Thank You For Submiting Feedback!
An act may be necessary for the carrying on of the business of a partnership, but when done by one partner the firm cannot be bound by it, unless he has express or implied power to do the act. Whether he has the implied power depends on whether the act be necessary to carry on the business in the ordinary way. A partner's power is to do only what is usual, and not what is unusual, because necessary. Whether the work was done in the usual course of business, or was necessary, is not the inquiry to which the mind of the jury should be directed. The work may have been done in the usual course of business, or necessary, but this does not confer on the partner power to borrow money to pay for it, unless the exercise of that power is usual in the ordinary conduct of such a business.
The sole business of Inter-American Advertising Agency (herein called "the partnership") was the sale, on a commission basis, of broadcast time on XERF, a radio station located in Ciudad Acuna, Mexico, and owned and operated by a Mexican corporation, Compania Radiodifusora de Coahuila, S.A. (herein called "Radiodifusora"). Bosquez and Gonzalez each owned 50% of the Radiodifusora stock, with Bosquez acting as president of the corporation. In 1957, a written contract was entered into between Radiodifusora and the partnership, on the one hand, and Roloff Evangelistic Enterprises, Inc., and Burns, on the other. Under this contract, Radiodifusora and the partnership, in consideration of the payment of $100,000.00 by Roloff and Burns, agreed to make available to them two 15-minute segments of broadcast time daily over XERF so long as the franchise of the radio station remained in force, beginning July 1, 1957. In accordance with the terms of the contract, Roloff and Burns paid the $100,000.00 in four equal installments on July 1, 1957, November 1, 1957, March 1, 1958, and July 1, 1958, with Burns retaining 15% of such payments as his commission, as he had a right to do under the terms of the contract. Subsequently, Roloff assigned all of its rights under this contract to Burns, effective June 16, 1962. Both Radiodifusora and the partnership approved such assignment. However, because of labor disputes and other circumstances, the radio station was shut down at various times. With some exceptions, the broadcast periods described in the 1957 contract were not made available to Burns or to persons to whom he sold such broadcast periods, after June 16, 1962.
On November 28, 1962, Bosquez, purporting to act on his own behalf and on behalf of the partnership, executed the subject promissory note valued at $40,000, payable to Burns on November 28, 1964. According to a separate instrument signed by Bosquez on the same date, the radio station was in receivership and it was unlikely that the broadcast periods to which Burns was entitled under the 1957 contract would be made available to him for the two-year period ending November 28, 1964, the date on which the note was payable. This instrument recited that since Burns would derive an income of $20,000.00 a year from sale of such broadcast periods, the note in the amount of $40,000.00 had been executed and delivered to Burns to compensate him for the income which he would have derived during the two-year period ending November 28, 1964. Thereafter, on May 24, 1963 another contract between Burns and Bosquez, who purported to act on behalf of Radiodifusora and the partnership was executed. The preamble to this agreement refers to the 1957 contract, the assignment of Roloff's rights thereunder to Burns, the approval of such assignment by Radiodifusora and the partnership, and the breach of such contract. No mention is made of the 1962 note. After this reference to the prior course of dealings between the parties, the agreement recognizes the rights of Burns under the 1957 contract, and Radiodifusora agrees to make the broadcast periods described in that contract available to Burns beginning September 1, 1963. As consideration for this promise by Radiodifusora, Burns agreed to pay to Radiodifusora one-half of the amounts realized by him from sale of such time, and agreed not to file suit against Radiodifusora. The contract concludes with the recital that all understandings between the parties had been reduced to writing and were embodied therein.
Burns sued Gonzales and Bosquez, individually and as sole partners in the partnership, to recover the promissory note executed by Bosquez in 1962. The trial court ruled that the note was an obligation of the partnership, but barred collection from Gonzales based on the theory that he had been relieved of liability on the note as a result of the 1963 agreement.
Is the note in question a partnership obligation?
The only thing known of the nature of the partnership here is that it was restricted to the sale of broadcast time over XERF on a commission basis. There is nothing to show that the transaction of such business required "periodical or continuous or frequent purchasing" or made "frequent resort to borrowing a necessity, not existing by reason of embarrassments, or on account of some fortuitous event, but for the advantageous prosecution of even a prosperous business." The assets of the partnership consisted of a few desks, chairs, typewriters and office supplies. The appellate court disagrees with the contention put forward by Burns to the effect that Bosquez was the managing partner. At best, the record reflects that both Bosquez and Gonzalez were active in the management of the business. As a matter of fact, with the exception of the transactions involving the 1962 note and the 1963 agreement, the record discloses that all instruments significantly affecting the relations between the partners and Burns were signed by both Bosquez and Gonzalez. Since the evidence does not disclose that Bosquez, in executing the 1962 note, was performing an act "for apparently carrying on in the usual way the business of the partnership," there is no basis for holding that the note sued on was a partnership obligation.