Case Name: Crosthwait vs. Ross
Court: Tennessee Supreme Court
Jurisdiction: Tennessee
Decision Date: 1839-12
Citations: 1 Hum. 23
Docket Number: 
Parties: Crosthwait vs. Ross.
Judges: 
Reporter: Tennessee Reports
Volume: 20
Pages: 23–31

Head Matter:
Crosthwait vs. Ross.
Pártners in trade, or partners in occupation or employment, can bind theit co-partners in a matter which according to the usual course of dealing has reference to business transacted by the firm; but on the contrary, if a person deals with a partner in amatter not within the scope of the partnership, the intendment of the law will be that he deals with him on his private account, notwithstanding the partnership name maybe used.
A partner in the practice of physic has the power to bind his co-partner by the execution of a note in the name of the firm for the purchase of all things necessary to be used by them in their vocation, such as medicines, surgical instruments, and the like, but has no power to draw bills or make notes for the purpose of raising money, money not being an article for which such a firm has a direct use.
The facts of this case as exhibited by the record are, so far as they are necessary to be stated to present the point determined by the court, substantially as follows. Alfred Hartwell and George D. Crosthwait, two practising physi cians in the county of Rutherford, entered into articles of partnership, which were as follows, to wit:
“Articles of agreement for a partnership to commence orí the 14th day of January, 1834, between Alfred Hartwell and George D. Crosthwait, of Murfreesboro’, Tennessee;
“Article 1. The partnership to continue under the firm of Hartwell and Crosthwait for two years from and after the 14th day of January, 1834, unless either one of the parties should determine to relinquish the practice or move to some other place; in that event the party so determining shall be at liberty to do so at the expiration of one year, and not sooner.
“Article 2. The partnership shall be in every respect equal; all debts, either by account or otherwise, from our joint services, shall at the expiration of the term be equally divided; the expenses of the firm shall be equal.
“Article 3. Each party shall at all times use all honorable means to promote the interest of the firm, and their labors to be as nearly equal as possible. In testimony whereof'we affix our hands and seals the day and date above.
Alfred Hartwell, [Seal.]
Geo. D. Crosthwait, [Seal.]”
Under these articles they rented a shop in the town of Murfreesboro’, for which they executed a note in the name of the firm of Hartwell & Crosthwait; they contracted a store account in the name of the firm; they subscribed their firm name to articles for the establishment of a race track; they owned a blooded horse jointly, but executed in payment therefor a note with their individual names signed by each respectively; they purchased medicines on two several occasions during the existence of their partnership, for which they executed their firm name, each of those purchases amounted to about one hundred dollars in value. The evidence did •not justify the belief that the partnership existed in regard to any thing except the practice of physic.
■In the month of May, 1835, during the existence of the partnership, Piartwell executed a promissory note in, the words following:
“$350 00, Four months after date we promise to pay to William W. Ross, or order, three hundred and fifty dollars, at the Planters Bank of Tennessee, value received. Witness our hands this 14th day of May, 1835.
HaUTWEM. & CilOSTHWAIT.”
This note was endorsed first by Ross and then by William H. Hanna; it was discounted at the Planters Bank and the proceeds paid over to Hartwell, and by him appropriated to his individual purposes. This note was in the hand-writing of Hartwell, and it does not appear that complainant knew of the existence of the note till after the death of Hartwell, about the period of its maturity; when informed of the fact he appeared surprised, and stated that the use of his name was wholly unauthorized in the transaction. On more than one occasion-, during the lifetime of Hartwell, Crosthwait when presented with notes signed by Hartwell and Cros-thwait protested against the use of his name as unauthorized. Hartwell was in embarrassed circumstances, and by some of the witnesses said to be “notoriously insolvent.” There was no evidence which justified the belief thatRoss knew that thé note was made for the purpose of raising money to answer the individual purposes of Hartwell, or that it would be appropriated in that way. Two physicians proved that it was unnecessary that the firm of Hartwell & Crosthwait should have expended more than about one hundred dollars annually in the purchase of medicine, and that it was not necessary that partners in the practice of physic should execute notes in the name of the firm, nor was it usual.
When the note fell due it was discharged by Hanna. Ross refunded the money to Hanna, took the note, and instituted an action of debt on the 1st of July, 1836, in the circuit court of Rutherford county against Crosthwait. Crosthwait pleaded that he did not execute the note nor authorize the execution of it. Issue was taken upon this plea, and the cause was continued till June term, 1837, when a trial took place. The jury gave a verdict in favor of the defendant, A.motion was made to set aside this verdict, and the motion prevailed and a new trial was granted to the plaintiff. The cause was continued until the February term, 1838, when a jury of Rutherford, the honorable Samuel Anderson pre siding, returned a verdict in favor of the plaintiff for the amount oí the note and damages. This verdict was set aside, upon motion of the defendant, and a new trial ordere'd. cauge was again continued until the July term, 1839s when it was again tried upon the facts as exhibited above.
The honorable Samuel Anderson charged the jury amongst other things as follows: “The general rule as to the liabilities of partners for the contracts of one member of the firm is that each is liable unless the nature of the transaction is such as to show that the contract was for the benefit of the partner making the contract, unless the person dealing with the partner did in fact know, or might have known by reasonable inquiry, that such contract was for the individual benefit of that member of the firm.. In the absence of such actual or circumstantial knowledge, and when the transaction itself does not show it was for the individual benefit of the partner making the contract, the legal presumption is that the contract was entered into for the benefit of the firm, and the partners will be held liable.” The court further charged the jury that “if a partnership could exist and be carried on without incurring any expense whatever, In such a partnership one member of the firm could not bind the' others by note without showing more than the mere fact of partnership; the jury must determine from the proof whether the firm of Hartwell & Crosthwait did in fact incur some expense in accomplishing the object of their partnership, viz: in practising physic together; if so, the contract of partnership conferred authority on each to buy such articles as in his judgment would best advance the interest of the firm.” The court further charged the jury that “if some expense was incurred in carrying on the business of the firm, Hart-well had authority to bind his co-partner Crosthwait in such Contracts for such expenses, and in thus acting he was exercising a general power connected with that business as distinguished from a special power, and the partnership contract conferring a general authority in the business, it follows that Crosthwait is bound on the note sued on unless the face of the note showed that it was for the individual benefit of Hart-well, or unlcjs Ross actually knew at the time he endorsed the note that it was for the benefit of Hartwell, or might have known that fact by reasonable diligence. In . .. .. i-i, ■the cause upon this view of the subject the jury would determine from the proof whether Hartwell was insolvent at the date of the note, or greatly embarrassed,^ whether his situation was known to Ross, and if so, whether a prudent, ■conscientious man with such knowledge would have his suspicions excited as to the fairness of the transaction. The jury would also look to the size of the note, the nature and object of the partnership, the season of the year the note was given, and determine whether the amount of the note at that ■season of the year was for a larger sum than would be reasonably required for the uses of the firm; if it was, then the face of the note itself should have put Ross on his guard, and he would not be permitted to say that he endorsed the note upon the credit of both partners under a belief that the contract of partnership alone conferred upon Hartwell authority to give the note of the firm to an unlimited amount.” The court further charged the jury that “they had a right to determine from the proof whether Hartwell and Crosthwait did in fact purchase their medicines upon a credit and give the note of the firm for payment, or authorize others to give s.uch notes for them; and to enquire also whether they gave the note of the firm for house rent or other expenses; if they did under these circumstances, it would be proper for the jury to say whether such a course of dealing would not of itself authorize them to infer an express assent or agreement that each should trade in procuring necessaries for the partnership upon the credit of the firm; if, from this custom of dealing, the jury should infer such express assent, the power conferred on each by such express assent would be in its nature a general authority and make each liable to the extent before stated, although the court should have erred in the opinion advanced that the contract of partnership of itself necessarily conferred such authority.” The jury returned a verdict in favor of the plaintiff for the amount of the note, three hundred and fifty dollars,, and eighty dollars and fifty cents damages.
A motion was made by the defendant to set aside the ver- diet, but the court overruled the motion and gave judgment 1 according with the verdict. An appeal in the nature of a writ of error was obtained by the defendant to the supreme court.
Edwin A. Keeble and James W. Campbell, for the plaintiff in error.
They cited 4 Kent, 17, 27,42, 43: Livingston vs. Rosewell, 4 Johns. 251: Dickinson vs. Valpray, 21 Eng. Com. Law Rep. 41: Smith’s Mercantile Law, 24: 14 Wend. 133,141: Wilson vs. Williams, 14 Wend. 146.
Charles Ready, for defendant in error,
cited Walden vs. Sherburne, 15 Johns. 422: Bond vs. Gibson and Jephson, 1 Camp. N. 0. Rep. 185: Swan, and others vs. Steele, and others, 7 East, 210: Ridley, etal. vs. Taylor, 13 East, 175: Livingston vs. Rosewell, 4 Johns. 251: Dubois vs. Rosewell, 4 Johns. 262: Lansing vs. Caine and Ten Eyck, 2 John. 300: Dickinson vs. Valpray, 21 Eng. Com. Law Rep. 41: Collier on Partnership, 221, 304, 303: Ballow vs. Spencer, 4 Cow. Rep. 163: Vallet vs. Parker, 6 Wend. 615: Whitaker vs. Brown, 14 Wend. 505.

Opinion:
Turley, J.
delivered the opinion of the court.
This is an action brought by the. defendant in error to recover judgment against the plaintiff- upon a note for the sum of three hundred and fifty dollars. This note was executed by one Alfred Hartwell, who was a partner in the practice of physic with George D. Crosthwait, the plaintiff in error; it was an accommodation note for his own benefit, and not for the use of the firm. The note was discounted in bank upon the endorsement of Ross, the defendant, and the proceeds applied by Hartwell to his own use. The endorser, took up the note at maturity, and has brought this suit to charge Crosthwait as maker, to which he pleaded non est factum, which under the charge of the court below was found against him, upon which the writ of error is prosecuted. Several questions are presented for the consideration of the court, only one of which we think necessary to examine, as upon that the responsibility of the plaintiff in error rests, and that is as to the powers of Hartwell to make his co-partner, Orosthwait, liable upon a promissory note for money received by himself and made for his own accommodation.
This question necessarily involves the power of partners to bind each other, and the extent to which it may be carried. Without entering into the question of what constitutes limited and general partnership, and what is the distinction between them as to the liabilities of the partners, which, as we think, has nothing to do with the case under consideration, we proceed to investigate the subject upon the grounds upon which we think it rests. For this purpose, we think partners may be classed: ist. Partners in trade. 2d. Partners in occupation or employment. Chancellor Kent, in the third volume of his Commentaries, page 28, says, "It is not essential to a legal partnership that it be confined to a commercial business. It may exist between attor-nies, conveyancers, mechanics, artizans or farmers, as well as between merchants or bankers." Now the question is, how far one partner has the right, by his individual contract, to bind his co-partner? We think that when the question is properly understood there is no conflict whatever between the authorities as applicable to partners in trade and partners in occupation or employment. A partner in either case can bind his co-partner in a matter which, according to the usual course of dealing, has reference to business transacted by the firm. See 3 Kent, 41, and the numerous cases there cited in support of this proposition. But, on the contrary, if a person deals with a partner in a matter not within the scope of the partnership, the intendment of the law will be that he deals with him on his private account, notwithstanding the partnership name be used. 3 Kent, 45: 4 John. Reports, 277-8: 16 John. Rep. 38: 19 John. Rep. 154: 6 Wen. 529: 5 Mason, 156. Therefore it is that partners in trade, whose business- is buying and selling, or of whose bm siness this constitutes an important item, may make, draw and endorse promissory notes and bills of exchange, and although one of the firm may abuse his trust for his individual benefit, yet the co-partner shall be bound unless the person contracted with knew at the time that it was not done in good faith; and this, because in such a business the use of securities is not only considered necessary, but is well sanctioned by commercial usage. Rut the question recurs, what kind of contract is in the usual course of dealing, and within the scope of the partnership? It is not necessary, nor do we design to argue or determine this question except in relation to the case now under consideration, which is a case of partners in occupation. In the case of Livingston vs. Rosewell, 4 John. Rep. 251, it is held that where,.there are partners engaged in a sugar refinery, if one purchase a lot of brandy and executes a note for the payment thereof in the name of the firm, it is not obligatory upon the firm because not in the'usual course of trade of the firm. In the case of Dickinson vs. Valpray, 21 Eng. Com. Law Reports, 41, it is held that in the case of an ordinary trading partnership the law implies the power of one partner to bind another by drawing and accepting bills, because the drawing and accepting bills is necessary for the purpose of Carrying on a trading partnership, but that it is not generally necessary for mining company, and that therefore in such a case the law will not imply the power of one of the company to bind the others by such contracts.
Now to apply these principles to the case under considT eration. Crosthwait and Hartwell were partners in the practice of physic; this is an occupation, and they may mutually bind each other for all things properly belonging or necessary to be used by them in this vocation, such as medicines, surgical instruments, et ejusdemgeneris; but the drawing of bills or the making of notes is no more within the scope of their partnership, in fact not so much so, as was the buying of the brandy by the partner in the sugar refinery, or the drawing of the bills in the mining company. If the note in this case had been executed for any thing for which a firm of physicians had use, as such the firm would have been bound, though the member who drew it had designed at the time to appropriate it to his own use and did so, unless the person contracted with knew of his intention at the time. But money is not an article for which such a firm has use directly, though it may indirectly, but if it has it must be raised by the individuals comprising the firm, and not hy one member thereof, unless he be authorized by the others so to do independent of any right arising from the partnership.
We therefore think the judgment of the circuit court is erroneous and rrlust be reversed, and the cause remanded for a new trial.