Court Opinion

ID: 6816519
Source: CourtListenerOpinion
Date Created: 2022-07-23 19:01:55.838844+00
Date Added: 2024-06-11T16:03:54.188133
License: Public Domain

Christian, J.,
dissenting:
The legal principles involved in this ease are of such public importance and I differ so radically from the majority of the court, that I feel it my duty to discuss the case in detail.
This was a proceeding by notice of motion brought to the April term, 1925, of the court, by the Virginia National Bank of Petersburg, Virginia, against Eugene S. Hobbs surviving partner of J. W. Thomas, deceased, and himself, trading as J. W. Thomas & Company, and Willie H. Thomas as endorser, to recover $19,390.00, evidenced by eighteen negotiable notes executed by J. W. Thomas in the name of J. W. Thomas & Company and endorsed by his wife, Willie H. Thomas. There was a verdiet after trial for $19,120.52 with interest from various dates when the notes became due and payable. The defendant, Hobbs, moved the court to set aside the verdiet and grant him a new trial because there was no evidence to sustain the verdict and for errors committed by the court during the trial, and in giving and refusing certain instructions, but the court overruled the defendant’s motion and entered up judgment upon the verdict. Whereupon the case, with all exceptions, was brought up for review by writ of error.
Hobbs filed a plea with affidavit denying the partnership, and that he had ever held himself out as a partner in the business of J. W. Thomas & Company. Upon this plea issue was joined, and the case tried. Thus the burden of proof was on the plaintiff to- prove that there was a contract of partnership, express or implied, between J. W. Thomas and Eugene S. Hobbs whereby they agreed to combine thei-r property or services as principles in the business for mutual profit.
The record discloses that in February, 1900, J. W. *856Thomas, who had theretofore been manager for Mrs. Winn in the conduct of the crockery and chinaware business, known as the “China Palace,” bought out this business and thereafter conducted it under the name and style of J. W. Thomas & Company. The business was small; the fixtures and stock carried amounted to about $4,500.00. Hobbs’ name never appeared as a partner on the stationery, advertisements or in any way as a member of the concern, and he took no part in the management or conduct of the business. He was a farmer living thirty or forty miles from Petersburg and visited that city about once a month. When there he called at Thomas’ store, because Thomas was his brother-in-law. The firm name Thomas adopted was J. W. Thomas & Company, and the name of Hobbs never appeared in the concern, and from their course of dealing or practice, he was a silent partner, if a partner.
After the notes were introduced and proven to have been signed and negotiated by Thomas, who had committed suicide in September, 1922, B. T. Kinsey, cashier, was put on the stand to prove the notes and their protest as to the endorser, and after testifying as to those facts, he was asked if he knew who composed the firm of J. W. Thomas and Company. He stated that he did. It was composed of J. W. Thomas and E. S. Hobbs.
The defendant objected to the question and answer-as a mere opinion of the witness, but his objection was overruled, and the evidence was permitted to go to the jury. This was clearly prejudicial error as witness testifies that he knows of a contract, but fails to show how he knew it, or anything about the partnership contract. His knowledge that he claimed to have was merely an opinion or belief, and has no probative effect, *857and should been have excluded. ‘1 The existence or nonexistence of a partnership is not to be established by the opinions or the belief of parties to a litigation or of their witnesses.” 30 Cyc., page 406, and cases cited in note 74.
G. C. Wright, president of the plaintiff bank, was then put upon the stand and testified that he extended the line of credit to J. W. Thomas and Company in 1919 upon the financial ability of E. S. Hobbs, and that the only evidence he had of Hobbs being a partner in the firm of J. W. Thomas & Company was the statement of Thomas that “the firm was composed of J. W. Thomas and E. S. Hobbs,” and the mercantile reports. This was all the evidence that the bank had that Hobbs was in any way connected with the concern, and upon that statement the credit was given and continued until the day of Thomas’ death. The defendant objected to the admission of this evidence as illegal. A person cannot be proven to be a partner of another by the statements of that party not made in his presence. This evidence was objected to and admitted over the protest of defendant.
It is true that the court said it would admit it for the present, but the plaintiff never claimed or showed any approval or ratification of the statement by Hobbs, nor did the court ever strike out this improper evidence upon which its whole claim was based. The defendant had the plain right to have that statement excluded at the time unless the plaintiff claimed it could show-subsequent approval or ratification after knowledge of all the facts, which it did not do or attempt to do.
The law upon this subject, without dissent, is laid down in 20 Ruling Case Law, page 847, section 53:
“The fact that a certain person was a member of a partnership, and therefore liable for the firm debts, *858at a specific time, may be proved by Ms admissions that he was a partner. But the declarations of one partner, not made in the presence of his copartner, are not competent to prove the existence of a partnership between them as against such other partner.” Owensboro Wagon Co. v. Bliss, 132 Ala. 253, 31 So. 81, 90 Am. St. Rep. 907; Chapman v. Wilson, 1 Rob. (40 Va.) 267.
In 30 Cyc., page 409, citing in note 91 eases from practically every jurisdiction in the United States as authority, the law is stated as follows: “Admissions of a partnership’s existence by one partner cannot be given in evidence against an alleged copartner unless made in the latter’s presence or unless the latter authorized or assented to the admission, or has adopted or ratified it.” Partnership being a mutual agency the authority or assent must be proven independently of the statement of the partner before the admission can be received in evidence.
Wright is conclusively presumed to know the law, and he was legally bound to make inquiry into the authority of Thomas before extending credit upon his statement that Hobbs was his partner. Failing to do so, the bank gave credit to Thomas alone, unless Hobbs was an actual partner, and this statement should have been excluded when offered. “Such admissions or representations are not competent evidence to establish the existence of the partnersMp relation, nor the extent of the maker’s authority to bind the firm.” 30 Cyc., 523.
The reason for the rule of law is, that to admit such evidence would open a door to fraud; for a trader in poor credit would be tempted to state that a man of wealth was his partner in order to secure credit (as was done in the instant ease) and his creditors *859would be tempted to further it, so that they might collect their debts.
The plaintiff was allowed by the court to introduce, by C. E. Plummer, president of the National Bank of Petersburg, a statement dated January 1, 1922, signed by Thomas and Hobbs, and secured by Thomas at the request of the National Bank, which did not state the true indebtedness of J. W. Thomas and Company but which was never seen by the plaintiff’s officers until after the death of Thomas, as evidence that Hobbs was a partner of Thomas. The court, after admitting this evidence, refused to permit Hobbs to explain the circumstances under which this statement was signed, and who denied ever signing it.
The court also allowed B. B. Jones, president of the Union Trust Company, to testify to a conversation with Hobbs after the death of Thomas in which he admitted that he was a partner of Thomas. “The fact that a certain person was a member of a partnership and therefore liable for the firm debts, at a specific time, may be proved by his admissions that he was a partner.” 20 R. C. L., section 53, page 847; Herman Kahn v. Bowden, 80 Ark. 23, 96 S. W. 126, 10 Ann. Cas. 132; Dawson v. Pogue, 180 Ore. 94, 22, page 637, 6 L. R. A. 176. But before this admission is admissible the plaintiff must show that he relied on the same and gave credit on the faith of the statement. The plaintiff never heard of these admissions for years after the credit was extended, and it is not shown that Hobbs admitted that he was a partner when the loans were made. Hence the evidence should have been excluded.
A number of witnesses, over the objection of the defendant, were permitted to testify as to their understanding, and the understanding in business circles or general reputation in Petersburg that Hobbs was a *860partner of Thomas, that the mercantile agencies so reported, and some that it was their opinion that they were partners. None of these witnesses showed that Hobbs was in any way responsible for these reports, understandings or opinions, or that he had ever heard of any of them. They were all merely hearsay, and improper evidence to establish the fact that Hobbs was a partner of Thomas, or that he had held himself out as such partner, or that the plaintiff had given the credit by reason thereof. The evidence being illegal should have been excluded from the jury, as highly prejudicial to the defendant and without probative value to establish the fact in is£ue. “Mercantile agency reports, general reputation, common notoriety or understanding are inadmissible in evidence to establish the existence of a partnership for such evidence is merely hearsay.” 20 R. C. L., section 316; 30 Cye., page 407.
It should be noted that the notice of motion charges Hobbs as an actual partner and there is no allegation or count charging him as a partner by holding out or equitable estoppel. The proof of the latter, for fixing liability upon a person as a member of a partnership, is very different from that required for an actual partnership, and should be alleged, but no point of this was made by Hobbs, but his plea denied that he was a partner of Thomas either actually or by holding out. This principle is adverted to simply because some cases have, upon certain peculiar conditions, permitted evidence of general reputation or notoriety to establish a partnership by holding out or equitable estoppel, but the great majority of courts hold that general reputation is inadmissible to establish the existence of a partnership between individuals. An actual partnership certainly cannot be established by common understanding, notoriety or general reputa*861tion. General reputation cannot prove the existence of a fact and at the same time be evidence of its own truth.
Reputation is a question which plays a larger part in the matter of an alleged ostensible partnership than an actual partnership, but barring an occasional loose or inapt expression to be found in a few decisions, the rule that a partnership is not to be proved by current gossip or vague general understanding is applicable to all partnerships whether actual or ostensible. Anfenson v. Banks, 180 Iowa 1066, 163 N. W. 608, L. R. A. 1918-D, 482-496, note (la) page 505; Central R., &c., Co. v. Smith, 76 Ala. 572, 52 Am. St. Rep 353. This almost universal principle of law has been adopted in Virginia by the uniform partnership act.
In the Anfenson Case, decided in 1917, the rule in reférence to general reputation to prove partnership is reviewed and it is shown by the large majority of the courts to be as above set forth, and the note to this case in L. R. A. 1918-D, page 505 and (la), gives a list of the cases, and there is hardly an exception to the rule. To allow one person who desires to improve his credit to circulate, without authority, a report, that some person of wealth was his partner, and thereby give rise to a reputation of the existence of such partnership relation, and then hold that such reputation may be put in evidence to prove its own truth, would assuredly not appeal to one’s natural sense of justice, nor have a tendency to enhance one’s respect for the law. The Connecticut court holds that to admit such evidence would be to open the door to fraud: “For a trader in poor credit would be tempted to circulate the rumor that a man of wealth was a member of his firm in order to help his credit, and his *862creditors would be tempted to further it so they might collect their debts.” Brown v. Crandall, 11 Conn. 92. If such be not the law, whose estate would be safe?
The burden of proving the existence of a partnership is on him who alleges and relies on the fact of its existence, or the facts that constitute an equitable estoppel. 20 R. C. L., section 54, 30 Cyc., page 403. It will be observed that there is no evidence in this case, from the plaintiff, to take it to the jury, as the credit was extended entirely upon the statement of Thomas that Hobbs was his partner, and Wright made no inquiry or investigation of the truth of that statement, although Hobbs could have been easily reached by telephone, and he saw him once a month at the meetings of another financial institution.
“Where a business is being conducted by a number of persons who are owners of that business, it is necessary that each of the persons so owning it shall be invested with power to do all things in the regular, necessary and usual course of the business, and when they do so it is necessary and proper that those who deal with them shall be protected. These considerations led the courts to require of persons who deal with partnerships to take notice of the partnership, its business and the general course of that business, as the public owes to the partnership the same fidelity, when dealing with its individual members, that the partnership owes to the public in such eases.” Morrison v. Austin State Bank, 213 Ill. 472, 72 N. E. 1109, 104 Am. St. Rep. 225-228.
Notwithstanding the plaintiff had not made out a prima facie case, the defendant was required to prove that he was not a partner nor liable in any wajr upon the notes. He went upon the stand and denied that he was a partner with Thomas; that he had never held *863himself out as such or authorized Thomas to do so, or ever knew that he was being held as a partner by Thomas. He testified that Thomas was his brother-in-law and in order to help him, he had executed a certain paper, bearing date on February 1, 1900, and which he had never seen since, until after the death of Thomas, when he qualified as his administrator’ and found it among his papers and then produced the paper in court. This paper was read to the jury as follows:
“Articles of agreement made and entered into this first day of Febru'ary, 1900, between E. S. Hobbs, of the one part, and J. W. Thomas, of the other part;
“Whereas, the said E. S. Hobbs and J. W. Thomas have agreed, and by these presents do agree, to become copartners together in the trade of china, crockery ware, willow ware, and kindred articles, and all things thereto belonging, and also in buying, selling, and retailing all sorts of wares, goods and commodities belonging to said trade, which said copartnership is to continue from the date hereof, for and during the pleasure of the said parties, to be terminated at any time by either of them; and,
“Whereas, the said copartnership is formed for the sole accommodation of the said J. W. Thomas for the purpose of giving him credit in and about the said trade; and,
“Whereas, the said E. S. Hobbs is to have no interest in any of the property or profits of the said copartnership, and is to put in no money, goods or stock of any kind in the said copartnership;
“Now, therefore, this agreement witnesseth: That for and in consideration of the premises,* the said J. W. Thomas doth convenant and agree to and with the *864said E. S. Hobbs, that he, the said J. W. Thomas, will pa.y all of the debts contracted and to be contracted by the said copartnership in and about the said business, and also, that all such losses as shall happen in the said joint trade by bad debts, all commodities or otherwise, and all wages, charges, expenses, rents, purchases and payments whatsoever, relative to and in the said joint trade, shall be paid and borne by the said J. W. Thomas; it being understood and agreed that all such gain, profit and increase that shall come, go or arise, for or by reason of the said joint trade, shall be, during the said copartnership, wholly and solely the property of the said J. W. Thomas. And the said J. W. Thomas doth further covenant to and with the said E. S. Hobbs that all of his, the said J. W. Thomas’ estate, real, personal, and mixed, shall be applied to the payment of any and all debts due or to become due during the said term by the said copartnership, and that he will indemnify and save harmless the said E. S. Hobbs from all liability of any kind whatsoever, which at any time may grow out of the said copartnership; and that he Avill repay any and all sums Avhich the said E. S. Hobbs may be called upon to pay by reason of the said copartnership. And the said J. W. Thomas doth hereby waive the benefit of his homestead, and all other exemptions, as to this obligation.
“Witness the following signatures and seals:
“E. S. Hobbs (Seal)
“J. W. Thomas (Seal).”
When the evidence was concluded, the plaintiff asked the court by its instructions to construe this, agreement as .making Hobbs and Thomas actual partners, and the court so construed it. • This was error, as the agreement does not contain the most *865essential element to constitute a partnership, that is, that Thomas and Hobbs were to carry on the business as co-owners for profit. The older English and American doctrine was that an agreement to share the profits of a business or enterprise constitutes a partnership as to third parties, whatever may have been, the relation of the parties as between themselves, but the modern and generally accepted doctrine, approved by the uniform partnership act which is the law in Virginia, is that except where the parties are partners by estoppel, persons who are not partners as to each other are not partners as to third persons. “The modern test of a partnership is a community of interest, a sharing in the profits and losses as such; the existence of the mutual relationship of principal and agent, and an intention on the part of the persons interested and uniting in the prosecution of the common enterprise to become and act as partners, are the proximate tests as to the existence of a partnership between them; Avhat constitutes a partnership being a question of laAV for the court, while the question as to the existence of the constituent elements of a partnership is one of fact for the jury.” 17 Am. & Eng. Ency. Law (1st ed.), page 830; Cye. page 366; 20 Ruling Case Law, page 28; Beauregard v. Case, 91 U. S. 134, 23 Law Ed. (U. S.) 263; Paul v. Cullum, 132 U. S. 539, 10 S. Ct. 151, 33 Law Ed. (U. S.) 430.
Whether the agreement constitutes a partnership depends upon their intention as legally ascertained. If the rights and obligations created by the terms of the contract are those of partners, such will be deemed to haAre been their legal intention, Avithout regard to their declared purpose, and if their contract is inconsistent AArith the partnership relation, they are not partners, even though they may have so called them*866selves. 17 Am. & Eng. Eney. Law (1st ed.) 833; Burnett v. Snyder, 76 N. Y. 344, 20 R. C. L. section 36; Wagner v. Buttles, 151 Wis. 668, 139 N. W. 425, Ann. Cas. 1914B, 144, note 115 Am. St. Rep. 415.
Construing the agreement of February, 1900, between Hobbs and Thomas in the light of the law, there is not contained the necessary elements therein to constitute arpartnership and none of the powers or liabilities of partners are conferred thereby on either of them. If the word copartners had not been used by the draftsman no question as to its purpose could arise. Therefore, .instruction number two and the latter part of number one which left to the jury to find that such partnership did exist was erroneous, and said agreement conferred no power upon Thomas to execute notes for borrowed money upon the credit of Hobbs. It is true that where there is an actual partnership for the purpose of conducting a mercantile business, each partner has authority to borrow money for use in the business as an incident to their relation as partners. But if there is no partnership, no such power to execute notes for borrowed money can exist, hence instruction number three was not applicable to this case and it was error to give the same.
The plaintiff’s president is conclusively presumed to know the law of partnerships, and that he could not justify the loan to Thomas, and make such loan the personal obligation of Hobbs upon the mere statement of Thomas to Wright that Hobbs was his partner, and Wright should have known that he could not rely upon that statement, as a basis of credit, and if he had investigated and known the truth he would have hardly loaned a cent on that agreement, and Hobbs if asked would have told him he was not a partner.
It is a rule of justice, as well as law, as stated by the *867Supreme Court in Commercial Bank v. Miller, 96 Va. 357-369, 31 S. E. 812, 816, that “A statement by a person that another is his partner in business, which induces the person to whom the statement is made to give credit upon the faith and credit of the person represented to be a partner, will hind such person, if the statement he true, hut not if untrue.” Hobbs not being a partner of Thomas, and the latter’s statement to Wright that he was being untrue, there can be no recovery against Hobbs, as an actual partner.
When the agreement of February 1, 1900, was introduced in evidence by Hobbs, the plaintiff claimed that if the agreement, with the evidence produced, did not make him liable on the notes as an actual partner, nevertheless it was authority to Thomas to hold him out to the world as a partner and thereby execute the notes in suit for the money loaned Thomas. It is hardly necessary to state that partnership is a branch of the law of agency, and if a party lends money upon the mere statement of a person that another is his partner, or he has authority to represent another as his partner, the lender acts at his peril, and should it turn out that there was no consent to the representation or the borrower exceeded his apparent authority, the person represented as a partner is not liable. When the question of an agent’s or partner’s consent to representations or authority is put in issue, and such claimed consent or authority is in writing, it must be found within the four corners of the writing, construed in the light of the circumstances and subsequent conduct of the parties.
The learned judge of the trial court, in addition to permitting the jury to consider the agreement as constituting evidence of an actual partnership, in the first .part of instruction No. 1, told the jury-as a matter of law that the agreement of February, 1900, was author*868ity to Thomas to hold Hobbs out to the world as a partner. If that be correct and Thomas did so hold him out, then that ends this case unless Thomas was not acting within the usual course of the business, which will be considered later in this discussion. The general rule of law is stated as follows: “The law is well settled that persons who are not actually partners may nevertheless become subject to the liabilities of partners either by holding themselves out as such to the public and the world generally, or to particular individuals, or by knowingly or negligently permitting another person todo so.” 20 R. C. L. 312; Owensboro Wagon Company v. Bliss, supra; Thayer v. Humphrey, 91 Wis. 216, 54 N. W. 1007, 51 Am. St. Rep. 887, 30 L. R. A. 549; notes 115 Am. St. Rep. 442, 18 L. R. A. (N. S.) 990-1105; Thompson v. Toledo First National Bank, 111 U. S. 529, 4 S. Ct. 689, 28 U. S. (L. Ed.) 507; Sun Ins. Co. v. Kountz Line, 122 U. S. 583, 7 S. Ct. 1278, 30 U. S. (L. Ed.) 1137.
The liability as a partner of a person who holds himself out as a partner, or permits others to do so, is predicated on the doctrine of estoppel, and on the policy of the law seeking to prevent frauds on those who lend their money on the apparent credit of those who are held out as partners. 20 R. C. L. section 312; Morgan v. Farrel, 58 Conn. 413, 20 Atl. 614, 18 Am. St. Rep. 282, notes 22 Am. St. Rep. 757, 115 Am. St. Rep. 442, 18 L. R. A. (N. S.) 988.
In the case of Anfenson v. Banks, supra (a case very similar to the one at bar, except the claimed holding out was by circular and general notoriety), there is a review of the authorities on the doctrine of equitable estoppel, as applied to partnerships by holding out, and the law is stated in substance to be: The burden of liability as a partner can be imposed on one not actually a partner *869only when, by reason of some act or wrong or fault on his part, he has estopped himself to deny the partnership relation. The Supreme Court of the United States, speaking by Field, J., of the doctrine of equitable estoppel, says: “For the application of that doctrine there must generally be some intended deception in the conduct or declarations of the party to be estopped, or such gross negligence on his part as to amount to constructive fraud, by which another has been misled to his injury.” Brant v. Va. Coal & I. Co., 93 U. S. 335, 23 U. S. (L. Ed.) 929. But before the party can set up the estoppel by conduct, he must show that he exercised good faith and due diligence to know the truth. Morgan v. Farrel, 58 Conn. 413, 20 A. 614, 18 Am. St. Rep. 282.
There was no act done by Hobbs which could in any sense be termed an equitable estoppel, but when that agreement was produced the court and counsel must have concluded that by the statement that a partnership was thereby formed, the use of the term partnership constituted a mutual agency between the parties thereto. This is not true as a legal proposition, for partnership is only a name for a contract which must constitute a co-ownership in business for profit before any partnership rights and liabilities attach to either party. But if in ignorance of law parties make a contract which is void as a partnership, and subsequently hold themselves out in a public manner, then the doctrine of equitable estoppel would apply. Thus it will be seen that two things are necessary in order for a void partnership agreement to make one not an actual partner liable, to-wit, he must thereby consent that his apparent copartner may represent him as a partner in a public manner and he must be held out in a public manner. It is obvious then how *870essential it is to the plaintiff’s ease that there should be some holding out in a public manner. The only evidence of such holding out in the instant case is general reputation, general understanding and opinions of persons in business in Petersburg; all of these constitute only general reputation, and was all the evidence to show that Hobbs had been held out to the public as a partner of Thomas.
The eases from which the doctrine of equitable estoppel has been deduced are those where it was done by means of firm advertisements, bill heads, and signs, and from these circumstances the jury may infer knowledge and assent to the same. 20 R. C. L. section 314; Fletcher v. Pullen, 70 Md. 205, 16 Atl. 887, 14 Am. St. Rep. 355.
A very few of the early decisions had held that general reputation or understanding in the community may be given in evidence as authority for such holding out, but the vast majority of the cases now hold that general reputation, understanding or gossip are inadmissible to show a holding out or authority to hold out. That is all of the evidence offered in this case of any holding out of Hobbs to the public as a partner. This proposition of law has never been directly passed upon in Virginia, but the uniform partnership act adopts the general line of authority on this subject, and the legislature, in adopting that act, has made the rule laid down by the courts in the great majority of the States and United States Supreme Court the law in this State.
Section 16, uniform, partnership act, Acts 1918,’ page 541, sets forth the essential conditions that constitute an ostensible partnership or partnership by equitable estoppel. The burden is upon the plaintiff to prove (a) that the person sought to be charged *871as an ostensible partner consented that another might represent him to a particular person as a partner, (b) or consented, that he might be represented by another in a public manner as his partner, (c) but the plaintiff must also prove that he gave the credit on the faith of such representation, except where the representation may be made in a public manner. This very much narrows the rule of equitable estoppel, and eliminates gross negligence, defaults, and ostensible partnership by inferences and speculation upon intent. Consent in law is an intelligent concurrence or agreement to an act or contract (here to a representation). It does not include therein inadvertences, misconceptions of the law of partnership, or void efforts to create an actual silent or dormant partnership, and have that by construction created into a consent to be represented publicly as a partner, nor does it include instances where another, who is given authority to represent him as a partner to the trade, deliberately or innocently exceeds that authority. Estoppel being constructive fraud there must be such knowledge and consent as clearly implies moral wrong and turpitude in creating the appearance.
It is not necessary that a partnership should have a name. If there is no firm name agreed upon in articles of partnership, then the parties by separate agreement must agree upon a firm name. One party has no right to use another’s name as a partner without his consent. A partner by agreement prior to the statute might become a silent or dormant partner. 30 Cyc. 420, 20 R. C. L. 5. It must be noted that there was no agreement for the firm name of J. W. Thomas & Company contained in the agreement of February, 1900, and that during the entire twenty-two years that it is claimed this agreement has been in *872effect Hobbs was never published as a partner. A person may become a dormant partner for the purpose of restraining the active partner from securing more credit than the vested capital of the partnership will justify, or gain large credit upon the personal estate of the dormant partner. Consent that a party may represent another who has not agreed upon a firm name, or consented to the use of his name in a certain firm, is a contradiction in terms. There can be no such thing as an ostensible dormant partner. It is clear from the conduct of the parties that it was understood that Hobbs was to be a dormant partner, or Thomas and Hobbs found out after the agreement had been executed that it was void, and therefore was abandoned by Thomas for fifteen years until he wanted to borrow large sums of money. The paper does not on its face consent that Hobbs may be represented as a member of J. W. Thomas & Company.
But it is also claimed that after laying dormant for many years this agreement was all the time vital and binding because of the provision, “which said co-partnership is to continue from date hereof, for and during the pleasure of the said parties, to be terminated at any time by either of them.” Is not this a contradiction in terms? If the agreement was in law a nullity as a partnership, and never came into existence as the legal entity known as a partnership how can it continue during pleasure when it never existed?
While in an actual partnership a partner may not limit his liability fixed by law, or the authority of the other partner, yet in ease of an ostensible partnership the ostensible partner may consent to be represented as such to an individual, or to the particular trade, and the owner of the business cannot exceed his authority. If the agreement be construed as still in *873existence the recital “the said, copartnership is formed, for the sole accommodation of the said J. W. Thomas for the purpose of giving him credit in and about the said trade” could by no process of construction authorize Thomas to represent Hobbs as a partner to the world or in a public manner, nor warrant Thomas in executing negotiable notes for large sums of money upon the credit of Hobbs. The risk and liability of a person who lends his credit to another for the purpose of buying china and crockery for sale is very much less than giving power to execute negotiable paper and sell or discount the same. This case illustrates the difference of risk in a most striking manner. It does not appear that Thomas ever found it necessary to get credit with the trade on the fact that Hobbs was his partner. But it is not sufficient that Thomas has held Hobbs out as a partner, but the bank must have given credit upon the faith thereof.
It is the almost universal rule of law now, that before the plaintiff can bind the ostensible partner, because he consented to another representing him as a partner, it must be proven that the plaintiff extended the credit on the faith of such representation. Thompson v. Toledo First National Bank, supra, 30 Cyc. page 394 and note 93 where cases are cited from United States Supreme Court, England and nearly every State in the Union in support of the rule of law. Where the party to be charged has consented to the representation being made in' a public manner and such representation has been so made, to-wit, by advertisement, etc., and if the person giving the credit had general knowledge of such public holding out, by the terms of the uniform partnership act it is presumed that he gave credit by reason of the same. Thomas never represented Hobbs as a partner in a public manner, there*874fore the bank could, have no general knowledge of a thing that never happened, hence there was no evidence in the ease upon which the jury could find a verdict.
The plaintiff evidently realized that there was no evidence that Hobbs had consented that Thomas might represent him as a partner in a public manner in the firm of J. W. Thomas & Company, or that he had ever done so, or that the bank had any general knowledge of such representation, therefore, it added to instruction number one the following fact upon which the credit was based, and the proposition of law that gave it the right to recover, to-wit: “Of that the said J. W. Thomas, before securing the loans from the said plaintiff, represented to the said plaintiff that the said E. S. Hobbs was his partner in the business of J. W. Thomas & Company and the said plaintiff loaned the said J. W. Thomas & Company the money represented by the notes sued on in this case on the faith that such partnership existed, then the said E. S. Hobbs will be liable as a partner as to such transaction. ’ ’ Wright admitted that he gave the credit on the faith of Thomas’ statement that Hobbs was an actual partner, and never claimed that the credit was given on any representation of Hobbs as an ostensible partner. The facts were not in dispute, and the plaintiff’s sole right to recover is placed in its instructions upon the existence of an actual partnership between them under style of J. W. Thomas & Company. This was a question of law for the court and not fact for the jury. The uniform partnership act, section 6, fixes by definition in Virginia when a partnership exists: “A partnership is an association of two or more persons to carry on as co-owners a business for profit,” and section 7 provides: “Except as provided by section sixteen persons who are not partners as to each other *875are not partners as to third persons.” No partnership ever existed in law between Hobbs and Thomas because they were never associated as co-owners in business for profit, and the court should have given a peremptory instruction to that effect.
But if it was not intended that the statement of Thomas to Wright constituted Hobbs an ostensible partner in J. W. Thomas & Company, there was no authority contained in the agreement of February,, 1900, to warrant that position. Under the law a person may consent to be represented to an individual or particular trade and not to banks, and Hobbs distinctly states that the partnership was formed for the sole accommodation of Thomas to give him credit in and about the trade of buying and selling chinaware, crockery and kindred articles, and that he has never consented that Thomas might represent him to banks with power to execute notes for any sum of money that said banks would lend Thomas on his financial worth, and thereby squander a large part of his estate.
The law of partnership by equitable estoppel is well settled now. It is a legal duty of the lender of money to a concern where the person sought to be charged is not apparently a partner to make investigation, and he is affected with notice of all that inquiry would reveal. However, if the person sought to be charged has consented to be represented as a partner in a public manner, then such public holding out relieves the lender from the duty of inquiry, and the ostensible partner having created an appearance which is false, is estopped to-prove the truth. • • .
Applying the law to the instant case, when Thomas came to the plaintiff and sought loans from it upon his statement that Hobbs was his partner (the latter not appearing to be such), it was the duty of the plaintiff to *876make inquiry into the authority for that statement, and if he had done so, the agreement of February, 1900, would have plainly disclosed that Thomas had no authority to borrow money upon the credit of Hobbs as a partner.
But suppose Hobbs was an actual or ostensible partner in J. W. Thomas & Company, still is he liable upon the notes in suit?
As a general proposition, a copartner has the right to give a promissory note in the name of the firm, if given in good faith, for partnership purposes, or to one who gives for it a valuable consideration, without notice that it is given for a purpose not within the scope of the partnership. The uniform partnership act, section 9 (2) provides: ‘ ‘An act of a partner which is not apparently for the carrying on of the business in the usual way does not bind the partnership unless authorized by the other partners.” So that if Hobbs was a partner either actual or ostensible, Thomas had the right to bind him by making notes only in the usual course of business as a part of the usual routine of their affairs. When Thomas came to Wright to borrow for the business of J. W. Thomas & Company the large sum of twelve thousand dollars, afterwards increased to nineteen thousand three hundred dollars, it was his duty to investigate the affairs or course of the business of the firm. He knew, apparently, that the concern was not worthy of credit, as he says he loaned the money upon the worth of Hobbs, or investigation would have disclosed that the total invested capital of the firm amounted to about $4,500.00, with debts for merchandise of $500.00, and whether Thomas was going to use the money to pay off notes due the National Bank of Petersburg to which at that time, as disclosed by the records before us, the firm of J. W. Thomas & Company was indebted in the *877sum of $21,500.00 evidenced by the notes of the concern, the amount of the loan and the invested capital, together with the fact that Hobbs was only a silent or dormant partner, made it apparent that such large amount of borrowed money was not being used to carry on the ordinary business of concern. By reason of the above facts and circumstances, Wright should have demanded production of the articles of agreement, or communicated with Hobbs whom he met frequently at the meetings of the board of another financial institution, before he loaned Thomas, upon the notes of J. W. Thomas & Company, such sums of money, so entirely out of proportion to the line of credit the firm was entitled, upon the financial worth of a dormant partner, and with no evidence of authority except the mere verbal statement of the borrower. The bank when it made the loan apparently never expected it to be paid from the assets of Thomas & Company, but out of the estate of Hobbs. The notes having been executed beyond the apparent scope of the very small business, there can be no liability upon Hobbs to pay them.
Prom the foregoing discussion of the law and evidence, the instructions should not have been given as there was no evidence from which an actual partnership or an authority to hold Hobbs out publicly as a partner in J. W. Thomas & Company, and, therefore, as section 6388, Virginia Code, is mandatory, this court should enter judgment for the defendant, Hobbs.