3 Com. Dig. Arbitrament, D. 2; 2 Bell, Comm. B. 7, p. 618, 5th ed.; Stead v. Salt, 3 Bing. 101; Adams v. Bankart, 1 C. M. & R. 681; Karthaus v. Ferrer, 1 Peters, 222, 228; Strangford v. Green, 2 Mod. 228; Buchanan v. Curry, 19 Johns. 137; 3 Kent, Comm. lect. 43, p. 49, 4th ed. In Pennsylvania and Kentucky, a different doctrine obtains, and one partner may, by an unsealed instrument, submit a matter to arbitration, so as to bind the partnership. Taylor v. Coryell, 12 S. & R. 243; Southard v. Steele, 8 Mon. 435; Cotton v. Evans, 1 Dev. & Bat. Eq. 284. But see Gow on Part. ch. 2, § 2, p. 66; Gow's Supp. to Part. ch. 2, § 2, p. 17; Boyd v. Emmerson, 2 Ad. & El. 184; Harrison v. Jackson, 7 T. R. 207; Strangford v. Green, 2 Mod. 228; Story on Part. § 114, 115, 116.
1 Ante, § 243; Watson on Part. ch. 4, p. 218 to 222, 2d ed.; Coll. on Part. B. 3, ch. 2, § 1; p. 308 to 312, 2d ed.; Gow on Part. ch. 2, § 2, p. 57 to 60; 3 Kent, Comm. lect. 43, p. 47, 48, 49, 4th ed.; Story on Agency, § 49, 50, 51; Harrison v. Jackson, 7 T. R. 207; Metcalfe v. Rycroft, 6 M.
& S. 75; Elliot v. Davis, 2 Bos. & Pul. 338; Hawkshaw v. Parkins, 2 Swanst. 543; Skinner v. Dayton, 19 Johns. 513.
2 Gow on Part. ch. 2, § 2, p. 58 to 60, 3d ed.; Steiglitz v. Egginton, Holt, N. P. 141; Harrison v. Jackson, 7 T. R. 207; Metcalfe v. Rycroft, 6 M. & S. 75; Elliot v. Davis, 2 Bos. & Pul. 338; Hawkshaw v. Parkins, 2 Swanst. 543. See Dillon v. Brown, 11 Gray, 179.
3 Act of Congress of March 1, 1823, ch. 149, § 25; Laverty v. Burr, 1 Wend. 529; Bank of Rochester v. Bowen, 7 Wend. 158; N. Y. Firemen Ins. Co. v. Bennett, 5 Conn. 574.
4 Harrison.v. Sterry, 5 Cranch, 289. See Cady v. Shepherd, 11 Pick. 400, in which all the authorities are reviewed and the doctrine elaborately discussed. Skinner v. Dayton, 19 Johns. 513; Gram v. Seton, 1 Hall, 262, in which all the authorities are examined and discussed. Anderson v. Tompkins, 1 Brock. 462; Lee v. Onstott, 1 Pike, 206; Morse v. Bellows, acting mala fide, or beyond his authority, and especially if there be collusion between them, the firm will not be bound by any act done, or contract made by them.1 In cases of fraud by one partner, the limitation in bar of the claim in equity only begins to run upon the discovery of the fraud by the party defrauded.2
7 N. H. 549; Henderson v. Barbee, 6 Blackf. 26.
5 Henderson v. Barbee, 6 Blackf. 26; Pike v. Bacon, 21 Me. 280.
§ 307. Another infringement is also made upon the English doctrine by act of Congress, which provides that a customhouse bond given in the name of a firm, and signed by one partner, for the payment of duties upon goods imported for and belonging to the partnership, is binding upon the firm.1
§ 308. The general doctrine, that the partnership is liable for all transactions by one partner, acting as agent, within the scope of the partnership business, is not limited to cases where such partner acts bond fide; but extends to all acknowledgments, admissions, frauds, or misrepresentations by one partner, made mala fide, in relation to matters apparently within the scope of his authority.2 This doctrine is founded not only upon reasons of public policy, but also upon the ground that there is an implied undertaking, on the part of each partner, to be responsible for the honesty of all, and wherever an injury must result to one of two innocent persons, it should be borne by the party whose act is the cause of the injury. If credit, therefore, be given bond fide to the firm, on account of the misrepresentation or concealment of one partner, all the partners will be responsible, notwithstanding their ignorance thereof, and notwithstanding any private agreement between them, limiting their liability.3 But if the party with whom the partner deals have knowledge or notice that he is
1 Act of Congress of March 1, 1823, ch. 149, § 25.
2 U. S. Bank v. Binney, 5 Mason, 176,187, 188; Etheridge v. Binney, 9 Pick. 272; Winship v. Bank of U. S., 5 Peters, 529; Story on Part. § 105; Coll. on Part. B. 3, ch. 1, p. 260; Thicknesse v. Bromilow, 2 Cr. & J. 428; Clavering v. Westley, 3 P. Wms. 402; Baker v. Charlton, Peake, 80; 1 Montagu on Part. p. 37, note c; Swan v. Steele, 7 East, 210; Ex parte Bolitho, Buck, 100; South Carolina Bank v. Case, 8 B. & C. 427; Manuf. & Mech. Bank v. Winship, 5 Pick. 11; Mifflin v. Smith, 17 S. & R. 165; 2 Bell, Comm. B. 7, § 615, 618, 5th ed.; Onondaga Bank v. De Puy, 17 Wend. 47; Locke v. Stearns, 1 Met. 560.
3 Gow on Part. ch. 2, § 2, p. 55, 3d ed.; Coll. on Part. B. 3, ch. 1, § 4, p. 282 to 290, 2d ed; Lacy v. M'Neile, 4 Dowl. & Ryl. 7; Pittam v. Foster, 1 B. & C. 248; Burleigh v. Stott, 8 B. & C. 36; Helsby v. Mears, 5 B. & C. 504; Bignold v. Waterhouse, 1 M. & S.' 255; Story on Part. § 107, 108; Willet v. Chambers, Cowp. 814; Stone v. Marsh, 1 Ry. & Mood. 364; s. c. 6 B. & C. 561; Hume v. Bolland, 1 Ry. & Mood. 371; Marsh v. Keating, 2 CI. & Finn. 250; Boardman v. Gore, 15 Mass. 331; Rapp v. Latham, 2 B. & Al. 795. See Linton v. Hurley, 14 Gray, 191.
§ 309. The application of a joint security by a partner in discharge of his individual debt, although it does not of itself give rise to an imperative presumption of mala fides, yet throws upon the creditor the burden of proof, not only that the whole transaction has been in entire good faith on his part,3 but without negligence; for as such a use of the partnership funds is a misappropriation, the mere nature of the transaction is enough to put him on his guard, and he is bound to acquaint himself with the actual authority of the partner.4 But where the negotiable paper of a firm, although given by a partner in payment of his private debt, passes into the hands of a bond fide holder, for valuable consideration, without actual or constructive notice, the partnership would be liable.6
§ 310. The release of a partnership debt by one partner will be void as to the firm, if it be taken in discharge of the separate debt of the partner releasing it, by a creditor who has knowledge of all the circumstances. In such cases the burden of proof is on the holder or creditor to repel the presumption of fraud or collusion, unless there were circumstances from which the assent of the partners might be inferred; because the nature of such a transaction should have put the creditor on his guard.1