Eady v. Newton Coal & Lumber Co.
| Decision Date | 01 August 1905 |
| Parties | EADY v. NEWTON COAL & LUMBER CO. |
| Court | Georgia Supreme Court |
Syllabus by the Court.
An agreement between a customer and a member of a partnership that its goods may be purchased and paid for by the customer in commodities furnished by him for the private use and benefit of such member of the firm is void, as being beyond the scope of the partner's apparent authority. So much of the decision in Perry v. Butt, 14 Ga. 699, as is in conflict with the above, is upon a formal review overruled.
Articles of partnership may be enlarged by implication from a general usage and habit of the firm, acquiesced in by all of the partners. But, before such a custom would become binding upon a partner who did not expressly authorize it, the circumstances would have to be such as to indicate that he not only knew of the course of dealing in particular instances, but contemplated and tacitly assented to a regular course of dealing with the public, rather than a departure from the partnership articles in the excepted cases.
Error from City Court of Griffin; E. W. Hammond, Judge.
Action by H. P. Eady against the Newton Coal & Lumber Company. Judgment for defendant, and plaintiff brings error. Reversed.
An agreement between a customer and a member of its firm, that its goods may be purchased and paid for by the purchaser in commodities furnished for the private use of the partner is void.
A partnership was formed in 1893 or 1894, under the firm name of H. P. Eady & Co., between H. P. Eady and J. A. Brooks, for the purpose of engaging in the wagon and buggy business and conducting a blacksmith and general repair shop. Brooks had charge of the books and looked after the office affairs of the firm, while Eady assumed the management of the shop. Shortly after the partnership was formed Brooks approached J M. Mills, manager of the Newton Coal & Lumber Company, and solicited the business of that concern, proposing to Mills that, if he would give the patronage of his company to Eady & Co., the individual accounts of its members for supplies purchased from his company would be allowed as a credit on such account as he might run with the partnership, and that they would in this manner "swap" accounts. Mills assented to this arrangement, and Brooks afterwards purchased from the Newton Coal & Lumber Company supplies for his individual use to the amount of $113.51, and supplies for his firm to the amount of $59.02. In January, 1898, Mills and Brooks effected a settlement of accounts, which included the individual indebtedness of the latter. Brooks made no entry of this settlement on the books of his firm, and his partner had no knowledge thereof or of the arrangement under which it was made. In June, 1902, Brooks effected another settlement with a representative of the Newton Coal & Lumber Company whereby an account of $19.36 against Eady & Co. and an account against Brooks of $121.44 were satisfied. Eady was not present and took no part in this settlement, and the transaction was not entered on the books of his firm, nor did Brooks charge his individual account with the amount which he received thereunder. In April, 1903, the partnership was dissolved, and Eady became the sole proprietor of the business. Brooks was at the time hopelessly insolvent. On December 5, 1904, Eady, as the successor of the firm and as transferee of the accounts which it held against its debtors brought suit against the Newton Coal & Lumber Company and the individuals who conducted business under that firm name to recover $200.80 on an open account claimed to be due by it to Eady & Co. The defendants filed an answer in which they admitted an indebtedness of $16.65, but by special plea they set up the agreement made between the manager of the Newton Coal & Lumber Company and Brooks, one of the members of the firm of Eady & Co., and the settlement of the accounts made in pursuance of that agreement. The defendants alleged that Brooks was authorized to enter into this agreement; that it was made in the usual course of dealings which had prevailed for a number of years, with the knowledge and approval of all of the members of the two partnerships; and that the settlement of accounts was made with the knowledge and consent of Eady and in accordance with the custom recognized and followed by his firm in settling accounts between it and other firms in Griffin with which it transacted business.
On the trial of the case Brooks testified that he had no direct authority from Eady to enter into the agreement made with the manager of the Newton Coal & Lumber Company, but that Eady had knowledge that settlements of the character made with that company were effected with parties with whom his firm had business dealings, and that he never raised any objections to settlements being made which included the individual accounts of its members. Eady testified that he never authorized any such agreement, had no knowledge that it was entered into, and never consented to any settlement in accordance with its terms. As to transactions with other firms in Griffin, he explained that on certain occasions he had consented that, when parties called for a settlement of accounts, the indebtedness of the members of his firm should be entered as a credit on the demands which his firm had against such parties, but that in each instance the account against him individually had been presented to him, he had marked it and he and his partner had agreed that the settlement with the firm should embrace an allowance of the indebtedness held by its debtor against them individually. He denied that he had ever conferred upon Brooks any authority to make any such settlement without his express assent and approval. A number of merchants testified to having made settlements with the firm of Eady & Co., in which demands against the members of that firm were allowed. In some instances Eady was present and consented to this arrangement; in other instances the settlement was made with Brooks in the absence of Eady. Only one of the transactions of this nature which was made by Brooks without the express consent of his partner appeared on the books of the firm, and Eady undertook to swear positively that the entry thereof was made after the firm was dissolved, by changing a former entry of $2.75 to $580.95, and that he had no knowledge of this transaction till after he had become the sole owner of the business. After the dissolution of the partnership, Eady repudiated the agreement entered into between Brooks and the manager of the Newton Coal & Lumber Company, saying he had no information in regard to it, and that the company would have to look to Brooks for the payment of his individual indebtedness to it. The defendants sought to show that Eady in point of fact knew of and tacitly assented to that agreement, but the only evidence adduced on this point was to the following effect: After this arrangement was agreed on between Brooks and Mills the latter was asked by Eady if he "didn't want a wagon." Mills replied, "You don't owe us quite enough to get a wagon yet," and Eady then said, "We will owe you enough." Subsequently Eady & Co. wanted to buy a car load of coal. Mills went to the office of the firm, and in the presence of both members said that coal was sold at a very small profit, and that he could not charge it--that he "could not swap accounts as to this." They accordingly paid cash for the coal, giving him a check for the price of it, and Eady took part of the car load, Brooks part of it, and a part of it was devoted to the use of the firm. Several bookkeepers, who had at different times been in the employ of the firm, knew of the custom of settling the individual indebtedness of its members when settlements were effected between the firm and other business concerns, and they were under the impression that Eady knew of this practice, as he looked pretty closely after the business.
After both sides had announced closed, the court, on motion of the defendants, directed the jury to return a verdict for only the amount which they admitted to be due, $16.65, holding that the plaintiff was not entitled under the evidence to recover the amount sued for. To the direction of this verdict exception is taken. Complaint is also made that the court admitted, over the plaintiff's objection, evidence as to the making of the agreement under which Brooks settled his individual indebtedness to the Newton Coal & Lumber Company, and as to the general custom of the firm of Eady & Co. to make with persons with whom it dealt settlements of the character effected by Brooks with the defendant partnership.
M. W. Beck and Robt. T. Daniel, for plaintiff in error.
Lloyd Cleveland, for defendant in error.
EVANS, J. (after stating the facts).
1. Counsel for the defendant in error insists that the agreement between Brooks and the manager of the Newton Coal & Lumber Company was an engagement in furtherance of the partnership business, which Brooks had the right to make, and by which his copartner is bound. This proposition is claimed to be supported by the case of Perry v. Butt, 14 Ga. 699. The report of that case discloses that the partnership concern did a cash and credit business and bartered goods for other articles. The defendant was a tavern keeper, and, in a conversation with one of the partners upon the subject of boarding, said that, when merchants or their clerks boarded with him, it was his custom to trade it out, and that he did not expect cash. It was the understanding that the tavern keeper's charge for the board of one of the partners was to be allowed for any goods he might buy of the firm. The tavern keeper had twice settled his account with the firm for goods purchased prior to the time...
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