Case Name: Aaron G. Gano and William Thoms v. Jamieson Samuel
Court: Supreme Court of Ohio
Jurisdiction: Ohio
Decision Date: 1846-01
Citations: 14 Ohio 593
Docket Number: 
Parties: Aaron G. Gano and William Thoms v. Jamieson Samuel.
Judges: 
Reporter: Cases decided in the supreme court of ohio : upon the circuit at the special sessions in Columbus
Volume: 14
Pages: 593–605

Head Matter:
Aaron G. Gano and William Thoms v. Jamieson Samuel.
An acting partner may, for the benefit of his firm, and in order to raise money, use the name of tho firm, by accepting a bill of exchange, to be exchanged for the acceptance of another firm; it being, in substance, but the giving the name of the partnership to secure an indorser.
A bill of exchange received in good faith, for a valuable consideration, without notice of fraud, may be recovered by the holder.
In examining a record to ascertain whether a jury has been misled by the instructions of the court, the whole record should be looked into, in order to ascertain the effect of the instructions, and what must have been understood by the jury.
It is no objection to the charge of the court that technical phrases are not employed. It is often necessary to employ phrases more familiar to unprofessional men; and if the jury be not misled, there is no error in so doing.
This is a writ of error to the Supreme Court of Hamilton county.
*The facts in the case appear in the following bill of exceptions:
Be it remembered, that on the trial of this cause in the Supreme Court within and for the county of Hamilton and State of Ohio, at April term, a. d. 1845, thereof, the plaintiff in this cause produced a bill of exchange, accepted in the name and style of Gano, Thoms & Talbott, for the sum of $10,000, dated at St. Louis, on November, 1, 1837, payable four months after the date thereof; drawn by William Talbott, payable to the order of Charles Collins, and by him indorsod and accepted by the said Talbott, in the name of G-ano, Thoms & Talbott, payable at Cincinnati, Ohio. And the defendants having offered evidence tending to show that, as between Collins and Talbott, the transaction was a fraud upon Gano and Thoms, and that Collins had the beneficial interest in tho suit; and the plaintiff having offered proof tending to rebut this, and also proof tending to show that he was the bona fide purchaser of the bill, before due, for value without notice; and that before he so purchased, Gano and Thoms had received the acceptance for which this was given, but had not used the said acceptance; and no ovidenoo having been offered by plaintiff to show that Gano or Thoms was present at the time of the transaction, and the de fendant having given in evidence the following articles of agreement, to wit:
“ Articles of agreement, made and entered into this December 29, 1835, by and between William Talbott, of Jefferson county, Ohio, and William Thoms and Aaron G. Gano, of Cincinnati.
“ The above parties hereby agree to enter into a joint speculation in lard, bulked meat, and barrel pork, and stock hogs.
“ The purchases to be made by said Talbott, in Indiana and Illinois, or wherever he can make the best purchases, and at the best rates, drawing on said Gano and Thoms, from time to time, for the amount of said purchase; each party to bear an *equal portion of the profit or loss on said speculation, to be stopped at the option of either party. Said Talbott to charge nothing for personal services; all actual expenses to be charged to joint account. Said Gano and Thoms to remain in Cincinnati, to accept and protect said Talbott’s drafts, on joint account, and he to advise them, from time to time, as purchases are made, in order to effect insuranco, when thought advisable.
“Wm. Talbott,
Wit. Thoms,
Witness: “ Charles Durjteld. A. G. Gano.
“ January 1, a. d. 1836.”
And to rebut which, the plaintiff offered evidence to prove that notwithstanding those articles, the partners had been in the habit of dealing as general partners, and raising money in various ways, in order to carry on .their business. And the evidence on both sides being closed, the plaintiff’s counsel, to maintain the issue, moved the court to instruct the jury, among other things:
That one copartner has authority to use the name of the co-partnership for the benefit of the firm, and that he may honestly exchange the acceptances of his house for the acceptances of other men.
That acceptances for mere accommodation of others are good and binding upon copartners, when the same are made by one of the copartners in the name of the firm, without intentional fraud, and- for the benefit of the firm.
That if they (the jury) believe that Talbott and Collins honestly made an exchange of their paper for the mutual benefit of Gano, Thoms & Talbott, and of Charles Collins, in order to afford fa cilities for their business, it is a legal transaction, and the plaintiff is entitled to recover.
That even if, as between Gano, Thoms & Talbott, and Charles Collins, no recovery could be had, if they are satisfied *that Samuels & Co., at the time they took the draft, were ignorant of the fact, and they took it either in payment of a debt, or for cash, or for other obligations entered into, and received it before the draft became due, the plaintiff has a right Jo recover.
VVhich motion the court sustained', and gave the above-mentioned instructions to the jury, to all which the counsel for the defendants excepted, and prayed that his bill of exceptions in that behalf might be allowed, which is accordingly done; and upon his motion, the same is ordered to be made a part of the rec ord in this cause.
The errors assigned are, that the court misdirected the jury, and general error.
J. A. Pugh, for plaintiff in error:
I select, for the purposes of this argument, the following charges of the court to the jury:
“ 1. That acceptances for the mere accommodation of others, are good and binding upon copartners, when the same are made by one of the copartners, in the name of the firm, without inten- “ tional fraud, and for the benefit of the firm.
“2. That even if, as between Gano, Thoms & Talbot, and Charles Collins, no recovery could be had; if they are satisfied that Samuels & Co., at the timo they took the draft, were ignorant of the fact, and they took it either in payment of a debt, or for cash, or for other obligations entered into, and received it before the draft became due, the plaintiff has a right to recover.”
1. I cflaim the law to be, that one partner does not derive any authority from the mere fact of partnership to bind his copartners by an accommodation indorsement or acceptance, made in the firm name; and that, to enable a third party, who *knew the indorsement or acceptance was made by one partner alone, to recover upon it against the firm, he must prove the assent of the firm, given either expressly or by implication.
If the proposition thus laid down by the court be sustained, there will be a singular inconsistency in the law upon this subject. It is well sottled, that a partner can not give the obligations of the firm for his own. accommodation- And while he can not do this for himself, ho may, if tho charge of tho court be sustained, give the obligations of the firm to pay the debts of his friend.
Laverty v. Burr, 1 Wend. 529. This was an action of assumpsit by plaintiffs, as second indorsers, against the defendants, as first indorsers of a promissory note, made by W. H. Allen. Allen owed tho plaintiffs for merchandise, for which they held his note, which they offered to £fcpew on his giving an indorsement. Allen procured the indorsement of Burr and Baldwin, whose name was indorsed by Burr, which tho plaintiffs knew.
By the court, Sutherland, J.: The partner who did not sign the note is not bound by it under such circumstances, unless he was previously consulted, and assented to the transaction ; and the burden of proving that tho partner who did not sign, consented to bo bound by it, is thrown on tho creditor. Eor which he cites Dob v. Halsey, 16 Johns. 38; Foot v. Jabin, 19 Johns. 137; Livingston v. Hustie and Patrick, 2 Caine, 247 ; Lansing v. Gaines and Ten Eyck, 2 Johns. 200 ; Lansing v. Rossevolt, 4 Johns. 251.
The same point was determined in Bank of Rochester v. Bowen et al., 7 Wend. 158. This was a suit on a promissory note discounted for tho benefit of Bowen by tho plaintiffs, on which was the namo of “Aldrich & Searlo,” signed by Aldrich. There was no evidence of any authority from Searle to Aldrich to subscribe the partnership name to the note, or of any subsequent ratification by him. The judge charged the jury that if they should be of the opinion that the partnership name of Aldrich & Searle was subscribed by Aldrich, ^without the knowledge or consent of Searle, as surety for Bowen, they must find for the defendants. The jury found for the plaintiffs, and the defendants now moved to set aside tho verdict. ®
By tho court, Eelson, J. : The rule protecting partnership property or funds from appropriation, to the payment of separate debts of one of tho partners, and prohibiting partnership security from being pledged to third persons, without tho consent of all the partners, is just and salutary, and should be strictly enforced. The charge of the judge is unobjectionable.' A now .trial was granted.
The same principle was acted on in Wilson v. Williams, 14 Wend. 146.
By the court, Brownson, J.: It is -said that it should have been submitted to the jury to say -whether there was any fraud in the transaction. It is not a question of fraud, but of contract. Has Johnson over agreed to pay these notes? Williams had no authority to bind him; and if Johnson himself had not assented to the obligation, there is an end of the question.
The case of Joyce v. Williams, 14 Wend. 141, was that of an acceptance made in the firm name by one partner, for the accommodation of a third person ; and it was held that the plaintiff could not recover without proving the consent of the other partner to the transaction.
See also Williams et al. v. Walbridge, 3 Wend. 415 ; Vallet et al. v. Parker, 6 Wend. 615; Boyd et al. v. Plum et al., 7 Wend. 309; Gainsworth v. Williams, 14 Wend. 233; Bailey on Bills, 58.
2. We claim there is error also in the other charge: “That even if, as between Gano, Thoms & Talbott, and Charles Collins, no recovery could bo had; if they are satisfied that Samuel & Co., at the time they took the draft, were ignorant of that fact, and took it either in payment of a debt, or for cash, or for other obligations entered into, and received it before the draft became due, the plaintiff has a right to recover.”
*Tho rulo is, that “an indorsee of a bill or note, in an action against any prior party thereto, is subject to the same defense as his indorser, if the indorsee took it with a knowledge of such defense; if ho received it when overdue, without consideration, otherwise than in the usual course of business, or under circumstances which ought to have excited his suspicions; or if he bo a mere agent or trustee of his indorser.” Bailey on Bills, 544, and the eases there cited; 3 Kent’s Com. 80, 81.
The court omitted the requisite, that it should have been taken in the ordinary course of business, essential to complete the plaintiff’s right of recovery. It docs not follow because a party has purchased a note or bill, ignorant of a defense By any of the prior parties, before its maturity, and has paid a valuable consideration for such note or bill, that bo is entitled to recover. Suppose a stranger wore to sell a bill of exchange not duo, at ton o’clock at night, to a broker, at a discount of fifty per cent., could not a prior party, having a defense, sot it up against such purchaser? It is easy to multiply cases of this nature, whore it is manifest the plaintiff would not bo entitled to recover, though ho might have given money or obligations for a bill or note before its maturity, and without notice of a defense. Every consideration of public policy will be satisfied under the limitations of the rule laid down in Bailey on Bills. But the grossest frauds may be perpetrated, if this court shall say that if there be fraud in the inception of a bill or note, a recovery may always be had by a party who has received the bill before its maturity, without notice of the fraud, though he may have received it out of the ordinary course of business.
Fox & Lincoln, for defendants :
"Why the instructions to the jury should be objected to, we can not imagine. We regard the'charge as an exact statement of the law, as found in all the books on the subject.
*It appeared, in evidence, that the terms of the original contract of copartnership had been frequently departed from by the parties defendant and Talbott, in the mode of transacting their business, and all the parties had acquiesced in it. And the court only declared, if such was the fact, the parties were bound — ■ a point admitted to be correct in Moore v. Gano and others, 12 Ohio, 302.
The same question has frequently been decided on the circuit in other cases, in which Gano, Thoms & Talbott, were parties. And, indeed, it arises as a necessary result of other well-known principles of law applicable to partners.
It is well settled, that whenever credit is given to a copartnership, the company is bound on all such contracts as come within the scope of the business of the firm, whether the partnership is of a general or limited nature, and notwithstanding an express stipulation in the articles of copartnership, unless notice is brought home to the party dealing. Story on Partnership, sees. 102, 105, 112; 5 Pet. 529, 561.
The world at large trusts to the ordinary powers and authority of copartners to bind each other. They have no opportunity of examining the articles of copartnership;' and, therefore, are not bound by any stipulations contained therein. 5 Pet. 529.
Now, it is very clear, that negotiating notes, borrowing money, drawing bills, and even exchanging the firm paper for the paper of other persons, is an ordinary business tránsaction.
In this ease, the very paper which the partner in St. Louis received in exchange for the paper sued upon, was forwarded to the other partners, and by them retained until after the present note was negotiated, so that they had impliedly sanctioned the whole transaction by not objecting to it.
' The other charge, that the plaintiff could not be affected by any fraud or agreement, between Talbott and Collins, unless the plaintiff was cognizant of the fraud, provided he was an honest purchaser, is so clear a proposition that I do not deem it proper to refer to authorities on the subject.

Opinion:
*Birchard, J.
In determiningwhetherajuryhas been misled by instructions of the court, in any given case, it becomes important to consider the evidence which called forth the instructions, in order that the bearing, which it might have had upon the minds of the jury may be understood and appreciated. In this case, it is claimed that Gano, Thoms & Talbott, by their private articles of association, had prescribed the mode of conducting their joint operations. Be this as it may, it is evident they had each and all departed from what are now claimed to be the written terms, and for a long period had so conducted as to justify third persons in treating them as general partners, and authorized to conduct the 'joint business which they were ostensibly engaged in, in a very different manner from that presented in their private agreement. The proof was, that they encountered difficulties in raising funds adequate to conduct successfully their joint operations, and that they had recourse to various means of obtaining loans. Among the shifts resorted to, the bill in question was prepared and given to Collins, in exchange for his paper, to be used by Gano, Thoms & Talbott, in procuring a discount at bank, or of some one else. The paper of Collins received in exchange for it, was immediately sent to .Gano and Thoms, by Talbott, to be used at Cincinnati. There was no evidence that they dissented from the proceedings. Notice was not given to Talbott, or any one else, of their dissatisiaction with it. The bill of exceptions state only that they did not use it, and the presumption, if any were to be raised, would be, not that the partner, Talbott, exceeded his authority, but that the paper could not be used, or was not needed by Gano and Thoms. It may be admitted, as a general rule of law, that one partner', in cases of ordinary partnership transaction, can not bind his copartners by a mere accommodation acceptance, made in the name of the firm for the benefit of another person, so as to enable the holder, with knowledge of the facts, to recover upon it in a suit against the firm, without other proof, showing a subsequent *assent or a prior authority. This proof may consist of facts or circumstances inconsistent with the supposition that lie exceeded his authority, as in the case at bai', of proof that all of the parties acted so as to show that each partner regarded his co-partner as acting within the scope of his authority, in attempting to raise funds to meet the joint necessity, by any means that would be most likely to facilitate their common object.
Take the whole case as it appeared before the jury, apply well-established legal principles, and wo think it will bo difficult to show wherein the jury were misled. One of the general principles, says Mr. Chief Justice Marshall (Winship v. Bank of United States, 5 Pet. 561), is, " that the acting partner has power to transact the whole business of the firm, whatever that may be, and consequently to bind his partners in such transactions, as entirely as himself. This is a general power, essential to the well conducting of business, which is implied in the existence of a partnership. When a partnership is formed for a particular purpose, it is understood to be in itself a grant of power to the acting members of the company to transact its business in the usual way." In the text of Mr. Justice Story (Story on Partnership, 150, 151), it is said, "each partner may bind the firm by contracts or engagements on behalf of the firm, in the ordinary trade and business of the firm, as by receiving- or borrowing moneys, or by drawing, or negotiating, or indorsing, or accepting bills and notes and checks, or other negotiable securities, or by doing any other acts, which are incident or appropriate to such trade or business, according to the common course and usages thereof."
It matters not what may be the nature of secret articles of co-partnership, so far as strangers are concerned. They are rarely, if ever, published. The trading community look only to the general course of the acting partners; they judge from their daily intercourse with them of the extent of power which the articles confer. This firm was doing business upon credit. Largo facilities were wanted; and in November, 1837, ^various shifts and devises to obtain them, were adopted. Those facts wore particularly in evidence. The manner in which they dealt, which was in evidence, showed, in fact, all that tho world know relative to Talbott's authority. It was what could be gathered from the common course and usage of that business. As only two portions of the charge of the court are mentioned in the argument as being particularly objectionable, they will be noticed in the order presented by counsel. The first part objected to, is in these words: " That acceptances for the mere accommodation of others, arc good and binding upon copartners, when the same are made by one of the copartners in the name of the firm, without intentional fraud, and for the benefit of the firm." The bill in this case was accepted by Talbott, in the name of the firm, on whom it was drawn, and for the benefit of the firm, in good faith; the object being to raise money, which the firm needed. The question is: Had he the power lo so accept? The substance of the charge was a mere answer in the affirmative. The quotations from Story and 5 Peters sustain it. Counsel argue that if he could do this, he might give the obligation of the copartners to satisfy the debts of his friend; but the argument omits one element of the charge. If given for the friend, it would not be for the benefit of the firm; it would be for the friend's benefit. So in the case cited from 1 and 7 Wendell. The indorsements, then spoken of, were made for the benefit of third persons, not for the benefit of the firm, whose name^ were signed by one of its members; and that distinction is taken by Nelson, Judge, in the opinion, and it runs through all the cases cited. We can not allow a sentence to be separated, and such part only be taken as will pervert its meaning. It must all be taken together, and the moaning must be gathered from the whole of it. There is some apparent repugnancy in this part of the charge. It can not be that an acceptance was for the mere accommodation of others, and at the same time for the benefit of the firm of Gano, Thoms & Talbott. This repugnancy, however, could not have misled the jury. They *must have misunderstood the language in reference to the facts in evidence, and as tantamount to these words: An acceptance of accommodation paper for the benefit of the firm, the object being to raise money for the firm, will bind all the joartners, if executed by one partner only, in the partnership name.
If a partner may, in behalf of the firm, draw, indorse, negotiate, or accept bills, for the purpose of raising money — and that he may do it, there is no doubt — what is there that shall require him to receive money only in payment? Why shall he bo restrained from taking negotiable paper, when that will enable him to realize the money wanted, and no other mode will effect the ob ject? We can give no sound reason why means may not be thus raised, when the joint business requires it, and we are unable to find any in the books.
The case cited from the law reports, is clearly distinguishable from this. That was a case where the partnership name was used for the benefit of another firm. In this the partnership name was used for its own benefit, in order to procure the name of another firm which stood better in the money mai'ket. It was substantially the same as using it to indemnify an indorser. And nothing more nor less was understood by the jury, than that this could be done by one partner for the benefit of all.
. It is said that the last instruction given was erroneous; that the true rule is as follows: " The bona fide holder can recover upon the pajier, though it came to him from a person who had robbed it from the true owner, provided he took it innocently, in the course of trade, for a valuable consideration, and not overdue, and under circumstances of duo caution." Wo find no fault with this rule; and if the charge of the court violates it, there must have been error. But if it was in substance the same, and the variation is only in the use of words and phrases, we would hardly reverse the judgment. Though it is generally safe to employ the language of the books in instructing a jury, it is not always the best way of enabling them to comprehend the principles by which they should be governed. With a *jury composed of sound lawyers, the language used by learned writers would doubtless be the best that could be omployed. They would know what was meant by "bona fide holder," and " by taking paper innocently in the course of trade," etc. ; and the judge, whose duty it might be tp instruct such a jury, would not feel the necessity of explaining the meaning, or of expressing himself in terms of more common use, and better understood by unprofessional men. But all jurors do not readily comprehend what professional gentlemen mean by such phrases. They do not, or at least it is not certain that they are aware that " bona fide holder " moans one who holds in good faith ; and " by taking paper innocently, in the course of trade, and under circumstances of due caution," we mean a taking it in ignorance of any fact that would vitiate it, and in payment of a debt, or for cash. Tot the meaning is the same. A man is not deemed ignorant of the cause that would vitiate such an instrument when in possession of circumstances sufficient to' put him upon inquiry; but is deemed to have the knowledge that those inquiries would elicit. Counsel insist that the court should have used the phrases "bona fide holder," "innocent purchaser," "in the ordinary course of business," or other equivalent terms, and complain that it was not done.»
The making of the complaint goes far to show the propriety of varying the language of the books in explaining matters of this nature to a jury, whom we may well suppose less familiar with the terms of our profession; for' if lawyers do not know that to take a bill of exchange for cash advanced at the time, or in payment of a pre-existing debt, is to take it in the ordinary course of trade, what would a jury comprehend by the sentence? The truth is, that the law was correctly stated to the jury, and we have no reason to suspect that it was misunderstood or misapplied. Judgment affirmed.