A partner who signs the firm name to a note or other instrument without authority, express or implied, is chargeable personally upon the instrument.1 But the declaration should be against him alone, and not against all the partners.2

So, also, one who takes such a bill or note in satisfaction of a claim against a partnership may repudiate the note or bill and charge the partnership upon the old claim.3 And, of course, one who takes such a bill in conditional payment of a claim against a partnership may repudiate it and hold the firm liable on the claim.

And he may, if the bill or note is dishonored, enforce it against the partner who executed it, and also proceed against the firm upon the claim, even after judgment upon the bill, unless he has assigned his judgment upon the bill or note.4 For a bill given in conditional payment of a claim becomes, in effect, from the moment of its dishonor, a collateral security for the claim, and an unsatisfied judgment upon a collateral security is no bar to an action upon the principal debt.5

A partnership cannot be charged upon a bill or note unless it is executed in the firm name or in the name of all the partners. But any name under which the firm has carried on its business will be sufficient to charge the partnership.6

1 Lang vs. Waring, 17 Ala., 145; Silvers vs. Foster, 9 Kas., 56; Finney vs. Allen, 7 Mo., 416.

2 Mitchell vs. Ostrom, 2 Hill, 520.

3 Perrin vs. Keene, 19 Me., 355;

Goodspeed vs. South Bend Co., 45 Mich., 237; Patterson vs. Camden, 25 Mo., 13;

Seward vs. L'Estrange, 36

Tex 295. 4 Hill vs. Marcy., 49 N. H., 265. 5 Davis vs. Anable, 2 Hill, 339;

Corn Co. vs. Babcock, 57 Barb.

231; Bank vs. Chaney, 10 W.

N. (Pa.), 137.

Similarly a bill payable to a firm must be indorsed in the firm name, or in the name of all the partners.7

Dormant partners are liable upon negotiable paper executed by a partner in the firm name, although the proceeds were misapplied by the partner in fraud of the firm. Even if the bill was given to the payee for other than firm purposes, the firm would be liable to a bona fide purchaser for value, before maturity, and without notice.8

No bill or note is good against a firm in the hands of one receiving it from a partner with notice of lack of authority on the part of the partner to execute it, and a subsequent purchaser with notice of his indorser's defective title would stand in his shoes. The execution of a firm bill or note known not to be in the interest of the firm or in relation to its business, puts the payee upon inquiry as to authority and to proof of the same.9

In Wait vs. Thayer, 118 Mass., 473, the following instruction to the jury was approved:

Each partner in a trading firm, such as that of which Lyman was a member, has implied authority to bind the firm by simple contracts made in their names, relating to the partnership, and within its general scope and ordinarily incident to its business, and thus to draw and to accept bills of exchange, and to make and indorse promissory notes. But if one of the partners, without the consent of the others, gives the note or indorsement of the firm for money borrowed for his private use, or gives such note or indorsement in payment of his private debt, the holder of the note, if he had notice, cannot collect it of the firm. And it is not necessary that express notice or knowledge that the money borrowed is for the private use of the partner, or that it is given in payment of his private debt, should be fixed upon the holder of such note. Circumstances from which this knowledge may be inferred, or which ought to have put him on inquiry, are sufficient to exonerate the firm. It is now admitted that the note in suit, although indorsed by Sergeant, one of the firm, in the name of the firm, was in fact given for the private use and benefit of Warner, another partner, and who has been defaulted in this suit. And it is also admitted that the indorsement by Sergeant was made without the knowledge of Lyman. Against him the present plaintiff cannot maintain this action, if the defendant has shown, the burden of proof being upon him, that at the time the plaintiff took the note from Warner, and advanced his money upon it, the plaintiff had notice or knowledge, that the money was for the private use of Warner, or, if the circumstances under which he took the note and advanced his money, were such as to authorize an inference of his knowledge, or which ought to have put him on inquiry as to the real character of the transaction. In determining this question it will be the duty of the jury to consider the manner in which this note was made and indorsed, the alterations or additions made in it by Warner in the presence of the plaintiff, the respects from which this note differs from that on which a loan was formerly made by this plaintiff to the firm, and all other evidence in the case tending to show whether or not the plaintiff had notice or knowledge that the money he advanced on the note in suit was for the private use of Warner. And if the jury find that the plaintiff had such notice or knowledge, or that the proved facts and circumstances under which he took the note and advanced the money, were such as ought to have put him on inquiry, or from which his knowledge may be inferred, they should return a verdict for the defendant; otherwise they should find for the plaintiff.

6 Pitts vs. Waugh, 4 Mass., 424;

Dryer vs. Sander, 48 Mo., 400; Nat. Bank vs. Thomas, 47 N. Y., 15; Siegel vs. Chidsey, 28 Pa., 279; Milner vs. Downer, 19 Vt., 14; Wright vs. Hooker, 8 N. Y., 51; Gavin vs. Walker, 14 Lea. 643.

7 Cooper vs. Bailly, 52 Me., 230. 8 Gavin vs. Wa1ker, 14 Lea, 643; ------ vs.------, 1 Crompton and Jervis, 316.

9------vs. ------, 13 Com. Bench Rep., N. S., 278; Reuben vs. Cohen, 48 Cal., 545; Wittram vs. Van Wormer, 44 III., 525; Ditts vs. Lansdale, 49 Ind., 521; Davis vs. Smith, 27 Minn., 390; Burleigh vs. Parton, 21 Tex., 585; Roberts vs. Pepple, 55 Mich., 367; Hickman vs. Kinkle, 27 Mo., 401; Howell vs. Wilcox Co., 12 Neb., 177.

But the firm will be bound to a purchaser of the note for value without notice of the partner's abuse of authority although the original payee or indorsee had such notice.10

The firm signature or indorsement may by its form be constructive notice that the note was not negotiable in the ordinary regular course of firm business, as when written on the back of the note before the payee's indorsement or with the word "surety" added, or as co-maker with a third party; in all such cases the taker of the note is put upon inquiry as to the partner's authority.11

A belongs to the firm of B & Co., and also to the firm of C & Co. He signs the name of B & Co. to a note payable to C & Co., then indorses it in the name of C & Co., and delivers it to D, who is a creditor of C & Co. D sues B & Co. on the note, and the firm is held liable, although in fact the execution of the note by A was an abuse of authority.12

10 Porter vs. White, 39 Md., 613; Boardman vs. Gore, 15 Mass., 331; First Bank vs. Morgan, 73 N. Y., 593; Moorehead vs. Gilmore, 77 Pa., 118; Fuller vs. Percival, 126 Mass., 381.

11 West Savings Bank vs. Shawnee, 95 U. S., 557; Rollins vs Stevens, 31 Me., 454; First Bank vs. Breese, 39 Iowa, 640; Rolston vs. Click, 1 Stewart (Ala.), 526.

The note was regular in form; to D nothing appeared in the transaction that was irregular, or that would put him on inquiry; and so it was a matter of fact that these trading firm names were signed by a partner whose general authority, till its absence was brought home to the parties who took the firm paper in regular course, was to be presumed.

In Freeman's Nat. Bank vs. Savery, 127 Mass., 75, the court discusses the question of notices as follows: "It is settled that one who takes a negotiable promissory note for value, before maturity, in good faith, and without knowledge of any defect of title, may recover upon it, although facts are offered in evidence which impeach its validity between antecedent parties. A suspicion that there is a defect of title, or a knowledge of circumstances that might excite suspicion in the mind of a cautious person, or even gross negligence not amounting to evidence of fraud, or bad faith, will not defeat the title of the purchaser."

"When the defect or infirmity of title to the bill or note however, appears on its face at the time of the transfer, it was said in Goodman vs. Simonds, that the question whether the party who took it had notice or not, was a question of construction, and must be determined by the court as a matter of law; as, where a person who took a bill which appeared upon its face to be dishonored, was held not to have the rights of a bona fide holder; or where one taking a note so marked as to show for whose benefit it was to be discounted was presumed to have knowledge of what the note imported. A party must be presumed to know the contents and true meaning of a written instrument which he takes as evidence of title, or of contract, and when it is in form of negotiable paper, to know the construction which must be given to it, with reference to the time when it is transferred to him, and the order of the several names then upon it. If the attempt is to impeach the title by facts accruing between other parties, independent and outside of the instrument itself, the question whether the purchaser had knowledge of them is a question of fact for the jury, to be proved by showing that they were directly communicated to him, or by proof of circumstances from which notice must be presumed."

12 Murphy vs. Camden, 18 Mo., 122; Miller vs. Consolidation Bank, 48 Pa., 514.

Notice that the discussion is on a case where authority is implied and therefore exists as far as the public is concerned, and the question is whether an innocent third party should suffer through the abuse of authority of the agent of another.

The defenses of the maker to negotiable paper in the hands of a bona fide holder for value, before maturity, and without notice of the existence of any defects therein, are non-execution, fraud in execution (not fraud in consideration, want or failure of consideration, immorality or duress), statutory illegality and incapacity of the maker. Therefore, if the partner has no authority, express or implied, to sign the firm name to negotiable paper, it has never been executed by the firm, and the holder cannot recover.

In a trading firm the partner has implied authority, but not in a non-trading firm; and therefore, to enable a plaintiff to recover upon negotiable paper, given by a partner in a non-trading firm, he must show the consent of the other partners, or such a situation or such usage, as will take the case out of the general rule.13