Sladen, Fakes & Co. v. Lance, 151 N.C. 492 (1909)

Dec. 15, 1909 · Supreme Court of North Carolina

151 N.C. 492

SLADEN, FAKES & COMPANY v. J. G. LANCE and M. R. JONES.

(Filed 15 December, 1909.)

1. Partnership — Limited Authority — Notice—Liability.

When one deals with a partner with notice that his acts exceed the limitation imposed upon his authority by the partnership, the partnership is not bound, and the remedy is restricted to the partner with whom he deals.

2. Same — Evidence.

One who has entered into a partnership with another in a business conducted in a different town from that of his residence. under a parol contract by which it was agreed that the other partner should conduct the entire business and only buy such goods as he was able to pay for promptly, is not liable to a erect itor of the firm to whom he had given notice of the agreement, and who acted in disregard of the notice and in such a manner as to keep Mm in ignorance of the true status of the account.

Appeal from Ferguson, J., May'Term, 1909, of BttNCOMBe.

Tbe defendant M. E. Jones alone was served witb summons, and defended tbe action. Tbe plaintiffs sued to recover a balance of $292.22 and interest for tbe value of tbe goods sold and delivered to tbe partnership of J. G-. Lance & Co., tbe company being tbe defendant, Mrs. M. E. Jones. Tbe goods were sold on tbe strength of Mrs. Jones’ connection as a partner. The defense was rested upon allegations that tbe partnership agreement, being verbal, provided that Lance, who was tbe active partner in tbe entire management of tbe business, should not run into debt, but should buy only such goods as be was able to pay for promptly; that thp defendant J ones communicated this stipulation to members of tbe plaintiff firm; -that she did not wish tbe plaintiff to permit him to trade with him unless be kept bis bills promptly paid; that, as she did not live in Asheville, where tbe plaintiffs and the partnership of J. 0. Lance & Oó. did business, but in Buncombe County, she made frequent inquiries, from time to time, of salesmen of plaintiff who visited tbe store conducted by her brother and herself in tbe county, if Lance was keeping bis bills paid up, and was always told that be was; that during tbe period covered by these inquiries plaintiffs were permitting tbe said Lance to run in debt; that when finally she found out that tbe partnership was about to fail, she went to see plaintiff, and tbe following conversation occurred: “I asked why they did not notify me of tbe fact that they were letting Lance run behind, and be (Dr. Fakes or Mr. Slayden) said that be was sorry that be did not — that he ought to have done it; and I asked for a statement, and they said that they would give it to me if I would not let Lance know it, and I asked why they did not want him to know it, and they said that it would make him mad. They gave me a statement and I took it and went home.” This was after tbe full indebtedness sued for bad been contracted, and tbe first and only statement ever furnished defendant Jones. That defendant bad not received anything whatever from tbe partnership; that what was left of tbe goods was sold and tbe entire proceeds turned over to plaintiffs.

At tbe trial tbe defendant Jones admitted, in writing, (1) tbe existence of tbe partnership during tbe period covered by plaintiff’s account; (2) that the itemized account sued on was correct; that tbe goods so sold were for the use of the partnership and had not been paid for, and (3) that the defendant assumed the burden of proof on the issue submitted. His Honor held that the admission established a prima facie case for the plaintiffs. 'Without objection,.his Honor submitted this issue to the jury: “Is the defendant MarJ- R. Jones indebted to the plaintiffs on account of the partnership of J. G. Lance & Co. ? If so, how much?” The jury having responded to the issue, “Nothing,” judgment was rendered against the plaintiffs for costs, and they appealed to this Court.

Tuclcer & Lee and Merrimon & Merrimon for plaintiffs.

Frank Garter and II. 0. Chedester for defendants.

MANNING, J.,

after stating the case: The principal question presented by this appeal is the correctness of his Honor’s refusal to instruct the jury, upon the evidence, to return a verdict for the plaintiffs, for the reasons that the defense pleaded was not good, and that it was unsupported by any sufficient evidence, in view of the written admissions of the defendant at the trial. We are against the plaintiffs upon both propositions. It is undoubtedly a generally accepted doctrine that “Whatever, as between the partners themselves, may be the limits set to each other’s authority, every person not acquainted with those limits is entitled to assume that each partner is empowered to do for the firm whatever is necessary for the transaction of its business, in the way in which that business is ordinarily carried on by other people.” Powell v. Flowers, at this term; Lindley on Part., 124; George on Part., 215. The doctrine stated is so generally held and so well established that no further citation of authority is needed for its support. It is equally well settled that where a party dealing with a partner has notice of the limitation upon the partner’s authority, the partnership is not bound; his remedy would be restricted to the partner with whom he dealt. Story on Part., secs. 128, 129, 130; George on Part., p. 215; Lindley on Part., pp. 168, 169; 1 Bates on Part, secs. 323, 324; Parson’s Principles of Part., 115; 22 Am. & Eng. Enc., 142; Cotton v. Evans, 21 N. C., 284; Long v. Carter, 25 N. C., 241; Baxter v. Clark, 26 N. C., 127; Gallway v. Matthews, 10 East, 264; Winship v. Bank, 5 Peters, 529; Knox v. Buffington, 50 Iowa, 320; Bramley v. Elliott, 38 N. H., 287; Livingston v. Roosevelt, 4. Johnson, 251; Pollock v. Williams, 42 Miss.; Fertilizer Co. v. Pollock, 104 Ala., 402; Wilson v. Richards, 28 Minn., 337; Radcliffe v. Varner, 55 Ga., 427; Williams v. Barnett, 10 Kan., 455; Hastings v. Hopkinson, 28 Vt., 108; Chap man v. Devereux, 32 Vt., 616; Cargill v. Carley, 15 Mo., 425. As opposed to a doctrine established by the well-considered decisions of learned and eminent jurists, the counsel for the plaintiffs cite Johnston v. Bernheim, 86 N. C., 339, and the same case, 76 N. C., 139. We think that in those two cases there will be found an express recognition of this doctrine. At page 140, 76 N. C., the Court says: “It is otherwise where the partnership is not general, but is upon special terms, as that purchases and sales must be with and for cash. There the power to each is special in regard to all dealings with third persons, at least, who have notice of the terms.” But the Court adds: “But even in that case, if the terms are violated, as if a partner buy on time when he ought to buy fox cash, and the thing bought come into the partnership and the partnership take the benefit, the partnership must pay for it.” This language was quoted by the learned Chief Justice, who spoke for the Court in delivering the opinion in the 86 N. C., 339, when the case of Johnston v. Bernheim was again before this Court, and was evidently predicated upon the evidence in that particular case, which tended to show that the partner sought'to be charged had knowledge of the delivery of the goods bought on credit and recognized the debt. The language of the Court, applied to that state of facts, is sustained by reason and authority, and is in agreement with the many well-considered opinions which we have examined. It is obviously true that when notice that the limitations upon the power of a partner contained in the partnership agreement are exceeded, or the restrictions therein imposed disregarded, is brought home to the other partner or partners, and, having such knowledge, the other partner or partners permit the partnership to enjoy the fruits of the abuse of power and to receive benefits therefrom, or fail promptly to disavow the act of such partner,, the partnership and its members would and ought to be bound; but, without such limitation, we think the language of this Court in the opinions quoted from above states the proposition too broadly, and is not sustained by the text writers and the well-considered opinions of other courts whose opinions are above cited. The evidence in this case tended to prove that in the partnership agreement it was stipulated that Lance should not go in debt for goods purchased; that Mrs. Jones notified a member of plaintiff firm of the agreement, and that she wished them to quit selling to him if he did not pay promptly; that she inquired from time to time of plaintiffs salesmen if Lance was keeping his bills paid up, and was uniformly told that he was; that when she was told that Lance had run the business in debt, she promptly complained to plaintiffs and tbey admitted tbat tbey ought to have informed her; tbat plaintiffs were permitting Lance to become and remain indebted to .them during tbe period sbe was inquiring if Lance was indebted; tbat sbe offered to turn over tbe stock of goods to plaintiffs and tbey refused to accept it; tbat sbe sold tbe stock, inventoried by an employee sent by tbe plaintiffs, and paid tbe plaintiffs tbe entire proceeds; tbat plaintiffs hesitated, upon her demand to give her a statement of tbe account, for tbe reason it might make Lance mad; tbat plaintiffs sold goods to tbe partnership upon tbe financial strength of Mrs. Jones. We think bis Honor committed no error in submitting tbe case to tbe jury upon this evidence, and tbat tbe jury were justifiedfin their verdict. While tbe plaintiffs were not, upon tbe evidence, guilty of tbat fraud which necessarily involves moral turpitu.de, yet their conduct was a fraud upon the right of tbe defendant, for tbe fraud in such case consists in tbe knowledge tbat tbe partner was violating, with their aid, a stipulation of tbe partnership agreement, without tbe consent of tbe other partner and against her express instructions. Livingston v. Roosevelt, supra; Bigelow on Fraud, 242; Story on Part., sec. 131; 1 Bates on Part., sec. 323; Cotton v. Evans, supra.

We bave carefully examined tbe exceptions taken at tbe trial by tbe plaintiffs, appellants, to tbe rulings of bis Honor upon the evidence, and to instructions prayed and refused, and to certain parts of bis charge, and we find no reversible error. Tbe judgment is therefore

Affirmed.