank and its officers are concerned!-
    
      In this case the court was called upon to charge the jury, “that even if Boyers had abused his authority in endorsing the note, if the bank was a bona fide holder for value without notice of such abuse of authority, having discounted the same in the ordinary course of its banking operations, Saffarrans would be liable, and their being accommodation endorsers would make no difference.” But the court charged, where there is an accommodation endorsement, that is an endorsement without consideration, and for the mere purpose of accommodation to some party to the note, and the party receiving it knows that it is so, then the other partner is not bound unless he was previously consulted and assented to the transaction, and that the burden of proof that he did consent is thrown on the creditor.
    Is this the law? the authority relied upon to slistain this position, is Story on Part. 190, 1, 2, and note which condenses some of the New York cases. But it will be seen that neither thecases referred to in the text or note decide this question at all in regard to accommodation endorsements. The English cases in the text are those of guaranty; and the case particularly referred to in the note, of Laverly vs. Burr, 1 Wend. 529— 531, was a mere case of security ship in the form of an endorsement, whereas in the present case, this note was taken in the usual course of trade, and discounted by the bank in its ordinary banking operations. If the court however in this case in 1 Wendall, mean to say, that one partner of a commercial firm cannot sign the partnership name in endorsing anote unless it is for a partnership debt, I submit that that is not the law, nor ought it to be. It would destroy all confidence in partnership securities, for it would be wholly impossible in every instance to apply to each partner to know whether he assented to the negotiation of the instrument. See Gow. 70. And even if that was done, and they all assented, generally it would be impossible to make the proof. If this is declared to be the law, no firm náme can with safety be received upon a negotiable instrument.
    With regard to the casein 7 Wend. 158, that is a case of a mere partnership security upon the face of the note, and not like the present, anote sent into the world and negotiated upon the faith of the partnership name. The casein Í4 Wendall, 133, is that of a firm note being executed to secure the private debt of one of the partners, and endorsed by the person seeking to enforce it, and he acquainted with the facts. The case in 14 Wendall, 146, is that of a note endorsed in the firm name to secure an individual debt, and that known to the party taking it. It will thus be seen that the New York cases refer to the principle of a firm note being executed-or endorsed to secure a private debt, either of an individual member of the firm, or some other person, and that known to the party receiving the instrument, which would be a fraud upon the other partners; and not to the authority which is believed to be inherent in a commercial firm to sustain their credit by endorsing the firm name, as well as procuring endorsements for-the firm.
    With regard to the English case's referred to, it will be found that none of them are analogous to the present. They merely decide the principle that one partner cannot use the firm name .in negotiating an instrument for the benefit of his individual creditors; and that the same will be fraudulent in the hands of a party receiving it with notice.
    Again, the court was called upon to charge the jury, “that if Boyers and Saffarrans were partners in trade and merchandise, and in their land business, and that this required extensive credits, giving and requiring endorsers, Boyers had aright to use the partnership name in endorsing the note and that Saf-farrans would be liable.” But the court refused to give the charge, and would not permit any question to be asked upon that subject. I take it the court clearly erred in this. Story, 151 and note, 161 et seq. 189-190:1 Hump. 29:15 Wend. 482— 8; Collyer on Part. 228-232 and note: Gow. 89-90: 3 Kent 19. The court should have charged, if this system of drawing and endorsing paper was according to commercial usage, and the usual course of trade, and was required by their particular business; but more especially if it was according to the known habits of Boyers and Saffarrans, and at this particular bank, where the bill and note were negotiated, Saffarrans would be liable. See Story, 190.
    The court erred too upon the subject of authority. In another part of his charge he says: “If a partner uses the name of the firm 'without authority, a strong case of subsequent approbation is required to make him liable.” The form of this charge, not to say any thing about its i ncongruity with what had been before said, was well calculated to mislead the jury, and to keep out of view altogether the fact of a general previous authority having been given to Boyers to endorse paper for others, as well as to get endorsers for the firm, which might well be inferred from the proof, and which would make Saffar-rans equally responsible, with subsequent approbation. See 3 Kent, 18 — 19: Gow. 63: Story, 189 — 190: 14 Wend. 139.
    If it is said, that the authority to be valid, must be exercised in cases within the scope of the ordinary business transactions of the firm; it may well be argued from the proof that this was the case here; that their business required extensive pecuniary means and credits, drawing, endorsing and accepting bills, and giving endorsers, requiring of course reciprocal endorsements.
    
      Guild, for the defendant.
    When individuals unite their money, their skill, effects or services, and form a partnership for particular purposes, it is true that they confide in and trust each other, and consequently are responsible for each other’s acts touching their partnership concern. But there is a limitation to the power of one partner to bind the firm. And among other limitations, the act which will bind the firm must be within the scope of the business of the partnership; even if it shall be within the scope of the business of the partnership, if it be made with a party or his agent, who knew the act was for the benefit of the particular partner, or if he was acting in violation of his duties' to the firm, or for purposes disapproved of by the firm, or in fraud of the firm; in any such case the firm would not be responsible. One-member of the firm cannot pledge the responsibility of the firm as security for a third person; cannot endorse the name of the firm so as to bind the absent partner as an accommodation endorser for another. The charge of the circuit court on this' point is in strict conformity with the law. Story onP. 191.
    It is true that a firm will be bound as the maker or endorser of commercial negotiable paper, in the absence of proof of a knowledge on the part of the party receiving the paper, that it was for the. benefit of one of the partners, or that the partners, in case of endorsers, were securities or accommodation endorsers; but when this knowledge is proved to exist, the firm is not bound, unless it is shown by proof, that the partner who did not sign the name of the firm was'previously consulted and assented to the transaction. And this-proof is thrown upon the party seeking to make the firm responsible. 2 Cains, 246: 19 John. 167: 1 Wend. 629: 7 Wend. 168: 14 Wend. VÚo.
    
    This draft was drawn by Benj. Exum, for his use, known and so stated to the directory at the time of its being discounted. The endorsers were known to be accommodation endorsers, and the monej^ was received by Exum to enable him to speculate in pork. The note was discounted by the directory to take up the draft. The same principles which fix the rights of the parties as regards the draft, apply in the case of the note. Daniel Saffarrans was absent from the country when the endorsement in each case was made by R. M. Boyers. It was known by the directory that R. M. Boyers made the endorsement. It will not do for the directory of the bank to urge that they discounted the draft upon the credit of Saffarrans. They have let the drawer, Exum, have the money without the signature of Saffarrans; without consulting him or obtaining his assent. Mr. Boyers had no authority, by virtue of the partnership, to endorse for Saffarrans, and they failing to show any authority other than that resulting from the general powers of partners, have no right to look to Saffarrans to pay this money. If they considered Saffarrans bound by this endorsement, they misconceived the law, and Saffarrans stands upon his legal rights, and cannot be affected by it.
    • In the case of The Bank of Rochester vs. Bowen, 7 Wend. 158, one of the partners signed the name of the firm as makers of the note with three others. The bank knew through the cashier that the note was discounted for the benefit of one of the makers and not the firm, and it was correctly held that the firm was not responsible.
    The case of Wilson vs. Williams, 14 Wend. 156, is precise-lj in point with this; being on anote endorsed in the name of the firm by one of the partners for the accommodation of the maker; the court determined that.the partner not privy to the transaction, is not bound. The court determines further, before the partner can be held responsible on the ground of subsequent assent, the evidence must be strong and satisfactory; slight and inconclusive circumstances will not be sufficient. The charge of the judge in this case being in accordance with the above principles, there is no error, and the bank is not entitled to a reversal.
   TuRLey, J.

delivered the opinion of the court.

The question presented for consideration in this case, is one of much interest to the commercial community, and has received that careful consideration, which its importance well merits.

The liability of partners upon contracts made in the name of the firm, has occupied much of the time and attention of courts of justice, in all commercial countries, and the principles upon which it rests, though varying a little and but little, seem to be well settled by authority, and upon correct principles of equity and justice; the rights of third persons on the one hand being well secured against all the members of the partnership upon contracts legally made, whilst on the other, the rights of an individual partner are properly protected against the illegal and fraudulent conduct of those with whom he is associated in trade.

The case under consideration presents the following facts:

Daniel Saffarrans and Robert M. Boyers were partners in trade and merchandise, in the town of Gallatin, from 1835 to 1838, when they sold out their goods without in form dissolving their partnership; they were also partners in buying and selling land to very large extent, which was in continuance up to the time of the trial in the court below. Their operations were heavy and inquired extensive means, both in money and credit, requiring them to draw and endorse bills of exchange and promissory notes, and give endorsers for large amounts, which they did. Boyers was the managing partner in Tennessee, (Saffarrans being most of his.time absent from the State,) and as such drew and endorsed in the partnership name all of the bills and notes required for the use of the firm; part of which Saffarrans paid. There is no proof that by the terms of the partnership any authority was given to either member of the firm to draw or endorse any bill or note other than such as the law regulating the rights and liabilities of partners permitted. On the 4th day of October, 1839, Benjamin Exum drew a bill on New Orleans for three thousand dollars at six months; this bill was endorsed by Boyers in the name of the firm of Saffar-rans & Boyers, and discounted by the Bank of Tennessee; it was drawn and discounted for the benefit of the drawer, and the proceeds received by him, all of whicRgag'^pwn to the officers of the bank at the time it bill not being paid at maturity, a note^vg^j&fawn by Esm in favor of Simpson Merrell, for the sum of three (tte©Sj$i&%wo hundred and thirty dollars, was endorMdrary Boyers in |e name of the firm, discounted by the banMand^^g^S^S^pliedto the payment of the bill. There is\p^¡)roof shcgs>if]g that Saf-farrans was éver aware that his name nacfffsBífthus used by his partner, or that he had ever given his assent or approbation thereto, either expressly or impliedly; and the question now is, is he responsible as endorser of the note?

In Gow’s Treatise upon Partnership, page 53? the general law upon the liability of partners, upon contracts made in the name of the firm is thus laid down: “Partners are bound universally by what is done by each other in the course of the partnership business; their liability is commensurate and coextensive with their rights.”

In the case of Harrison vs. Jackson, 7 Term. Rep. 207, it is held, that in simple contracts itis a clear and undeniable principle of law, that one partner may by his own acts bind his co-partners in transactions relating to the partnership. So the signature of one partner as the maker of a promissory note, or the drawer of a bill of exchange, or his acceptance or endorsement of a bill or note, is binding upon his co-partner in transactions relating to the partnership. :

But cases exist (and this is one of them) in which a partner may enter into a joint engagement in a transaction not relating to the partnership, and it will only be binding if it receive their express or implied sanction. “The power possessed by a partner of binding his co-partners in joint transactions without their knowledge or consent, bears in many instances, sufficiently hard upon partners, but it would.fee'carrying their liability for each other’s acts to amost unjust extent if it were suffered, that in a separate transaction, one partner could pledge the credit of the firm.

This subject has frequently fallen under judicial consideration in the courts, both in England and the United States, and it has been undisputably settled, against the power. In the case of Swan vs. Steel. 7 East, 210, it was held that if a creditor of one of the partners collude with him to take payment or security for his individual debt out of the partnership funds, knowing at the time that it was without the consent of the other partner, it is fraudulent and void. In the case of Wells vs. Masterman, 2 Esp. N. P. C. 131, it is held that if a man who has dealings with one partner only, draws a bill of exchange upon the partnership on account of these dealings, he is guilty of a frau d, and the acceptance made by the partner on the account of the firm would be void; so when the bill was drawn by one partner in the joint name, to the order of his separate creditor, it was held that he could not recover against the firm, notwithstanding he had no notice of the non-concurrence of the co-partner. Green vs. Deakin, 2 Stark. N. P. C. 347. But in the case of Henderson vs. Wild, 2 Campbell, 261, the converse of this proposition is held, upon the ground, that the proof of non-concurrence rests upon the partner seeking to be discharged, and that in the absence of all proof upon the subject, a concurrence will be presumed; a principle which seems to be established by the current of authority in England, yet not without some conflict.

In the case of Arden vs. Sharp, 2 Espmassis N. P. C. 523, it is held that in case of a bill endorsed by one partner in the name of the firm, when the party bringing the action is himself the person who discounted the bill, and wa's informed at the time that the transaction was to be concealed from the other part-hers, he cannot hold the partnership responsible,- the transaction itself indicating that the money was .for the separate partner’s own use, and was not intended to be applied for partnership purposes. So in the case exparte Bonbonus, 8 Yesey, 640, it is determined that if a partnership negotiable security be given by one partner to his creditor in discharge of an antecedent debt due from himself, the presumption-is, that the firm is not liable, because the separate creditor must be considered as being advertised, in the nature of the transaction, that it could not be intended to be a partnership proceeding. In the case of expar-te Agace, reported in 2 Cox, 312, and referred to in Collier on Partnership, p. 270, Lord Commissioner Eyre, says: “In partnerships both parties are authorized to treat for each other in every thing that concerns or properly belongs to the joint trade, and will bind each other in transactions with every one who is not distinctly informed of any particular circumstances which may vary the case. On the other hand, if the transaction has no apparent relation to the partnership, then the presumption - is the other way, and the partnership will not be bound by the acts of one of the partners without special circumstances; here the debt due had nothing to do with the partnership, I am perfectly satisfied that this was a transaction with an individual partner, in a matter not relating to the partnership, and that, therefore, the partnership could not be bound by it without subsequent concurrence.” Lord Ashurst said, one partner is bound by the acts of his co-partner in all acts referable to the partnership trade; but when a man takes a security from one partner in the name of the firm, in- a transaction not in the usual course of dealing, he takes such security at his own peril.

In the case of Franklin vs. McGurty, 1st Knapp’s Rep. 315, Sir John Leach, Master of the Rolls, says: “I take it to be clear, from all the cases upon the subject, that it lies upon a separate creditor who takes a partnership security for the payment of his' separate debt, if it be taken simpliciter, and there is nothing, more in the case, to prove that it was given with the consent of the -other partners. But there may be other circumstances attending the transaction whieh'may afford the separate creditor a reasonable ground of belief, that the security so given in the partnership name, is given with the consent of the other partners. Upon a consideration of all the authorities, I am of opinion, that the law is, that taken simpliciter the separate creditor must show the knowledge of the partnership, but if there are circumstances to show a reasonable belief, that it was given with the consent of the partnership, it lies upon the partnership to ¡Drove the fraud, which I think will reconcile the cases.”

And again, in the same case: “There being no direct evidence whether the bills had been given with the assent of the partners, the question was, whether they being given by an individual partner in the name of the partnership firm for his individual debt, the burden of proof to show that the other partners did not assent to their formation, rested upon the partners or upon the party claiming the interest in the bills, and upon the consideration of that question and examining all the authorities he was of opinion, that simpliciter bills drawn by one partner for a separate debt in the partnership name, could not be recovered upon as against the partnership firm: but that the person claiming payment of the bills, must prove either a direct assent of the other partners to the formation of the bills, or if not such direct assent, that there were some circumstances in the transaction from which the party taking them might reasonably infer, that they were given with the assent of the partners.”

Then the law upon this subject, in England, seems to be conclusively settled, that one partner cannot bind the partnership, by drawing, endorsing or accepting notes or bills upon a transaction not relating to the partnership; that if it be done, the other partners are not responsible, if they can show that it was done without their knowledge or consent, and that they had not after-wards assented thereto; and most probably, that if the notes or bills be taken simpliciter, that is, without any attending circumstances, sufficient to raise a reasonable presumption, that they were executed with the assent of the other partners, the person receiving them, is bound by the knowledge of the consideration, and that it throws upon him the necessity of proving the assent precedent or subsequent: and these principles apply to all persons into whose hands soever the securities may come with knowledge of the consideration, or in other words, who are not bona fide purchasers, without notice.

But whatever of difficulty or doubt, if any, may exist in England as to the person upon whom the onus yrobandi lies, there is none in this country.

Mr. Story in his Treatise on Partnership, p. 190, sec. 127, says: “If one partner gives a letter of credit or guaranty in the name of the partnership, it is not to be treated as of course binding on the partnership, for it is not a„ natural or necessary incident in all sorts of partnerships, for one partner to possess the power to bind his co-partners by a guaranty. It must be shown to be justified, either by the usages of the particular trade or business, or by the known habits of the particular partnership, or by the express or implied approbation of all the partners in the given case. The same rule will apply to cases, where one partner signs or endorses the name of the firm to a note as surety for a third person, in which note the partnership has no interest, and where it is not in the course of their business.” In sec. 128, he says: “Every contract in the name of the firm, in order to bind the partnership, must not only be within the scope of the business of the partnership, but it must be made with a party who has no knowledge or notice, that the partner is acting in violation of his obligation and duties to the firm, or for purposes disapproved of by the firm, or in fraud of the firm. For every such contract made with such knowledge or notice, will be void as to the firm.” In sec, 133, he says: “It maybe taken as a general rule, that when a note, or security, or fund of the firm has been taken in discharge of a separate debt of one partner, the burthen of proof is on the holder or creditor to show circumstances sufficient to repel every presumption of fraud or collusion, or misconduct, or negligence on his own part; unless, indeed, the circumstances already in proof on the other side repel such presumption. . And if the securities or funds of the partnership are received in payment of the separate debt of one partner by his creditor, it will not be necessary for the partners to establish the fact, that the creditor knew at the time that it was a misapplication of the securities or funds, for the very nature of such a transaction ought to put him upon further inquiry, and however bona fide his conduct may be, it is a case of negligence on his part, which will not entitle him to recover against the partnership. At p. 208 in note, he says: “the cases are believed to be uniform from that'of Livington vs. Hastee, 2 Caines, 246, down to the present time, that when a note or other security is given in the name of the firm by one partner for his private debt, or in a transaction unconnected with the partnership business, which is the same thing, and known to be so by the party taking it, the other partners are not bound, unless they have consented. The fact of the paper of the firm being given out of the partnership business by one member, is presumptive evidence of want of authority to bind the other members of the firm; and if the person taking it, knows the fact at the time, he is chargeable-with notice of want of authority, and guilty of concurring in an attempted fraud upon the other partners.” These positions are all well sustained by 14th John. Rep. 544, 16th John. Rep. 34, 19th John. Rep. 154, 3d Wend. 419, 5th Wend. 223, 6th Wend. 619, 7th Wend. 158-310, 1st Wend. 529', 14th Wend. 133. Such is unquestionably the law in the United States.

The bank then having taken the endorsement of Boyers & Saffarrans with full knowledge that it was made by Boyers alone for the accommodation of a third person, and not in the business of the firm or for its use, cannot hold Saffarrans responsible, unless it proves his assent thereto, express or implied, before or after the transaction. This has not been done, in all probability, because it cannot, for the law is well settled, that it may be- shown that the other partners have directly or by fair implication authorized or confirmed the misapplication of the partnership credit, and if the proof could have been made m this case, the presumption is that it would.

As has been said the proof may be presumptive. For if it should appear that a member of a house, with the knowledge of the partners, was in the habit of endorsing at bank or elsewhere for another, such general course of dealing would be sufficient evidence of authority from all the members of the firm, and such use of it by one, would bind all. Duncan vs. Lownds & Bateman, 3 Camp. 478. The authority would not flow from the partnership, but from facts and considerations independent of it. See same point, Wilson vs. Williams, 14 Wend. 146, Rogers vs. Batchelor, 12 Peters, 221, 229, 232, Story on Partnership, 209, in note.

The argument which has been used, that in as much as Boyers & Saffarrans being in a trade which required a credit based hpon endorsements by others, they must reciprocate them, has no weight whatever. It is undoubtedly the practice of mercantile firms (as Mr. Story observes) to endorse the bank paper of each other, by the hand of any one of their members; but upon a strict application of the rule here, and upon some of the cases in England, such paper would not bind the firm, if the bank had knowledge of the facts.

It is not within the purpose and business of a mercantile firm to .endorse paper for its neighbors; such business is not within the contemplation of the partnership, and, therefore, no such authority is implied or attached to any one of the members. Story, 209.

A contrary doctrine might well alarm the commercial community, and be productive of .the worst consequences; under it there would be no safety in partnership pursuits, and strong inducements constantly offered to breaches of trust, involving the ruin of confiding and unsuspecting tradesmen.

Upon the whole view of this case, we are satisfied that the circuit judge has committed no error in the proceedings below, and affirm the judgment.  