First Nat. Bank of Ann Arbor v. Farson

Decision Date22 April 1919
Citation123 N.E. 490,226 N.Y. 218
PartiesFIRST NAT. BANK of ANN ARBOR, MICH., v. FARSON et al.
CourtNew York Court of Appeals Court of Appeals

OPINION TEXT STARTS HERE

Appeal from Supreme Court, Appellate Division, First Department.

Action by the First National Bank of Ann Arbor, Mich., against John Farson and William Farson, individually and as copartners doing business under the firm name and style of Farson, Son & Co. From a judgment of the Appellate Division affirming a judgment for plaintiff after trial without jury (178 App. Div. 135,165 N. Y. Supp. 119), defendants appeal. Reversed, and new trial granted.

Simon Fleischmann, or Buffalo, and Walter H. Pollak, of New York City, for appellants.

Arnold L. Davis, of New York City, for respondent.

COLLIN, J.

The plaintiff recovered a judgment in the amount of the face value of five bonds of the Eden Irrigation & Land Company, in virtue of a guaranty executed in the name ‘Farson, Son & Co. The claim of the defendants is that the member of ‘Farson, Son & Co. who executed the guaranty, in executing it, exceeded his authority. The findings of fact of the Trial Term were unanimously affirmed by the Appellate Division.

The cardinal facts are: At the times involved, John Farson, Sr., and the defendant John Farson were the members of a general partnership in the name of Farson, Son & Co. They, as the partnership, carried on the business of buying and selling bonds and other securities. On or about April 10, 1908, a salesman of the firm sold to the plaintiff the five bonds we have mentioned. Each bond was of $1,000, was dated January 1, 1907, was payable January 1, 1906, with interest payable semiannually, and was owned by the partnership. The salesman, in negotiating the sale, offered, on behalf of the partnership, under the authorization of John Farson, Sr., to guarantee the principal and interest of the bonds. In closing the sale the cashier of the partnership, one Parrott, authorized thereunto by John Farson, Sr., delivered to the plaintiff through the mail a written instrument with the signature ‘John Farson, Son & Co. Made by John Farson, Sr., which contained, among other things, the stipulation:

‘For value received, we hereby guarantee payment of principal and interest promptly at maturity of the following bonds, namely: [Followed by a designation of the five bonds.]

The acts of John Farson, Sr., were performed by him purporting to act as a member of the firm. The obligor in the bonds did not pay the principal sum of them at maturity or at any time, or the interest due upon them from July 1, 1915. In case the defendant John Farson, who is the surviving member of the partnership, is liable to the plaintiff by reason of the guaranty, William Farson is also liable, by reason of an agreement between him and John Farson. The finding of the trial court, as a conclusion of law, ‘there is now due and owing from the defendants and each of them to the plaintiff the principal sum of the face value of the bonds and the unpaid interest,’ was duly excepted to. We are to determine whether or not the findings of fact sustain the conclusion of law and the consequent judgment.

[1][2] The partnership was a trading or commercial partnership. Kimbro v. Bullitt, 22 How. 256, 268, 16 L. Ed. 313;Pease v. Cole, 53 Conn. 53, 22 Atl. 681,55 Am. Rep. 53;Marsh v. Wheeler, 77 Conn. 449, 59 Atl. 410,107 Am. St. Rep. 40; 1 Bates on Partnership, 327. Each partner possessed the powers the law attributes to a member of a partnership of that nature. Each constituted the other his agent for the purpose of entering into all contracts for him, and for the partnership, within the scope of the partnership business. The law of agency mainly, although not exclusively, governs the relations of partners to each other, and to the persons who deal with the partnership. Each partner acts, as to himself, as a principal,having a joint interest in the partnership property, and, as to each other partner, as a general agent. The implied powers of a partner rest in the usages and business methods of those conducting commerce and trade, and grew out of the necessities of commercial business. They do not extend broadly to partners in nontrading partnerships. As to third persons, the authority to a partner must be found in the actual agreement of the partners, or through implication, in the nature of the business according to the usual and ordinary course in which it is carried on by those engaged in it in the locality which is its seat, or as reasonably necessay or fit for its successful prosecution. If it cannot be found in those, it may still be inferred from the actual, though exceptional, course and conduct of the business of the particular partnership itself, as personally carried on with the knowledge, actual or presumed, of the partner sought to be charged. The power or authority of a partner in a commercial partnership is to be tested and measured, when the actual agreements between the partners are unknown, by the ordinary usages of and the methods customarily used in partnerships conducting a business like unto, or by the usages and methods of, his own partnership. Each partner is impliedly empowered to conduct the business in the way usual to that class of business, or to his partnership. Partnership Law (Consol. Laws, c. 39), § 5; Winship v. Bank of the United States, 5 Pet. 529, 563, 8 L. Ed. 216;Irwin v. Williar, 110 U. S. 499, 505, 4 Sup. Ct. 160, 28 L. Ed. 225;Nemeth v. Tracy, 217 N. Y. 714, 112 N. E. 1061;King v. Sarria, 69 N. Y. 24, 25 Am. Rep. 128.

[3] The instant case does not involve, through the findings or evidence or the briefs or argument of counsel, a method or course of dealing peculiar to Farson, Son & Co., or a ratification of or acquiescence in the guaranty by John Farson, or an express or actual authorization to John Farson, Sr., to execute it. The findings present us with the facts: The existence of the partnership; the nature of its business; the sale and the attendant circumstances; the execution of the guaranty; and the consequent liability. Those findings do not directly or by just and reasonable inference beget the conclusion that persons engaged in the business of buying and selling bonds and other securities in the cities of New York and Chicago, customarily and as an ordinary usage in selling bonds owned by them, guaranteed the payment of the principal and interest of the bonds. The law has known and recognized certain transactions and contracts of one partner as binding upon the other partners and the partnership, because they were manifestly within the scope or objects of the partnership; they were directly and reasonably, if not necessarily, incident to or connected with the business of the partnership. Thus a member of a trading or commercial partnership has, through implication, the power to buy and sell the articles dealt in, to borrow money for the business, and to give notes and checks of the partnership, to transfer and indorse by the partnership the notes and checks given the partnership, or enforce their payment by actions at law, or hire and discharge employés. Those acts and others are within the general usages and...

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17 cases
  • Durkin v. Shea
    • United States
    • U.S. District Court — Southern District of New York
    • 6 Marzo 1997
    ...is, in fact, an agent of his fellow partners, as well as of the partnership. First National Bank of Ann Arbor, Michigan v. Farson, 226 N.Y. 218, 221-22, 123 N.E. 490 (1919) ("Each partner acts, as to himself, as principal ... and, as to each other partner, as a general agent.") Caplan v. Ca......
  • Deutsche Bank Nat'l Trust Co. v. Bills
    • United States
    • New York Supreme Court
    • 15 Octubre 2012
    ...the partnership property, and, as to each other partner, as a general agent.' First National Bank of Ann Arbor, Mich., v. Farson, 226 N.Y. 218, 221, 123 N.E. 490, 491.” (Caplan v. Caplan, 268 N.Y. 445, 450–451, 198 N.E. 23, 26 [1935];see Partnership Law § 20[1]4). A partner may bind the par......
  • U.S. v. Acorn Technology Fund, L.P.
    • United States
    • U.S. District Court — Eastern District of Pennsylvania
    • 23 Octubre 2003
    ...must be found in the partnership agreement or shown to be inherent in the partnership business."); First National Bank of Ann Arbor, Mich. v. Farson, 226 N.Y. 218, 223, 123 N.E. 490 (1919) ("it is a thoroughly established rule of law that a partner has no implied authority to bind his partn......
  • In re McManis
    • United States
    • U.S. Bankruptcy Court — Eastern District of Kentucky
    • 3 Noviembre 1986
    ...partner is held to have the power to hire employees, he is likewise given the power to discharge employees. First Nat. Bank of Ann Arbor v. Farson, 226 N.Y. 218, 123 N.E. 490 (1919). These authorities indicating that an individual partner as co-owner has the general power to hire or dischar......
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