Having formed a joint-stock corporation by the name of Lawrence Gaynor, Incorporated, to engage, among other things, in the business of street paving, the defendant Lawrence, who alone was experienced in that work, acting as agent and manager of the corporation, wrote to the plaintiff requesting it to ship 7,600 square yards of wooden paving blocks, and signed the letter "Lawrence Gaynor, John H. Lawrence." A few days later the plaintiff agreed to ship the blocks, but by way of security insisted upon getting an order on the Connecticut Company, upon whose tracks the blocks were to be used, requiring it to pay the plaintiff each month for the number of square yards of block actually laid; such an order was subsequently given by the paving corporation to the plaintiff, and the plaintiff was duly paid by the Connecticut Company for all the blocks used upon its tracks. It happened, however, that 1,440 square yards of the block furnished by the plaintiff were not used in that contract, and these were by mistake appropriated and used by the city of Bridgeport in its paving operations. The paving corporation became insolvent, and the plaintiff, in an action to recover for the remaining part of the blocks, sought to charge the defendants as partners, contending that if Gaynor was not in fact a partner he was estopped from denying the existence of a partnership in the purchase of the blocks in question. Held: — 1. That the circumstances disclosed by the evidence and the facts as found by the trial court, furnished no basis for an implication of law of a partnership between the defendants; nor did they justify the conclusion, relied upon by the plaintiff, that Gaynor had permitted himself to be held out by Lawrence as a partner in any of the transactions therein referred to. 2. That even if it were to be assumed, upon the facts found, that the defendant Gaynor had permitted himself to be held out by Lawrence as a partner, the plaintiff was certainly in no position to urge that fact as a basis of estoppel against him, since it affirmatively appeared not only that the plaintiff had no knowledge of any representations of Lawrence tending to show a partnership, but also that it did not sell and deliver the paving blocks in reliance upon the existence of any such supposed relation between the defendants, but trusted solely to the order upon the Connecticut Company which it had demanded as a condition of the sale. A contract made in behalf of a non-existent corporation may result in a joint liability upon the part of those undertaking to act for it; but if so, it would be because they had falsely held themselves out to be agents of a principal which did not exist, or because they, having no authority to make the contract, would be presumed to have intended to bind themselves. A person who holds himself out as a partner, or permits others to do so, is liable as such to third persons who give credit to the firm upon the faith of his connection with it, or who know of such holding out.
THAYER, J.
The defendant Lawrence, having as agent and manager full authority to act for a corporation then existing in Bridgeport under the name "Lawrence Gaynor, Incorporated," on June 10th, 1913, ordered of the plaintiff by letter a quantity of wooden blocks, and signed the letter "Lawrence Gaynor, John H. Lawrence." The letter was written upon paper having the heading "Lawrence Gaynor, Contracting Engineers." He wrote with the purpose to bind the corporation only, and omitted the word "Incorporated" from the signature through ignorance of the law. The plaintiff accepted the order and delivered the blocks to the corporation, which is now insolvent. The defendants were members of the corporation, and the plaintiff by this action seeks to hold Gaynor, as a partner with Lawrence under the firm name Lawrence Gaynor, for the balance due on the contract. Lawrence was not served with process and did not appear to defend.
The statement of facts shows the circumstances under which the order was given. The court has found that the defendants were never, by agreement, partners in business. The plaintiff claims that upon the facts found they were partners by implication of law, and if not, that Gaynor by his acts is estopped to deny that, as to the plaintiff, he was the partner of Lawrence in the purchase of the blocks in question.
In Morgan v. Farrel, 58 Conn. 413, 422, 20 A. 614, it is said that a partnership as to third persons sometimes arises by operation of law even against the intention of the parties; and that this happens either because the contract which the parties have entered into, in law makes each the principal and agent of the other (as in Parker v. Canfield, 37 Conn. 250, and Citizens National Bank v. Hine, 49 Conn. 236, when the contracts called for a sharing of the profits of the business by the parties), or because by a course of dealing they have shown that such was the real relation between them. The liability in the latter case, as where a person holds himself out as a partner, is stated in Morgan v. Farrel, 58 Conn. 413, 426, 20 A. 614, to be predicated upon the doctrine of estoppel.
There was nothing in the arrangement made by the defendants in the present case from which the law will imply a partnership between them. There was no agreement to enter into any contract in behalf of themselves, but only in behalf of the proposed corporation. Proposals and bids were to be made in its behalf, which, if accepted, were to result in contracts which would not, as contemplated, be performed until long after the corporation would be organized. It may be that, if such a contract were made by them in behalf of a non-existent corporation, a joint liability on their part might result; but this would be because they had falsely held themselves out to be the agents of a corporation which did not exist, or because they would be presumed, having no authority to make the contract, to have intended to bind themselves. 1 Thompson on Corporations (1st Ed.) § 416; Johnson v. Smith, 21 Conn. 627, 634.
The plaintiff says that in fact contracts were made by Gaynor Lawrence as partners with the city before the corporation was organized, and that the court erred in overruling the plaintiff's claim that this was so. Upon the finding, Lawrence had no authority from Gaynor to make such a contract, and, if he attempted to make one, it was not binding upon Gaynor unless he ratified or assented to it, which he did not do. The court finds that Gaynor had no knowledge of the terms of the contract, or the way in which it was signed, and there is nothing in the facts found to indicate the contrary, except the fact that Gaynor at some time knew that Lawrence had letter-heads printed reading "Lawrence Gaynor, Contracting Engineers," which he informed Lawrence was wrong, and the fact that, after the contracts were completed, Gaynor used one of these letter-heads in making out a bill to the city in the name of Lawrence Gaynor for the blocks which are in question in this action. These were facts proper to be considered in determining what the contract was between the defendants, and whether Gaynor ratified or accepted the contract as made by Lawrence with the city. They were by no means conclusive of the fact of such a ratification. Doubtless the usual way of speaking of the corporation, both when proposed and after it was organized, was as Lawrence Gaynor. Whatever the reason for Gaynor's presenting the bill as he did after the city had mistakenly used the blocks, the court has found that he had no knowledge, until several months after the contracts were signed, of the contents of the contracts or the manner in which they had been signed, and supposed that they had been signed properly by Lawrence as the agent of the corporation. Upon the facts found the court properly held that no contract with the city which was binding upon Gaynor as a partner with Lawrence, had been established by the plaintiff.
There is less ground for claiming that he was by operation of law a partner as to the contract with the Connecticut Company and as to that with the plaintiff. The corporation had been incorporated, but not organized, when the contract was made with the Connecticut Company, and had been organized when the contract with the plaintiff was made. In neither case did Lawrence have any authority from Gaynor to make these contracts otherwise than for the corporation, and it was Lawrence's intent to bind, not a partnership, but the corporation, as he was authorized to do. If it be conceded that there was in fact no prior existing partnership under the name Lawrence Gaynor, it will hardly be claimed that the law will imply one from the fact that the word "Incorporated" was mistakenly omitted in signing the name of the corporation to the contract.
A person who holds himself out as a partner, or permits others to do so, is liable as such to third persons who give credit to the firm upon the faith of his connection with it, or who know of such holding out. Morgan v. Farrel, 58 Conn. 413, 426, 20 A. 614. The plaintiff insists that Gaynor either held himself out to the city of Bridgeport as a partner with Lawrence, or permitted Lawrence to do so, in making the contracts with the city, and that the plaintiff knew that the city contracts were made with Lawrence and Gaynor and was entitled to presume that the partnership continued. If we assume that what was done by Lawrence constituted a representation by Lawrence that Gaynor was his partner in that transaction, all that Gaynor knew of the transaction, tending to show permission or acquiescence upon his part was the fact, announced in the newspapers, that the successful bidder was "Gaynor Lawrence." The finding shows that he did not see the bids or contracts until several months after the contracts were made, and thus necessarily after the corporation had been organized; that he did not know how they had been signed, but supposed that they had been signed properly by Lawrence as agent for the corporation. The fact that he saw in the newspaper that the contract was awarded to Gaynor and Lawrence would not call for an investigation on his part to learn whether the bids or contracts had been properly signed, and his failure to do so would not be sufficient under such circumstances to charge him with permitting himself to be held out as a partner of Lawrence. It might be different in case similar conduct on the part of Lawrence had continued for a considerable period of time, for knowledge may be presumed from a course of conduct. In a single instance where it is found that there was absence of knowledge in the party to be bound, mere silence on the latter's part is not enough to constitute permission or acquiescence.
But were permission to be presumed from Gaynor's conduct, the other facts are such that he is not estopped to deny liability as a partner. The court finds that the plaintiff did not sell and deliver the paving blocks relying upon the joint or individual credit of Lawrence and Gaynor, or upon any supposed partnership between them. It also appears that after the plaintiff knew of the city's contract, made before it contracted with Lawrence to furnish the paving blocks, it inquired of Lawrence about his finances, and was then told that he had no money, but that he was "going to ally" himself with Gaynor. This was a representation that no partnership then existed, and what was done and said at that time by the plaintiff and Lawrence justifies the finding that the plaintiff sold the blocks not relying upon any partnership which it supposed existed because of the city contract. Anything done by Gaynor after the contract with the plaintiff was made could not have influenced the plaintiff when it accepted the order and closed the contract for the blocks. His claimed silent acquiescence when Lawrence indicated that he would use the letter-heads after Gaynor told him the name was wrong, and his rendering the city a bill for the blocks which it had taken by mistake, relied upon by the plaintiff as acts of acquiescence, could not, for this reason, have been relied upon by the plaintiff in making the contract. The court, therefore, properly overruled the plaintiff's claim that Gaynor was estopped from denying that a partnership between him and Lawrence existed at the time its contract was made.