HASKINS v. THRONE, FRANKLIN & ADAMS

Supreme Court of Georgia1897-05-07

101 Ga. 126

Summary · law.co

Holding. The court affirmed the judgment for the plaintiffs, holding that an innocent purchaser of a promissory note signed in a partnership's name and acquired before maturity for value and without notice of a partner's lack of authority may enforce the note against the partnership, notwithstanding that the issuing partner violated partnership restrictions.

Throne, Franklin & Adams sued Ellis Davis & Company, a mining partnership, on two promissory notes signed in the firm's name. The partnership's other member, Haskins, defended by arguing that his co-partner Davis lacked authority to execute negotiable instruments without his consent, that the notes were issued without consideration to settle Davis's personal debt, and that the plaintiff should have been put on notice given the firm's non-commercial character. The trial court directed a verdict for the plaintiffs, and Haskins appealed.

The court held that under Georgia law, both commercial and non-commercial partnerships have authority to execute negotiable instruments in the firm name. Although a promissory note issued by one partner in violation of partnership restrictions would not bind the other partner when held by someone with notice of the defect, an innocent purchaser who acquired the note before maturity, paid value, and had no knowledge of the unauthorized act may enforce it against the partnership. The plaintiffs satisfied these conditions—they were innocent purchasers without notice of any problem with the notes.

Summary generated by law.co from the public-domain opinion. The opinion text itself is public domain.

Key issues

Authority of partnership members to execute negotiable instruments
Effect of partnership restrictions on validity of negotiable instruments
Rights of innocent purchasers of negotiable instruments versus notice holders

Procedural posture

This appeal challenges a trial court's directed verdict in favor of the plaintiffs on two promissory notes signed by the partnership.

Authorities cited

No cited authorities resolved to law.co cases yet.

Opinion · public domain

majority opinion

Cobb, J.

Throne, Franklin & Adams brought suit against Ellis Davis & Company, a mining partnership, composed of Ellis Davis and C. R. Haskins, upon two promissory notes signed in the firm name, and payable to Jones & Whitehead or bearer. Plaintiffs alleged that they were holders for value before maturity, without notice of any defect or defense. The defendant Haskins pleaded, that he was a member of the defend ant firm, which was a partnership engaged in the business of quarrying and selling slate; that Davis, the other member of the firm, under the partnership contract, had no authority to give any note, except in connection with partnership transactions ; that the notes sued on were given without his authority to Jones & Whitehead purely for their accommodation and with knowledge on their part that he had instructed Davis that no note of any description was ever to be given by Ellis Davis & Company without his express consent; that the firm of Ellis Davis & Company was not indebted to Jones & Whitehead in any sum, and the notes were without consideration and void; that while plaintiffs may have acquired them before maturity, they knew that the firm was a mining and not a commercial firm, and that therefore they were put on notice that the other member of the firm was not bound by the notes, and that they “ had sufficient notice to put them on inquiry as to the true condition and binding force of the notes.” There was no evidence whatever that the plaintiffs had any knowledge of the alleged defect in the notes sued on. So far as appears, they were innocent purchasers before maturity of the papers. The court directed a verdict for the plaintiffs for the amount of the notes sued on, and to this defendant Haskins excepted.

The questions of practice ruled on in the first and third headnotes require no further discussion. Harris v. McArthur, 90 Ga. 216, 219; Renew v. Redding, 56 Ib. 311.

At common law a member of a trading or commercial partnership had implied authority to use the firm name in making, drawing, or accepting negotiable instruments, but such was not the case with a non-commercial partnership. In this State the rule is that a member of a non-commercial or non-mercantile partnership may bind the other members of the firm by negotiable papers signed in the firm name. Civil Code, § 2643 ; Selman v. Brown, 78 Ga. 332. It necessarily follows that making, drawing, and accepting negotiable instruments is legitimately within the scope of a partnership whether mercantile or non-mfercantile in its character. It is therefore unnecessary to be decided whether a mining partnership of the character described in the record is a mercantile or a non-mer cantile partnership. If a mercantile partnership, the giving of promissory notes would be within the scope of the partnership according to the rules of the common law, which are of force in this State; if it is non-mercantile in its character, under the code the giving of promissory notes would be within the scope of the partnership. This being true, a promissory note signed by a member of a firm in the partnership name and delivered to his individual creditor in payment of his debt, would not be binding upon the other partner in the hands of the original holder, who had notice of the want of authority in the partner to give the note; but such note would be valid and collectible in the hands of an innocent purchaser, who took before due, for value, and without notice of the unauthorized act of the partner giving the note. Freeman v. Ross, 15 Ga. 253.

Applying the principles above laid down to the facts of this case, the court committed no error in directing a verdict for the plaintiffs for the amount of the notes sued on. According to the record, the plaintiffs were innocent purchasers before due, without notice of any defect in or defense to the notes, and were entitled to collect the same, notwithstandingthe fact that one partner had violated the partnership agreement and used the partnership note in payment of his individual indebtedness.

Judgment affirmed.

All the Justices concurring.