Hobbs v. Virginia Nat. Bank

• Citation: 147 Va. 802
• Parties: EUGENE S. HOBBS v. VIRGINIA NATIONAL BANK OF PETERSBURG, VIRGINIA.
• Decision Date: 28 May 1925
• Court: Virginia Supreme Court

Page 802

147 Va. 802

EUGENE S. HOBBS v. VIRGINIA NATIONAL BANK OF PETERSBURG, VIRGINIA.

Supreme Court of Virginia, Richmond.

May 28, 1925.

Reheard May 27, 1926.

1. PARTNERSHIP — Estoppel — Holding out as Partner — Case at Bar. — In the instant case, the question at issue was whether defendant was a partner with one T. in a mercantile firm. Defendant entered into an agreement with T. under which T. was to conduct the business in respect to third persons, just as if it were an actual partnership, though from other stipulations it appeared that there was no actual partnership. The agreement was for the purpose of obtaining credit for T. T. repeatedly held out defendant as his partner in the business. Mercantile agencies listed T. and defendant as partners in the business. Statements made by T. of the assets and liabilities of the firm to a bank stated the names of the partners as defendant and T. And at least one of such statements to the bank was signed by defendant.

Held: That there was evidence sufficient to support a verdict holding defendant liable for the debts of the concern as a partner by estoppel.

2. PARTNERSHIP — Actual Partnership — Community of Interest. — A person may be an actual or a true partner of another because they are engaged in a joint enterprise in which they have a community of interest and share in the profits.

3. PARTNERSHIP — Estoppel — Ostensible Partner. — A partner by estoppel is ordinarily designated as a nominal or ostensible partner; and is one who, although not an actual partner, has made himself liable upon the ground that he is estopped from denying that he is a partner by holding himself out as such or allowing himself to be so held out.

4. PARTNERSHIP — Estoppel — Ostensible Partner — Liability. — 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 to do so. Yet in fact such a person does not become a partner; he is merely liable as a partner; for individuals may be liable as partners as to third persons, while as between themselves they are not to be considered partners.

5. PARTNERSHIP — Estoppel — Ostensible Partner — Liability. — Persons may therefore be made liable as partners, as far as third persons are concerned, by assertions, admissions, and acts tending to show that they are such, although such evidence might be insufficient to prove a partnership as between the parties themselves.

6. PARTNERSHIP — Estoppel — Ostensible Partner — Liability — Intention. — The question of liability does not depend on the intention of the parties, for persons who are not partners may by estoppel be held to the responsibilities of partners directly contrary to their own intentions.

7. PARTNERSHIP — Holding Out — Extent of Liability — "Credit" — "Trade" — Bank Loan — Case at Bar. — In the instant case defendant had entered into an agreement with ont T. under which `for the accommodation of T. and for "the purpose of giving him credit in and about the said trade," a copartnership was ostensibly formed though in reality there was no community of interest. In an action against defendant on a note of the partnership to a bank, it was argued that the credit so referred to meant credit on the purchase of goods or stock in trade, and did not include money borrowed at banks.

Held: That the language was not capable of such a restricted construction. Credit at banks is one of the most important items of credit.

8. WORDS AND PHRASES — Credit in and about Trade — Partnership — Right to Borrow Money. — Certainly credit "in and about the trade" would include all credit reasonably incidental to the business, and it is well settled that mercantile partnerships have the right to borrow money and may be expected to do it.

9. PARTNERSHIP — Ostensible Partner — Uniform Partnership Act. — The circumstances under which a person should be held bound as a partner by estoppel are stated in section 16 of the uniform partnership act. Acts 1918, page 545. The statutory rule is substantially an expression of the common law as recognized by the courts, and certainly puts a person claimed to be an ostensible partner in no more advantageous position.

10. PARTNERSHIP — Existence of Partnership — General Reputation. — It is settled that the common report, or general reputation, is not admissible upon an issue of general partnership, and cannot be used to prove an actual partnership. It seems, however, to be also well settled that when it is sought to hold a person as a partner by estoppel, general reputation is admissible if known to him, or brought about with his consent, or by his acts.

11. PARTNERSHIP — Existence of Partnership — General Reputation — Case at Bar. — General reputation of a man's being a partner of another is not of itself admissible to hold one liable as a partner; it must be supported by evidence showing knowledge of the existence of the reputation and a failure to deny it under such circumstances as to create the estoppel. Likewise the holding out of a person by some one other than himself without his knowledge is not sufficient to bind him to a partnership liability. But in the instant case the reputation was naturally and necessarily brought about by defendant's own conduct, and was the consequence of his own act in making an agreement with one T. that he might hold him out as his partner. The law holds a person to intend, have knowledge of, and to be responsible for the natural consequences of his own act or undertaking.

12. PARTNERSHIP — Ostensible Partner — Evidence — Written Statements to a Bank — Case at Bar. — In the instant case the question at issue was whether defendant was a partner of one T. in a mercantile business. Defendant excepted to the admission of a written statement of liabilities and assets made to a bank signed by T. and himself, and to preceding similar statement signed by T. only on the ground that plaintiff knew nothing of the dealings between T. and the bank, and also that the statement signed by defendant was made subsequent to the time T. borrowed the money in suit from the plaintiff.

Held: That these statements were admissible.

13. PARTNERSHIP — Partnership by Estoppel — Instruction — Harmless Error. — Where the question at issue was the liability of defendant as ostensible partner in a mercantile firm, although an instruction given by the court was not clear in its purport and effect, yet, considering the overwhelming tendency of the evidence to establish a partnership by estoppel, the clear statement of the law in another instruction, and the statement of the law as a whole resulting from considering the two instructions together, there was no possibility of the jury having been misled, and if there was error, it was harmless error.

14. BANKS AND BANKING — Loans — Partnership. — Where money is borrowed in the name of and for the use of an apparent partnership, there is no duty upon the bank to inquire whether it was to be devoted to partnership purposes exclusively.

ON REHEARING.

15. PARTNERSHIP — Holding Out as Partner — Evidence — Statement of Condition of Firm — Knowledge of the Defendant. — In the instant case, an action to hold defendant liable to plaintiff bank upon an endorsement of a note by a partnership on the ground that he had permitted himself to be held out as a member of the partnership, a statement of the condition of the partnership rendered to another bank and signed by the defendant and one T. as the two persons composing the partnership was offered in evidence. It was objected that this statement was not admissible as its existence was unknown to and did not influence the plaintiff bank in making the loan. Defendant denied that the so-called partnership agreement authorized T., the other partner, to represent to anyone that defendant was a partner in the firm, and contended in his testimony that he understood the arrangement between T. and himself to have the effect only of allowing the firm to buy trade goods upon his credit.

Held: That the statement was made admissible by this testimony of defendant and the introduction of the so-called partnership agreement in writing between him and T.

16. PARTNERSHIP — Ostensible Partner — Holding Out — Case at Bar. — In the instant case defendant and one T. entered into an agreement to form a copartnership, in which it was stated that the copartnership was formed for the sole accommodation of T., "for the purpose of giving him credit in and about the said trade." Later the partnership rendered a financial statement to a bank signed by the partnership and by T. and the defendant.

Held: That reading these two papers together the parties intended that they should be taken by the business world as partners and that defendant's property should be considered as financial backing for the firm.

17. PARTNERSHIP — Ostensible Partner — Liability on Firm's Endorsement — Case at Bar. — In the instant case, where an agreement between defendant and on T. had authorized T. to hold out defendant to the world as a partner with T. in a firm for the purpose of giving T. credit in and about the trade therein mentioned, if T. represented to plaintiff bank that defendant was his partner in the business and the plaintiff in good faith loaned the partnership the money represented by the note sued on, upon the faith of this representation, then defendant became liable as a partner upon the note.

18. ESTOPPEL — Probative Effect of Writing — Parol Evidence. — It is a fundamental principle of law that a person cannot deny the effect of a writing intentionally and purposely signed by him in order to accomplish a definite object. The probative effect of the writing overweighs all parol testimony as to intention.

19. PARTNERSHIP — Estoppel — Holding Out. — In the application of the doctrine of...