Opinion
Argued March 17, 1890
Decided April 29, 1890
Wm. H. Arnoux for appellant. C. Elliott Minor for respondent.
This action was brought to recover damages for breach of warranty in the sale of a promissory note purporting to be made by Franklin Farrell Co., to the order of W.M. Babbott, and indorsed by him, the plaintiff claiming that there was no such firm as Franklin Farrell Co., and that consequently the note was not genuine. The defendant claims that he sold the note to plaintiff as the agent of Babbott; that there was such a firm, and that the note was a genuine note thereof.
A person who sells commercial paper as his own is understood to warrant his title thereto to be good, and that the instrument is genuine. ( Littauer v. Goldman, 72 N.Y. 506; Delaware Bank v. Jarvis, 20 N.Y. 226; Fake v. Smith, 7 Abb. [N.S.] 106.)
Assuming, therefore, that the note was sold by the defendant as his own, and that the law implies a warranty on his part that the note was genuine, it becomes necessary to determine whether or not it was the genuine note of Franklin Farrell Co. The evidence is that the name of Franklin Farrell Co. was signed by W.M. Babbott, and it is claimed that Franklin Farrell and William M. Babbott were copartners, engaged in business; that the note was given to raise money to carry on such business, and that Babbott had lawful authority to so execute the instrument. This question was submitted to the jury, and it remains for us to determine whether there was sufficient evidence to justify such submission. It appears that business relation commenced between Farrell and Babbott about the month of February, 1879; they then had some conversation in reference to the manufacture and sale of ice refrigerating machines. The first arrangement which appears in writing was made with one Thomas Cook, in which Cook was to apply for and assign all of his patents relating to or growing out of the business to the company; that he was to put his one-third interest in the Pennsylvania company into the Cook Ice and Refrigerating Machine Company, and to use his influence to combine all interests for the benefit of the company; he was to teach Farrell and Babbott the business in all its branches, and at the earliest possible moment to complete drafts and specifications for small machines and adapt them to transportation, and was to put Farrell and Babbott on the board of directors. "Mr. Farrell and Mr. Babbott to have transportation to work on moiety of profits on the same terms as proposed by the Philadelphia parties when called for, etc." This instrument is signed by Thomas Cook, Franklin Farrell and W.M. Babbott. The next instrument is a contract dated the 22d day of March, 1879, between the Cook Ice and Refrigerating Machine Company of the first part, and Franklin Farrell of Ansonia, in the state of Connecticut, and W.M. Babbott of the city of New York, of the second part. It recites certain letters-patent issued by the United States for certain improvements in ice refrigerating machines and apparatus, and that the parties of the second part are desirous of acquiring certain rights which are therein specified, and then, among other things, provides: "First. The said parties of the second part shall, with all diligence and despatch and without expense or charge to the party of the first part, manufacture a refrigeratering machine under the said patents, and for the purpose of aiding and benefitting the business hereinafter mentioned; shall run the said machine at least for two months succeeding the time of its completion; and second, the said parties of the second part shall use their best endeavor to introduce machines and apparatus containing said patented improvements to public notice and create a demand therefor, and shall use reasonable diligence to build or cause to be built said machines and apparatus to fill any bona fide orders which may be given for the same by responsible parties for such prices and upon such terms and conditions as shall from time to time be agreed upon by the parties hereto, and shall also use reasonable diligence and their best endeavors to effect sales of interests, rights or licenses in or under said letters-patent, etc." The next contract executed by the parties bears date July 1, 1879, and is in the form of a letter addressed to David Smith, Esq., in which Franklin Farrell and W.M. Babbott agree to pay him $175 per month, for nine months, with the privilege of extending the time to October 1, 1880, for the purpose of developing, as they may think best, the Cook principle of manufacturing cold air by refrigerating machines, etc. It is true that these instruments are executed by each of the parties thereto in their own name, and that Farrell and Babbott may be said to be joint contractors, but these instruments establish the fact that they had engaged in a joint enterprise and business, and had made contracts with other parties. Numerous letters, telegrams and talks took place between them in reference to the contemplated business. They had agreed to construct a trial machine, and to run it for a specified time so as to test its practicability and create a demand for it in the market. Babbott testifies to the oral arrangement between him and Farrell, in which it was understood that he was to have the general management of the business; that Farrell was to manufacture the machines and furnish the money therefor, and that the profits were to be divided equally between them; that Smith, who was employed by them, was a practical machine manufacturer, and that the trial machine was to be constructed by him in Blackwell's warehouse in Greenwich street, but was finally placed in building No. 45 Clarkson street; that Farrell employed a man by the name of Green to draw plans for a part of the machine and sent him to New York with a letter of introduction to Babbott; that a portion of the machine was ordered immediately after the employment of Mr. Smith; that Babbott proceeded with the construction of the trial machine and arranged with Blackwell Co. to put it up in the warehouse at No. 45 Clarkson street, putting the arrangement into writing in the form of a letter, which was signed "Franklin Farrell Co.," he sending a copy by mail to Farrell. It further appeared that this note was given after he had incurred expenses in putting up this machine.
Whilst this evidence may not be very satisfactory, we are inclined to the opinion that it is sufficient to carry the case to the jury for its determination as to whether or not there was a copartnership. It is true that nothing was said about how the losses should be shared, but we must assume that it was understood that they were to be borne equally in view of the fact that it was agreed that the profits were to be shared equally. It is also true that it does not appear that there was any firm name agreed upon under which they should conduct their business, but a copartnership may exist and the parties be bound even though there is no firm name. Had the note in suit been drawn payable to the order of Smith and delivered to him in payment for his services and expenditures in the construction of the machine we should not long hesitate upon the liability of Farrell thereon. ( First Nat. Bk. of Chittenango v. Morgan, 73 N.Y. 593; Whitaker v. Brown, 16 Wend. 505.)
If a copartnership name has been agreed upon it must be used in order to bind the firm, but if none has been agreed upon a name that fairly represents the company may be adopted, and, by custom and use, become its valid name. (Parsons on Part. 125.)
The business engaged in involved the preparing of plans and specifications, the purchasing of materials and the manufacturing of machinery. It involved the contracting of obligations and the expenditures of considerable sums of money, and we are inclined to the view that it was such a copartnership, in which the rule is recognized, that one partner is impliedly authorized to give notes in the firm's name.
Upon the trial Babbott had given evidence to the effect that he had paid Smith for the work performed by him upon the machine about the sum of $2,500. The defendant's counsel then offered to read from the minutes of the former trial. Objection was taken as incompetent, which was overruled, and he then read a list of items amounting in the total to $2,495. We do not understand upon what theory this evidence was competent. It was not brought within the provisions of section 830 of the Code of Civil Procedure, neither does it tend to contradict any testimony that had previously been called out.
The court submitted to the jury the questions as to whether or not the defendant disclosed his agency in making the sale, and as to whether there was an implied warranty that the note was genuine. Of this submission the plaintiff complains and takes an exception, urging that these questions should have been disposed of by the court. It appears from the testimony that the defendant was in fact the agent of Babbott in making the sale of the note, and that on receiving the money therefor from the plaintiff the same was paid over to Babbott, the defendant retaining his commissions only. It does not appear from any express statement made by the defendant to the officers of the plaintiff that his agency was disclosed. It is claimed, however, that the fact of such agency was known and understood by the officers of the plaintiff. The first communication we have upon the subject is a letter from the cashier of the plaintiff to the defendant, in which he says: "Dear sir: You have a note Franklin Farrell I understand end. at 7 per cent. Please inform me who is the endorser." To this letter the defendant answered upon one of his letter-heads, on which was printed the following: "P.W. Gallaudet, banker and dealer in commercial paper. Stocks, bonds and gold bought and sold on commission. 3 and 5 Wall street." In the body of the letter he states as follows: "Gents: I still have note of Franklin Farrell Co., Ansonia, Ct., end. by W.M. Babbott, due Mch. 18, 7 per cent, (2,800.00). Babbott is reputed to be worth 15 to 20 M., and is said to be interested in some patents manufactured by the Farrell Yale Lock Mfg. Co., Stamford, Ct." The plaintiff, on the receipt of this letter, ordered the note Franklin Farrell Co., which was forwarded by the defendant, the plaintiff returning its draft therefor. It does not appear whether the plaintiff and defendant had had other business transactions. The first letter by the plaintiff's cashier states that he understands that the defendant has a note of Franklin Farrell. The source of his information is not stated. Mr. Fay, an attorney for the bank, was sworn as a witness on behalf of the plaintiff, and gave testimony in reference to conversation had with Babbott, in which he stated to Babbott that he had been sent for to determine the question as to whether there was a competent relation between Farrell and Babbott with reference to seeking a redress on the notes which the bank had purchased from the defendant as a broker. It is not understood, however, that he was an officer of the bank, or was present or had personal knowledge of the actual transaction between the officers of the bank and defendant. There is nothing in the language used that tends to indicate who the principal was, and we have been unable to find any evidence that raises a question of fact upon this subject. We are, therefore, of the opinion that the plaintiff was entitled to have this question disposed of by the court, and the jury instructed that the defendant in making the sale of the note in question did not disclose his principal.
The question as to whether there was an implied warranty depends upon the facts as to whether the defendant was an agent and disclosed his agency to the plaintiff, or whether that fact was known and understood by its officers in making the purchase.
For these reasons the judgment should be reversed and a new trial granted, with costs to abide the event.
All concur.
Judgment reversed.